Kossan Rubber expects strong FY21 after posting 4Q record profit

The demand for gloves will continue to undergo secular growth as a result of increased healthcare and hygiene awareness


KOSSAN Rubber Industries Bhd predicts rubber glove demand to remain robust for financial year 2021 (FY21) with average selling prices (ASPs) to remain high despite the rollout of vaccines to treat the Covid-19 pandemic worldwide.

“Post-pandemic, the demand for gloves will continue to undergo secular growth as a result of increased healthcare standards and hygiene awareness in the medical and non-medical sectors,” Kossan noted in an exchange filing yesterday.

The company added that with the new incoming capacity and efficiency improvements, its glove division is expected to deliver an even stronger performance in FY21.

“For the technical rubber products (TRP) division, the anticipated gradual uptick in economic activity and infrastructure spending domestically and regionally, will continue to bode well for the infrastructure and automotive segment and the group expects this division to remain profitable in FY21,” said Kossan.

The group expects to see a strong long-term relationship with customers and robust demand for products in the gloves and cleanroom divisions coupled with a stable TRP division, thus leading Kossan to state it is confident that FY21 will be an extraordinary year for the group.

The Malaysian Rubber Glove Manufacturers Association (MARGMA) in its January 2021 projections said Malaysia’s glove export revenue to hit RM29.8 billion in 2020 compared to RM17.4 billion in 2019.

While global demand is estimated to reach 360 billion pieces of gloves in 2020 compared to 270 billion in 2019.

“MARGMA projects annual demand growth of 15%-20% with Malaysia’s projected glove export revenue to be RM34 billion in 2021 and global glove demand to be 420 billion pieces,” Kossan quoted MARGMA in a filing to Bursa Malaysia.

Kossan’s net profit surged 789% to RM542 million in the fourth quarter (4Q) ended Dec 31, 2020, from RM61 million posted in the same quarter last year.

Revenue went up by 125% to RM1.3 billion for the same quarter under preview from RM578 million recorded last year due to improved overall performance in the gloves and cleanroom divisions compared to last year.

Kossan declared a second interim dividend of three sen a share and a special payout of eight sen a share.

Its gloves division recorded revenue of RM3.3 billion for the financial year under review, compared to RM1.9 billion posted the year before.

“The improved performance was mainly attributable to the strong demand growth for the group’s glove products, with higher volume sold, an increase of 19.22%, and better ASP in comparison to last year,” it said.

Additionally, its TRP division recorded revenue of RM163.25 million in FY20, a decrease of 9.7% compared to RM180.74 million last year.

The company also intends to undertake share buybacks as glovemakers’ share prices continue to fall despite sterling business prospects.