KUALA LUMPUR: Kossan Rubber Industries Bhd, which saw its net profit tumble to RM46mil in the second quarter ended June 30 (2Q22), from RM1.06bil a year earlier, expects the performance in the second half of FY22 to be challenging.
The rubber glove manufacturer said in the near term, the glove industry will be confronted by an oversupply situation as a result of overstocking and subsequent inventory adjustments from customers, forcing the average selling price (ASP) to come down.
In addition, Kossan said 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.
“As such, the group expects to encounter 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 expects the technical rubber products (TRP) division to deliver a satisfactory performance in the second half of FY22.,
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“Due to the headwinds affecting the glove sector, the group expects the performance in the second half of FY2022 to be challenging.
“As such, the group will place its near-term expansion plans on hold subject to prevailing market conditions. However, the group remains positive on the glove industry and will continue to focus our efforts on accelerating our transformation and reinvestments into digitalisation and automation to increase productivity and efficiency,” it said.
In the second quarter ended June 30, Kossan’s revenue stood at RM589.86mil, a decrease of 73.6% as compared with RM2.24bil in 2Q21 due to the decrease in revenue from the gloves, TRP and clean-room divisions.
Its earnings per share for the quarter fell 1.8 sen compared with 41.72 sen previously.
For the first six months to June 30, Kossan posted a net profit of RM136.1mil against RM2.1bil a year ago, while revenue fell 71% to RM1.28bil from RM4.43bil last year due to lower revenue from all three divisions.