Kossan 2Q earnings tumble 96%, expects near-term glove oversupply

KUALA LUMPUR (July 26): Kossan Rubber Industries Bhd saw its net profit plunge by 95.6% to RM45.99 million in the second quarter ended June 30, 2022 (2QFY22), down from RM1.06 billion a year ago, on the back of lower revenue and average selling price (ASP) for gloves.

As a result, earnings per share dropped significantly to 1.8 sen in 2QFY22, as compared with 41.72 sen a year earlier.

In a Bursa Malaysia filing on Tuesday (July 26), the Klang-based glove manufacturer said its revenue declined by 73.6% to RM589.86 million in 2QFY22, as compared to RM2.24 billion last year, amid decrease in revenue from its gloves and clean-room divisions.

For the half year period, the group’s net profit tumbled by 93.5% to RM136.1 million, down from RM2.11 billion a year before.

Revenue, on the other hand, fell by 71.1% to RM1.28 billion in 2QFY22, against RM4.43 billion registered in the same period last year.

Quarter-on-quarter, the group’s net profit slid by 48.9%, down from RM90.1 million in the immediate preceding quarter (1QFY22), while revenue came in lower by 14.5% q-o-q, from RM69.06 million in 1QFY22.

Kossan is ultimately controlled by glove tycoon Tan Sri Lim Kuang Sia.

Moving forward, Kossan concedes that the glove industry will be confronted by an oversupply situation in the near term, as a result of overstocking and subsequent inventory adjustments from customers, forcing the ASP to come down.

“In addition, surplus installed capacity arising from existing and new entrants, higher energy costs as a result of the Russia-Ukraine conflict, and the increase in minimum wages will continue to impact the glove industry,” it elaborated.

As such, Kossan expects strong headwinds in the second half of FY22.

“Over the longer-term, global glove demand is expected 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,” it said.

Kossan, however, remains positive on the glove industry and will continue to focus its efforts on accelerating its transformation and reinvestments into digitalisation and automation to increase productivity and efficiency.

Shares of Kossan finished two sen or 1.5% higher to RM1.33 on Tuesday, valuing the company at RM3.4 billion.