Hartalega 2016 Macquarie new version for PRINTING

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Growing Global

………………………………………………………………………………………………………………………………………………………………………………….. Innovation Quality

Growing Global


• Established in year 1988

• Manufacturer of rubber examination gloves

• 100% export to US, EU, Japan, Australia, China, India

• World’s largest nitrile glove producer since 2011

• 6 manufacturing facilities located in Selangor, Malaysia

• Installed glove production capacity of 16 bil per annum

• Workforce of 5,100

• Sales exceeding RM1.1 billion per annum (FY2015)

• Listed on Bursa Malaysia since 2008

• Market capitalization of RM7-8 billion

• 10 years sales revenue CAGR of 26%

• 10 years profit CAGR of 32%

• Most profitable glove manufacturer in the world

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Growing Global

……………………………………………………………………………………………………………………………………………………………………………….. Innovation Quality3

Market Reachand Overseas Operations

Export to over 40 countries

Four overseas offices

• Australia (1996)

• USA (2003)

• China (2012)

• India (2013)

Growing Global


Market Segments

� Products mainly sold to quality demanding markets such as USA, Japan and Germany

� 93% of sales to healthcare and lab industries where demand remain robust

Asia

Pacific,

14%

USA, 48%

Others,

8%

Europe,

30% Healthcare, 76%

Food, 5%

Industrial, 2%

Lab, 17%

3

Growing Global


Global Recognition

5

2013 & 2014 2010, 2011, 2012 & 2013 2013, 2014 & 2015 2010 & 2012

HR Asia Best

Employers to Work for

in Asia

Forbes Asia 200 Best

Under a Billion

The Edge Billion

Ringgit Club – Most

Profitable Company in

Industrial Products

Segment

Asiamoney Best

Managed Company in

Malaysia

Growing Global


Revenue and Profit

110 160 240 282

443 572

735

921 1,032

1,107 1,145

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Revenue (RM mil)

13 19 37 40

85

146

190 201 234 234 210

FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15

Profit After Tax (RM mil)

CAGR for revenue from FY2005 to FY2015 of 26%

CAGR for PAT from FY2005 to FY2015 of 32%

Net margin improved from 12% in FY2005 to 21% in FY2014 but declined to 18.3% for FY15

Sales and PAT for FY2015 of RM1145 mil and RM210 mil respectively

FY2015 EPS of 27 cents

FY15 lower than FY14 due to NGC high start up cost

Highest profit margin in the industry

Highest net profit in the industry

6

4

Growing Global


Highest output with lowest number of workers

7

*unit measurement used is worker per million pieces of gloves produced per month*sector average and listed companies figures from news releases and company’s quarterly and annual reports

Hartalega’s existing facilities are 48% higher in productivity compared to industry average

Compared to top listed glove companies, Hartalega is 17% higher in productivity

Higher productivity is achieved through innovative technologies

Sector average

Average of listed glove companies in Malaysia (ex-Hartalega)

Hartalega’s existing setup

7.5

4.7

3.9

Growing Global


Intensified competition

10,800

28,000

-

10,000

20,000

30,000

Industryaverage

Hartalegaaverage

Average production line speed (pcs/hr/line)

Fastest Production Rates

� Hartalega’s average production line speed is 60% higher than industry average

� Comparing to fastest production lines in the industry, Hartalega’s most advanced production line is 12% higher in rate of output

� All production technologies are in-house developed and proprietary to Hartalega

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35,000

45,000

-

20,000

40,000

Industry fastest Hartalegafastest

Fastest production line speed (pcs/hr/line)

5

Growing Global


11% 10% 10% 8%

15% 16%

9% 11% 12%15%

12%15%

17% 17%

22%

31%33% 33%

28% 30% 28%24%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Industry average profit before tax Hartalega profit before tax

* Industry average is the average profit margin of top 3 listed glove manufacturers in Malaysia

Most Profitable & Highest Profit Margin

9

Growing Global


Sector leader

10

World‘s largest nitrile glove

manufacturer.

Valuable Glove Company in

Malaysia (current market cap of

over RM8 billion)

Highest Productivity in the Industry.

World‘s fatest production line at

45,000 pcs/hr.

Most advanced in-house developed

production technologies.

Most Innovative Glove Company.

Several breakthrough inventions

that changed the landscape of

glove industry.

341

1,263 1,629 1,782

3,542

5,285 5,560

2008 2009 2010 2011 2012 2013 2014

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Growing Global


0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

5.00% 10.00% 15.00% 20.00%

Net Margin

CAGR

KossanTop Grove

Supermax

Hartalega

4-yr CAGR5-yr avg net

margin

Hartalega 18.0 23.3

Kossan 11.7 9.3

Supermax 8.8 13.2

Top Glove 10.9 9.3

Sector leader

Source: Deloitte & Touche, 2014

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Growing Global


What are our competitors doing?

