Update Kossan to pay higher dividend on 20-25% earnings growth

by **Cals** Thu 23 Jan 2014, 18:39

Update Kossan to pay higher dividend on 20-25% earnings growth

Business & Markets 2014

Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com

Thursday, 23 January 2014 17:31

KUALA LUMPUR (Jan 23): Kossan Rubber Industries Bhd said that its investors can expect higher dividends for 2014 and expects its earnings to grow by 20% to 25% for the next 2 years.

"Dividend has been on the rise, looking at 2012 and 2013, the payout ratio increased from over 20% to over 30%, so maybe investors can expect something higher from this year onwards," said Edward Yip, general manager of Kossan.

He added that the group does not have a written policy for dividend payment, saying "if we earn more, we pay more."

Kossan expects a 20% to 25% growth in earnings for 2014 and 2015, with Yip hinting that earnings growth may be higher as the forecasts do not reflect the group's potential expansion into Indonesia and Vietnam.

According to Yip, the group had acquired a 2.2ha tract of land in Jakarta for approximately RM6 million for the construction of a plant for production of technical rubber products.

"We are very upbeat on Indonesia's market potential, as the country has a high number of cars sold, on par with Japan and China, consecutively for the last 2 to 3 years," he said.

However, Yip remained tight-lipped on the group's plans for Vietnam but said that Kossan is very positive on the Vietnamese environment.

Domestically, the group has 3 plants under construction, which will collectively add about 5 to 6 billion units of production capacity to its current capacity of 22 billion.

The group aims to increase its capacity to 32 billion gloves by 2017.

On the topic of higher costs due to higher raw material price, fluctuating exchange rates, the implementation of the minimum wage policy and higher energy costs, Yip said that there is "no need to worry" as Kossan passes on the extra costs to its customers.

"Any new cost we factor in, we will come up with a new selling price, and vice versa.

"If raw material prices are coming down, we'll lower prices accordingly," he said.