Monday 17 Jun 2024
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KUALA LUMPUR (Nov 15): Kossan Rubber Industries Bhd reported a net profit of RM40.97 million for its third quarter ended Sept 30, 2023, up 76.14% from RM23.26 million in the corresponding quarter a year ago, thanks to better cost controls and lower raw material costs in its glove business, as well as the sale of higher margin infrastructure products at its technical rubber products (TRP) division.

The stronger earnings came despite revenue being 28% lower at RM403.48 million, versus RM560.52 million previously, as contribution dropped from all divisions, its bourse filing showed.

Its glove division's revenue dropped 30.8% amid lower average selling price and lower sales volume, but profit before tax (PBT) improved on cost control management, with lower raw material costs. TRP revenue also saw a decline, due to lower deliveries of TRP products, but PBT for the segment about doubled due to higher margin infrastructure products. The glove division contributed about 80% of the group's revenue for the quarter, with TRP contributing 14%; the clean room business made up the rest.

With the stronger quarterly profit, earnings per share grew to 1.61 sen in 3QFY2023, from 0.91 sen per share in 3QFY2022. No dividend was declared for the latest reporting quarter.

The 3QFY2023 earnings was also a return to the black for Kossan after two consecutive loss-making quarters, when it made a total net loss of RM27.55 million. 

This led to the group lodging a net profit of RM13.42 million for the first nine months of FY2023 (9MFY2023).

This, however, was just 8.42% of the RM159.36 million the group made in the same period last year, as 9MFY2023 revenue dropped 34.97% to RM1.19 billion from RM1.83 billion in 9MFY2022, again on lower revenue from all divisions. Hence, cumulative earnings per share shrank to 0.53 sen from 6.25 sen previously.

On prospects, Kossan said the ongoing supply-demand imbalance continues to affect the glove sector, despite emerging signs of stability. It anticipates this challenging operating environment to persist throughout the rest of FY2023.

"As the market undergoes readjustments due to industry consolidation and capacity rationalisation, the pressure on average selling prices from international competitors is expected to persist. Despite these immediate market challenges, the long-term outlook for glove demand remains positive, driven by increasingly stringent standards and heightened hygiene awareness in both the medical and industrial sectors," the group said.

It also expects its TRP business to achieve satisfactory performance in FY2023, driven by an anticipated gradual increase in global economic activity and infrastructure spending that particularly benefits the infrastructure and automotive segments.

In the meantime, it plans to continue with more effective cost management, while accelerating the digitalisation and automation of its operations to overcome manpower challenges, enhance overall productivity and efficiency, and reduce production costs.

Kossan shares closed four sen or 2.78% higher at RM1.48 on Wednesday, giving the group a market capitalisation of RM3.79 billion. Year to date, the stock has gained 38 sen or 34.55%.

Edited ByTan Choe Choe
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