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Wednesday, February 24, 2016

Kossan Rubber plans RM450mil expansion programme

KUALA LUMPUR: Kossan Rubber Industries Bhd, which only last year increased its capacity with the operation of two new glove plants, is embarking on yet another expansion exercise estimated to cost RM450mil (excluding land).

In a filing with Bursa Malaysia, the glove manufacturer said the expansion programme, expected to keep it busy for the next four years, would involve building four more plants with total output of at least 18 billion pieces per year on its 56-acre land in Bestari Jaya, Selangor.

“We expect the first plant, with 4.5 billion pieces of capacity, under Phase 1 to be completed and start contributing by the fourth quarter of financial year 2017,” it said.

There will be four phases in all, with one plant each.

Meanwhile, Kossan has begun construction of one nitrile glove plant in Jalan Meru, Klang, located near its existing plants.

This plant, scheduled for completion by the second half of financial year 2017, will add 3 billion pieces of gloves.

Currently, Kossan is operating with a capacity of 22 billion pieces, with 70% being nitrile gloves and the rest natural rubber gloves.

“Despite the recent hefty 30% growth in capacity (with the two new plants starting production in mid-last year), all our production lines are running almost at full capacity and there are still pending up orders from our customers. This positive note strengthens our view that demand for gloves is still strong,” Kossan said.

The company was explaining its current-year prospects in the explanatory notes accompanying its unaudited fourth-quarter (Q4) results submitted to Bursa Malaysia on Tuesday.

Kossan recorded a 45.5% jump in earnings for Q4 FY15 to RM55.21mil from RM37.93mil a year earlier. Revenue improved 21.7% to RM439.16mil.

For the full year ended Dec 31, 2015, earnings grew 39.6% to RM203.26mil on 25.7% higher revenue of RM1.64bil.

All three of its business segments - the gloves, technical rubber and clean-room divisions - boosted their pre-tax profits by double-digit percentages for the quarter under review and for the year.

The gloves division, which contributed about 90% of its total profit, chalked up a 44.8% growth in pre-tax profit to RM243.13mil for FY15.

“The strong earnings performance was mainly attributed to higher quantity of gloves sold by approximately 26% (higher) compared with the previous financial year, better product mix and improved operational efficiency,” Kossan said.

The counter closed 8 sen lower at RM6.75 on Tuesday.

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