Kossan hits jackpot as 3Q20 earnings surge 609%

by NUR HANANI AZMAN / pic by MUHD AMIN NAHARUL

KOSSAN Rubber Industries Bhd’s noted that higher demand and pricing power enabled it to post stellar earnings for its third quarter ended Sept 30, 2020 (3Q20), with net profit rising 609% year-on-year (YoY) to RM348.74 million as improvement was recorded across all three divisions — gloves, technical rubber products (TRPs) and cleanroom and safety business.

Revenue for the quarter increased by 94.51% YoY to RM1.03 billion as its rubber gloves division sales increased 103.24% to RM946.57 million in 3Q20 from RM465.75 million in 3Q19, with its pretax profit rising 670.8% YoY to RM416.65 million.

According to Kossan, the improved performance was mainly attributed to the higher volume sold (34.9%) and higher average selling price (ASP) compared to 3Q19.

The TRP division recorded revenue of RM46.47 million in the current quarter compared to RM46.61 million in 3Q19, while profit before tax rose 19.4% to RM9.75 million compared to RM8.17 million from a year ago.

“The improved performance in the current quarter was mainly attributable to the resumption of full operations from the lockdown imposed under the Movement Control Order (MCO) and the rebound in deliveries in the infrastructure segment,” the company said in a bourse filing yesterday.

Its cleanroom and safety division’s revenue and pretax profit rose by 118.82% YoY and 1131.8% YoY respectively to RM40.25 million and RM10.19 million in 3Q20.

As a result, Kossan’s earnings per share for the quarter were 27.27 sen versus 3.84 sen in 3Q19.

Kossan announced its interim single-tier tax exempt dividend of three sen per ordinary share, payable on Dec 9.

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

Post-Covid-19, the Malaysian Rubber Glove Manufacturers Association expects glove demand to expand by at least 20%-25% from the usual 8%-10% annual growth rate.

Kossan said the TRP division, which had been impacted by the MCO, has since resumed full operations with a substantial improvement in its performance in the current quarter.

“With the anticipated gradual uptick in economic activity and infrastructure spending domestically and regionally, the TRP division, which comprises the infrastructure and automotive segment, is well placed to capitalise on the continued recovery in these sectors, and the group expects this division to remain profitable.

“For the gloves division, demand continues to far exceed supply. The increase in ASP has started to be reflected in the current quarter, and the group expects further significant upward price adjustments on a quarter-on-quarter basis in 4Q20,” it added.

Kossan is confident of a further step-up in revenue and profit growth in 4Q20 and for financial year 2020 to be an exceptional growth year for the group.

Kossan’s share price rose 0.13% or one sen to RM7.50 yesterday, giving it a market capitalisation of RM19.18 billion.

The Healthcare Index fell 7.97 points or 0.19% to close at 4,122.36 yesterday.

Top Glove Corp Bhd fell two sen or 0.24% to RM8.48, while Supermax Corp Bhd fell by 15 sen or 1.53% to RM9.63, and Hartalega Holdings Bhd ended two sen higher at RM18.22.