Kossan's 4Q profit up 45.56% on higher contribution from divisions

by **Cals** Wed 24 Feb 2016, 04:15

Kossan's 4Q profit up 45.56% on higher contribution from divisions

By Meena Lakshana / theedgemarkets.com | February 23, 2016 : 10:25 PM MYT
KUALA LUMPUR (Feb 23): Kossan Rubber Industries Bhd saw its net profit rise 45.56% on year to RM55.21 million or 8.63 sen per share in the fourth quarter ended Dec 31, 2015 (4QFY15), from RM37.93 million or 5.93 sen per share a year ago, on higher contribution from its divisions due to higher sales and lower overheads.

In a filing with Bursa Malaysia, Kossan said revenue increased 21.66% to RM439.16 million in 4QFY15, compared to RM360.96 million in the fourth quarter of financial year 2014.

For the full 12 months (FY15), net profit grew 39.6% to RM203.26 million or 31.79 sen per share, compared to RM145.6 million or 22.77 sen per share in financial year 2014 (FY14); while revenue grew 26.15% to RM1.64 billion, from RM1.3 billion.

In notes accompanying its results, Kossan said its gloves division recorded a 44.8% jump in profit before tax (PBT) in FY15, due to a year on year (y-o-y) sales growth of 26%, better product mix and improved operational efficiency.

Improvement of productivity and efficiency in curtailing rising production costs saw PBT at its technical rubber division rise 20.6% y-o-y, while the cleanroom division saw higher sales volume of various cleanroom products and lower overhead cost, which contributed to a 164.44% boost in PBT for FY15.

On its prospects, Kossan said it expects all its three divisions to grow in FY16 and that its group’s earnings growth in FY16 will be underpinned by the balance of 2 billion pieces of nitrile glove capacity from its two new plants, which commenced production in July 2015.

“Our continual effort in carrying out revamp and modification works on some of our aged production lines will amplify our profitability growth due to higher productivity and improved efficiency throughout the financial year of 2016,” the note read.

“Currently, we are operating with 22 billion pieces of capacity, with 70% into nitrile glove,” it added.

Kossan said despite a 30% growth in capacity, there are still pending orders from customers, which strengthens its view that demand for gloves is still going strong.

Therefore, the company is expanding its business operation, with a large-scale expansion on 56 acres of land bank in Bestari Jaya within the next few months.

“The subject land is ready with all the necessary infrastructures and is capable [of] housing four plants with total output of not lower than 18 billion per annum. The entire expansion program will be carried out in four phases, with one plant and total cost excluding the land estimated [at] RM450 million,” it added.

Kossan said Phase 1 of the plant is expected to add 4.5 billion pieces of gloves to its capacity and contribute to the group by the fourth quarter of financial year 2017.

The group also expects its nitrile glove plant in Jalan Meru, an on-going project, to be completed and contribute to the group in the second half of financial year 2017. It will add 3 billion pieces of gloves to its existing capacity.

Also, in anticipation of a challenging operating environment, the company will ramp up production process improvements and automation, to improve product quality and overall efficiency, with the aim of reducing dependence on manual workers.

Kossan shares closed 8 sen or 1.17% lower at RM6.75 sen today, for a market capitalisation of RM4.32 billion.