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Thursday, May 24, 2018

Higher gas price weighs on Kossan's 1Q earnings

Sulhi Azman / theedgemarkets.com
May 24, 2018 20:11 pm +08

KUALA LUMPUR (May 24): Kossan Rubber Industries Bhd announced that its net profit for the first quarter ended March 31, 2018 (1QFY18) slipped 4% year-on-year (y-o-y) to RM45.29 million from RM47.25 million, as the higher price of natural gas trimmed the rubber glove manufacturer's earnings.

Quarterly revenue slipped 3% y-o-y to RM484.18 million from RM499.98 million.

"The slight decrease in the [gloves] division's performance was mainly attributable to the time-lag in cost-pass-through arising from the increase in price of natural gas," Kossan said in a filing with Bursa Malaysia today.

Kossan did not declare any dividend for the quarter.

According to Kossan, the demand for glove products continued to be strong and this was reflected by a 2.7% y-o-y increase in the volume sold in 1QFY18.

Going forward, Kossan said the construction of its two new plants, Plants 17 and 18, is on-track, and is expected to be completed by 3QFY18 and 1QFY19 respectively.

"These two new plants would be capable of producing up to 4.5 billion pieces of nitrile gloves per annum once completed," it added.

As for the 824 acres of land in Perak that it had bought for RM82.4 million, Kossan said it will be used to accommodate its expansion in a centralised location over the medium and longer term.

"The group expects the expansion to take six to eight years to complete and the additional capacity, which will come on-stream progressively, is projected to add a total additional output of 34 billion pieces of gloves per annum when completed," it added.

With the group's expansion plans and continued strong demand for gloves, coupled with its ongoing transformation programme and improvements in operating efficiency, Kossan said it is "optimistic of the performance for financial year 2018".

Currently, Kossan's manufacturing facility is capable of producing 25 billion gloves annually, and its products are exported to over 190 countries.

Kossan shares gained 7 sen or 1% to close at RM7.07 today, for a market capitalisation of RM4.51 billion.

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