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Nov 13, 2022 252 likes •421 views

Growing Global .. Innovation Quality Growing

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Growing Global

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Growing Global

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  • 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

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Market Reach and Overseas Operations

Export to over 40 countries Four overseas offices

  • Australia (1996)
  • USA (2003)
  • China (2012)
  • India (2013)

Growing Global

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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%

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Growing Global

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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

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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

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Growing Global

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Highest output with lowest number of workers

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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’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

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Intensified competition

10,800 28,000

  • 10,000

20,000 30,000 Industry average Hartalega average 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

8 35,000 45,000

  • 20,000

40,000 Industry fastest Hartalega fastest Fastest production line speed (pcs/hr/line)

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Growing Global

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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

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Sector leader

10 World‘s largest nitrile glove manufacturer. Valuable Glove Company in Malaysia (current market cap of

  • ver 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

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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 Kossan Top Grove Supermax Hartalega

4-yr CAGR 5-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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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

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Growing Global

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Our enemies have arrived! Are we ready?

13 Growing Global

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OUR STRATEGY

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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

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Talent development

Senior Management Management Executives, Supervisors (critical mass)

Leadership development program by Skills development and lean manufacturing

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Growing Global

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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

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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

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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 Per 75%76%77%78%79%80%81%82%83%84%85%86% Availability% x Performance% x Quality% x Availability% x Per 75%76%77%78%79%80%81%82%83%84%85%86% Availability% x Performance% x Quality% x Availability% x Per 75%76%77%78%79%80%81%82%83%84%85%86%

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Growing Global

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Intensified competition

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 20 40 60 80 100 120 140 160 180 Asia China EU USA per capita glove usage (pcs)

Growing Global

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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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Growing Global

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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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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% 22

*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

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Growing Global

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Intensified competition

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 10,000 20,000 30,000 40,000 FY14 FY15 FY16 FY17 FY18 FY19 FY20 Projected output (mil pcs) Growing Global

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MARKET OUTLOOK

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Growing Global

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Intensified competition

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 3.4 3.9 4.7 4.4 5.5 6.4 6.7 6.6 6.6 68 84 92 94 102 110 122 124 140 150 148 160 171 181 World's Import of Examination Gloves (US$ Bil) World's Import of Examination Gloves (Bil pcs) Growing Global

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  • 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)

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 81.4 88.5 95.3

Malaysian Rubber Glove Export Trend

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

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Growing Global

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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

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Intensified competition

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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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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