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� NR:NBR ratio for global glove market is 50:50

� All glove producers want a bigger share of nitrile glove market

� All new capacities are nitrile gloves

Nitrile glove business

� Competitors claim to have 45,000 pcs/hr lines

� Competitor investing in 35,000 pcs/hr lines

� Competitor investing in IT

� All big glove companies already have stripping machines

Production technology

� Competitors seek to differentiate themselves in terms of product offerings

� SilkSkin sericin glove

� Accelerator free glove

Product innovation

7

Growing Global


Our enemies have arrived! Are we ready?

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Growing Global


OUR STRATEGY

14

8

Growing Global


Four pillars of growth

15

Engaging critical mass

Knowledge management

Competencies development

Succession planning

Capacity expansion (NGC)

Lean manufacturing

Invest in Information Technology

Production technologies

Product innovations

Innovative culture at all levels

Develop own brand market

Emerging markets like China and India as target markets

Vision to build a global multiple medical device company

Innovation

Own Brand

Human Resource

Productivity

Growing Global


Talent development

Senior

Management

Management

Executives, Supervisors

(critical mass)

Leadership development program by

Skills development and lean manufacturing

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9

Growing Global


High paying jobs – extended ESOS program

With NGC’s contribution to earnings growth

ESOS program can be extended to Technician level

Inclusive shares options scheme instills ownership and drives better performance

17

3,462,400

2,122,680

1,553,448

1,164,960

659,976

426,984

273,240

- 1,000,000 2,000,000 3,000,000 4,000,000

Director

Senior Manager

Manager

Assistant Manager

Executive

Supervisor

Technician

5 years maximum income (year 2015 to 2020)

Growing Global


5S & Kaizen positive impact on OEE (Overall Equipment Effectiveness)

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OEE – Overall Equipment Effectiveness

• OEE – Overall Equipment Effectiveness is a total number percentage which is a combination multiple of Availability, Quality &Performance: OEE is a formidable benchmark whereby 85% is considered world class

• Culture of 5S & Kaizen at Hartalega will help to improve further the OEE• 5S Japanese concept & practice of setting up the workplace to be more efficient & organized• Kaizen Japanese concept of continuous improvement from the bottoms up - integral to innovation & long term sustainability of

the company• Hartalega invested substantially in organizing learning trips to Toyota Company in Tokyo to learn & experience these concepts

in practice

Availability% x Performance% x Quality% x Availability% x Per75%76%77%78%79%80%81%82%83%84%85%86%Availability% x Performance% x Quality% x Availability% x Per75%76%77%78%79%80%81%82%83%84%85%86%Availability% x Performance% x Quality% x Availability% x Per75%76%77%78%79%80%81%82%83%84%85%86%

10

Growing Global



Own Brand Product Potential in China & India

Asia’s per capita consumption of gloves is significantly lower than US and EU

China’s ongoing healthcare reform is expected to drive up glove demand substantially

If China’s per capita glove consumption equaled that of EU, demand would be 135 billion pieces per

annum, almost equivalent to the current combined global consumption

19

4.8

5.3

100

166

0 20 40 60 80 100 120 140 160 180

Asia

China

EU

USA

per capita glove usage (pcs)

Growing Global


Hartalega NGC Status

An Entry Point Project (EPP) under the ETP

RM2.2 billion investment

112 acres site at Sepang

95 acres industrial land, 17 acres lake

High technology and integrated

Conducive work environment

6 high tech manufacturing plants

72 fastest production lines in the world

Designer built offices

Centre of excellence comprising training and R&D centre

Sports and recreation complex

Employees’ accommodation

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11

Growing Global


NGC – total 72 production lines; average output per line is 45,000 pcs/hr

45,000 pcs/hr

12,000 pcs/hr

30,000 pcs/hr

45,000 pcs/hr

Bestari Jaya – total 45 production lines; average output per line is 28,000 pcs/hr

Hartalega NGC – Latest Technology

• NGC leverages on latest technology to drive up organisation wide productivity level

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Growing Global


Quantum leap in productivity – workers per output

33% jump in productivity at NGC compared to Hartalega’s exisitng setup

Sets a new benchmark for the sector – NGC is 45% higher in productivity compared to other listed companies

Further automation and lean manufacturing practices will improve productivity at NGC by another 23%

