Sept. 19 (Bloomberg) -- Kuan Kam Hon saw the need for rubber gloves during the early years of the AIDS epidemic.
At the time, health-care workers and others were increasingly using the gloves to protect themselves against the virus and other infectious diseases. So Kuan turned his stagnating woven-label and badge manufacturing plant into a maker of latex gloves.
The decision has made Kuan, 66, a billionaire. His Kuala Lumpur-based company, Hartalega Holdings Bhd., has soared 56 percent this year, reaching an all-time high yesterday. Kuan and his family own 55 percent of the company. He has never appeared on an international wealth ranking.
“He is very involved in the installation and design of equipment, in the day-to-day production,” said Ang Kok Heng, Kuala Lumpur-based chief investment officer at Phillip Capital Management Sdn., who has known Kuan since Hartalega’s initial public offering in 2008. “He is the person who is everywhere in the factory.”
Hartalega -- the company’s name is a combination of two Malay words that mean “relief assets” -- is now the world’s biggest synthetic-glove maker, and one of its most efficient. A robotic system that mimics the human hand motion of stripping gloves off molds has helped it reduce costs and make its production lines some of the fastest in the industry, churning out as many as 45,000 gloves an hour, according to the company.
Hartalega’s earnings before interest, taxes, depreciation and amortization margin, was almost 34 percent in the fourth quarter of its financial year ended March 31, about double its competitors’, including Malaysia-based Top Glove Corp. Bhd.
“He enjoys higher margins because of low raw material costs, low usage of materials, higher productivity and lower labor requirement,” said Ang, who helps manage $428 million, including investments in Hartalega. “They can produce more gloves per line, which other glove companies cannot do.”
Hartalega has six plants that can produce 13.6 billion gloves a year, according to company reports, and is spending as much as 1.9 billion ringgit ($580 million) to build a manufacturing complex with 72 production lines by 2021. The new lines will produce an additional 28.5 billion gloves a year, the company said.
Kuan started working in 1969 at his father’s property development company, Kuan Yen & Sons, building high-end homes in Kuala Lumpur and its suburbs. In 1978, he made his foray into manufacturing by setting up Timol Weaving Sdn., a maker of woven labels and badges. He decided to venture into rubber glove manufacturing when the recession in the 1980s “coincided with the end of the building and weaving businesses,” his son, Kuan Mun Leong, who is Hartalega’s managing director, said in an e-mail.
In 2002, Hartalega invested in the research and development of thin nitrile gloves that can be used by health-care professionals and patients allergic to rubber protein.
“At the time, nitrile gloves were chiefly used in industrial applications and not in the medical sector due to their heavy weight and thickness, which was a hindrance for medical practitioners in the examination of patients,” said the billionaire’s 37-year-old son, Mun Leong. “Nitrile gloves are a necessity as there are people who are allergic to rubber protein.”
Kuan introduced the world’s first 4.7-gram nitrile glove that bore the elasticity and softness of natural rubber, without the protein allergy risk. The lightest nitrile glove that Hartalega currently produces weighs 3.2 grams, his son said. Global demand for the synthetic gloves is set to grow as much as 20 percent a year till 2014, he said.
Kuan has a net worth of at least $1 billion, based on the value of Hartalega shares and warrants held by him and his family, as well dividend income since 2008, according to the Bloomberg Billionaires Index. The Kuan family declined to comment on their wealth.
“We would prefer not to speculate on this,” the billionaire’s son, Mun Leong, said in an e-mail to Bloomberg News.
The patriarch owns his shares through holding companies Hartalega Industries Sdn. and Budi Tenggara Sdn., according to the company’s latest annual report. His two sons also directly own shares in the glove maker.
Kuan stepped down as managing director in November while remaining executive chairman, paving the way for his son, Mun Leong, to helm the company. The younger Kuan, who holds a mechanical engineering degree and an MBA, joined Hartalega’s engineering department in 2001, according to the company’s annual report. The patriarch’s older son, Kuan Mun Keng, 38, a certified practicing accountant, is executive director at the company and oversees sales and marketing as well as corporate finance.
“Now, he is slowly handing over to his sons,” Phillip Capital’s Ang said.
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