Kossan’s 3Q profit driven by demand, margins

Firm says the growth was achieved despite the increase in natural gas and nitrile prices


Kossan Rubber Industries Bhd’s net profit for the third quarter ended Sept 30, 2018 (3Q18), increased by 18.54% year-on-year (YoY) to RM54.15 million due to higher demand and pricing power.

In an exchange filing last Friday, the glove maker noted its technical rubber products division posted a 21.6% jump in revenue to RM46.14 million, while pretax profit soared 89.48% to RM6.88 million in 3Q18.

The improved performance was mainly attributable to increased sales deliveries and sales of higher margin products.

Kossan’s gloves division revenue rose 18.75% to RM505.78 million in 3Q18, with pretax profit increasing by 17.62% to RM63.07 million in the quarter.

The improved performance was achieved on the back of continued strong demand for its glove products, with higher average selling prices (+11.5%) and higher volume sold (+11.9%) compared to the preceding year.

Kossan said the growth was achieved despite the increase in natural gas (+23.74%) and nitrile (+38.35%) prices, as well as the less favourable ringgit-US dollar exchange rate (-3.93%).

Natural rubber prices declined (-23.67%) during the period under review.

Its cleanroom division recorded a revenue and pretax profit of RM21.03 million and RM920,000 respectively in 3Q18, compared to RM24.8 million and RM790,000 in 3Q17.

Revenue for the quarter increased 17.32% YoY to RM573.9 million, which is its highest quarterly revenue yet.

The company noted the glove industry’s prospects remain strong with continued growth in the demand for its glove products.

Its Plant 17, which is capable of producing up to 1.5 billion pieces of gloves per annum, has been fully commissioned in November 2018 and is expected to contribute positively to the group’s performance in the coming quarter.

In addition, the construction works for Plant 18 (2.5 billion pieces) and Plant 19 (three billion pieces) are on track with expected full commissioning by 2Q19 and 4Q19 respectively.

“Thereafter, the next phase of the group’s expansion programme will be focused on Bidor in Perak, following the purchase of the 824-acre (333.5ha) land for RM87.4 million in March 2018.

Kossan said the expansion, which is currently in the planning stage, will commence in 2020 and is set to take eight years to complete. It is also projected to add a total output of 45 billion pieces of gloves per annum upon completion.