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*unit measurement used is worker per million pieces of gloves produced per month*sector average and listed companies figures from news releases and company’s quarterly and annual reports

Hartalega NGC

Sector average

Average of listed glove companies in Malaysia (ex-Hartalega)

Hartalega’s existing setup

7.5

4.7

3.9

2.6

Hartalega NGC with further automation and lean manufacturing practices

2.0

12

Growing Global



Capacity projection

Average capacity growth of 20% for the next 6 years

First production line at NGC is expected to begin operation in January 2015

Subsequent production capacity will come on stream progressively

23

11,787 12,522

18,426

24,993 29,739

34,258 35,307

0

10,000

20,000

30,000

40,000

FY14 FY15 FY16 FY17 FY18 FY19 FY20

Projected output (mil pcs)

Growing Global


MARKET OUTLOOK

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13

Growing Global



Market outlook

World demand for rubber gloves grow at an average of 8% per annum

Malaysia is the largest supplier of rubber gloves for the world – 62% market share

Demand of glove is inelastic

Nitrile is preferred choice for developed markets

25

2.3 2.3 2.6 2.8 3.1 3.43.9

4.7 4.4

5.5

6.4 6.7 6.6 6.6

68

8492 94

102110

122 124

140150 148

160171

181

World's Import of Examination Gloves (US$ Bil)

World's Import of Examination Gloves (Bil pcs)

Growing Global

………………………………………………………………………………………………………………………………………………………………………………….. Innovation Quality26

• Malaysia Rubber Glove Export dominates at over 60% global share

• Export Quantity grew at CAGR average growth rate at 11.2%

• USD sales revenue flat in the last few years due to weak raw material cost

• Expect positive trend to continue due to organic global healthcare growth

• Untapped markets in emerging nations with low per capita consumption of rubber glove

Malaysian Rubber Glove Export Trend (2008-2014)

0

10

20

30

40

50

60

70

80

90

100

2008 2009 2010 2011 2012 2013 2014

5.9 7.3 8.5 9.4 9.7 10.4 10.4

50.4

65.3

74 70.7

81.488.5

95.3

Malaysian Rubber Glove Export Trend

Malaysian glove export (USD$b) Malaysian glove export (bil pcs)

14

Growing Global


Malaysia’s Export of Rubber Gloves - World

• Share of nitrile gloves of Malaysia’s total glove export increased from 46% to just 55% in 4 years

Nitrile, 46%NR,

54%Nitrile, 50%

NR, 50% Nitrile,

51%

NR, 49%

Year 2012 Year 2013 Year 2014 1H Year 2015

Nitrile, 55%

NR, 45%

Growing Global



Market outlook

Developed markets had improved growth in import of natural rubber gloves due to latex price collapse

Emerging markets like South America and China registered strong growth in both types of rubber gloves albeit

from a low base. Note that many emerging markets exhibited high double digit nitrile glove growth

Malaysia’s export ratio of natural rubber to nitrile glove has reached 49:51 for 2014 & 45:55 for 1H2015

US latex:nitrile import ratio for year 2014 was 22:78; 1H2015 USA nitrile grew 20%

EU latex:nitrile import ratio for year 2014 was 43:57

Malaysian rubber glove exports (1H2014) 23,567 million pieces & (1H2015) 25,980 million pairs or 10.2% higher

1H2015 Nitrile glove export grew 20% & Latex glove export grew 0%

2012 (mil pairs) 2013 (mil pairs) 2014 (mil pairs)* % change (2013 to 2014)*

Destination Latex Nitrile Latex Nitrile Latex Nitrile Latex Nitrile

USA 3,446 9,649 3,346 10,801 3,158 11,525 (5.6%) 6.7%

EU 5,865 5,352 6,105 7,231 6,003 8,104 (1.67%) 12.07%

Japan 737 1,394 721 1,757 773 1,750 7.21% (0.39%)

South America 3,106 175 3,903 185 4,692 277 20.21% 49.72%

China 542 182 789 293 1,009 339 27.88% 15.69%

Table: Malaysia Export of Rubber Gloves (source: MREPC)

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15

Growing Global


Market outlook

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Import ratio of natural rubber to nitrile glove for US and

EU is 22:78 and 43:57 respectively

EU import of nitrile is expected to grow further

Asia’s per capita consumption of glove is substantially

lower than US and EU (about 30 times lower)

Future demand growth will be driven by emerging

markets such as China and India

Hartalega is well positioned to tap into opportunities in

emerging markets with our branding strategy and NGC

All lines at NGC are interchangeable for production of

nitrile or natural rubber glove

Growing Global


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Hartalega 2016 Macquarie new version for PRINTING

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