Kossan 2Q earnings rise 2-fold

by SHAHEERA AZNAM SHAH/ pic credit: KOSSAN

KOSSAN Rubber Industries Bhd’s net profit rose by 135% year-on-year (YoY) in its second quarter ended June 2020 (2Q20), to RM131.06 million as the contribution from its gloves and cleanroom divisions improved.

The rubber glove manufacturer’s revenue for the quarter rose 27.45% YoY to RM701.68 million as its glove business benefitted from higher sales and pricing power. Earnings per share for the quarter stood at 10.25 sen as against 4.37 sen last year.

Revenue from Kossan rubber gloves division increased 28.83% to RM630.57 million in the quarter from RM489.45 million last year, while the division’s profit before tax (PBT) jumped 143.28% to RM150.61 million compared to RM61.91 million a year ago.

The improved performance was attributable to the higher volume sold and better average selling price during the quarter, the firm stated in the exchange filing yesterday.

Kossan’s cleanroom division’s revenue and PBT jumped to RM45.56 million and RM8.57 million respectively in 2Q20 compared to RM17.66 million and RM0.63 million recorded for the same period last year.

The improved performance was attributable to the increasing demand for the division’s products as a result of the Covid-19 pandemic.

The group’s technical rubber products division recorded a revenue of RM25.14 million in the current quarter, down 41.16% YoY, while its PBT dropped 79.62% YoY to RM1.52 million.

The weaker performance was due to the imposition of the Movement Control Order which had disrupted the division’s operations, and the slowdown in the infrastructure and automotive industry.

Moving forward, Kossan expects its glove division to remain strong due to the high projection of the glove demand globally.

“The need for personal protective equipment, including rubber gloves, has increased significantly as the Malaysian Rubber Glove Manufacturers Association projected global glove demand to grow 20% to 330 billion pieces in this year.

“The Covid-19 outbreak has resulted in the demand for protective gloves to grow exponentially, leading to a supply-demand imbalance,” it said.

Kossan added that its higher selling prices for gloves will impact its 3Q and 4Q results.

“With the additional capacity of around 15% to 20%, we are confident of a further step-up in revenue and profit growth on a quarter-on-quarter basis in the 3Q and 4Q,” it said.

Glove counters came under selling pressure on Bursa Malaysia yesterday with Kossan falling 8.16% or RM1.30 to RM14.64, dragging its market capitalisation to RM18.72 billion.

Top Glove Corp Bhd fell RM2.50 or 8.96% to RM25.40, while Supermax Corp Bhd eased RM2.30 or 10% to RM19.80 and Hartalega Holdings Bhd ended RM1 or 5.7% lower at RM16.50.