Kossan 2Q net profit slips 3% on lower contribution from gloves division

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KUALA LUMPUR (Augt 17): Kossan Rubber Industries Bhd’s net profit slipped 2.5% to RM44.7 million in the second quarter ended June 30, 2018 (2QFY18) from RM45.84 million a year ago, on lower contribution from the gloves division, which were largely offset by the improved performance in the technical rubber products (TRP) division.

The gloves division's lower performance was mainly attributable to the time-lag in cost-pass-through arising from the increase in raw material costs (nitrile butadiene rubber +13.16%), natural gas prices (21.91%) as well as the less favourable USD/MYR exchange rate (-8.82%) compared with 2QFY17.

This resulted in a lower earnings per share of 6.79 sen for 2QFY18 compared with 7.12 sen for 2QFY17.

Quarterly revenue, however, rose 1.3% to RM496.79 million from RM490.51 million in 2QFY17.

For the cumulative six months (1HFY18), the group's net profit declined 3.3% to RM89.99 million from RM93.09 million a year ago, while revenue fell by a marginal 0.96% to RM980.9 million compared with RM990.49 million in 1HFY17.

Going forward, Kossan expects demand for its glove products to remain robust. Its Plant 16 has been fully commissioned, while construction works for Plant 17, Plant 18 and Plant 19 are underway and expected to be fully commissioned between the fourth quarter of this year and the end of next year.

Meanwhile, the TRP division is viewed as stable, with the group being optimistic of its performance for the year.

“With the group’s expansion plans, continued strong demand for our gloves, ongoing transformation programme, improvements in operating efficiency and new plants coming on-stream, management is optimistic of the performance for the financial year ending Dec 31, 2018," it said.

Shares in Kossan closed down 2 sen or 0.45% at RM4.43 today, bringing it a market capitalisation of RM5.59 billion.