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 KOSSAN 7153 KOSSAN RUBBER INDUSTRIES BERHAD 3Q earnings plummet 96% to RM23m, lowest in a decade

KUALA LUMPUR (Nov 2): Kossan Rubber Industries Bhd’s net profit for the third quarter ended Sept 30, 2022 (3QFY2022) plummeted 95.6% to RM23.26 million from RM528.2 million in the same period last year, heavily impacted by lower average selling prices (ASPs) and volume of gloves sold.

Earnings per share fell to 0.91 sen from 20.69 sen previously, the Klang-based glove manufacturer’s Bursa Malaysia filing on Wednesday (Nov 2) showed.

Quarterly revenue declined 56.97% to RM560.52 million from RM1.3 billion in the same period a year ago due to the decrease in revenue from its gloves and clean-room divisions.

Kossan’s gloves division recorded revenue of RM464.17 million in 3QFY2022, down 61.9% from RM1.22 billion in 3QFY2021, due to lower ASPs and volume sold. Additionally, the performance in 3QFY2022 was affected by higher energy and labour costs due to the increase in natural gas tariffs and higher minimum wage.

The group’s clean-room division posted RM31.66 million in revenue, down 31.7% from RM46.36 million in 3QFY2021 due to lower ASPs in clean-room products.

Notably, Kossan’s latest quarterly net profit of RM23.26 million is the lowest since 2QFY2012, when it stood at RM23.62 million.

For the cumulative nine-month period, Kossan’s net profit plunged 93.95% to RM159.36 million from RM2.63 billion a year prior, as cumulative revenue dropped 68% to RM1.83 billion from RM5.73 billion.

Kossan anticipates the remaining quarter of FY2022 will be challenging given the headwinds affecting the glove sector. It intends to place its near-term expansion plans on hold subject to the prevailing supply-demand conditions.

“However, the group remains positive on the glove industry and will continue to focus our efforts on accelerating our transformation and reinvestments into digitalisation and automation to increase productivity and efficiency,” it said even though it expects the glove industry will continue to be confronted by an oversupply situation given the surplus installed capacity as a result of the surge in capacity additions during the pandemic, as well as overstocking and subsequent inventory adjustments from customers, which have forced ASPs to fall significantly.

These factors are in addition to higher energy costs as a result of the Russia-Ukraine conflict and the increase in minimum wages, which Kossan views will continue to negatively impact the glove industry.

“As such, until the demand-supply disequilibrium eases, the group expects to encounter strong headwinds for the remaining quarter of FY2022 and FY2023,” it said.

Over the longer term, Kossan foresees global glove demand to remain on a growth path as a result of a shift in glove usage due to higher healthcare standards and hygiene awareness in both the medical and non-medical sectors.

In addition, increased glove usage in emerging economies with low per capita consumption will also drive global glove demand in the long run.

Kossan said the anticipated gradual uptick in economic activity and infrastructure spending globally will continue to spur the infrastructure and automotive segments for the technical rubber products (TRP) division, and the group expects this division to deliver a satisfactory performance in the remaining quarter of FY2022.

Shares of Kossan finished one sen or 0.83% lower at RM1.20 on Wednesday, valuing the group at RM3.07 billion. Year-to-date, the stock's price is down 37.5%.

http://www.theedgemarkets.com/article/kossan-3q-earnings-plummet-96-rm23m-lowest-decade

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