KUALA LUMPUR: Kossan Rubber Industries Bhd's net profit plunged 95.6 per cent year-on-year (YoY) in its third quarter (Q3) ended Sep 30, 2022, to RM23.26 million from RM528.2 million in the same period last year due to lower average selling prices (ASPs) of gloves and lower volume sold.
Revenue for the quarter dropped 57 per cent YoY to RM560.52 million from RM1.3 billion a year ago due to the decrease in revenue from the gloves and cleanroom divisions, mitigated by the higher revenue in the technical rubber products (TRP) division.
The gloves division recorded revenue of RM464.17 million in Q3 2022, down 61.9 per cent from RM1.22 billion in Q3 2021, dragged by lower ASP and volume sold.
In a Bursa filing, the company said the performance in the current quarter was also affected by the higher energy and labour costs due to the increase in natural gas tariffs and the higher minimum wage.
The clean-room division recorded revenue of RM31.66 million, a decrease of 31.7 per cent compared with RM46.36 million in Q3 2021 due to lower ASPs in clean-room products.
The TRP division recorded revenue of RM64.69 million in the quarter, an increase of 77.2 per cent compared with RM36.51 million a year ago due to higher deliveries of TRP products.
For the cumulative nine-month period, the company's net profit was down by 94 per cent YoY to RM159.36 million from RM2.63 billion last year on the back of lower revenue.
Revenue dropped 68 per cent to RM1.83 billion from RM5.73 billion in the corresponding period last year due to lower revenue from the gloves and clean-room divisions.
The gloves division's revenue dropped 70.7 per cent to RM1.59 billion in the nine months as compared with RM5.43 billion in the same period last year due to the lower average selling price (ASP) and volume sold.
The clean-room division's revenue was down by 44.5 per cent to RM90.96 million versus RM163.86 million last year.
Kossan noted that the glove industry continues to be confronted by an oversupply situation.
Surplus installed capacity due to the surge in capacity additions during the pandemic, overstocking, and subsequent inventory adjustments from customers have forced ASPs to fall significantly.
"In addition, higher energy costs due to the Russia-Ukraine conflict and the increase in minimum wages will continue to impact the glove industry negatively.
"As such, until the demand-supply disequilibrium eases, the Group expects to encounter strong headwinds for the remainder of the financial year 2022 (FY22) and FY2023.
"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.
As a result of the headwinds affecting the glove sector, Kossan expects the performance in the remaining quarter of FY22 to be challenging.
"The company will place its near-term expansion plans on hold subject to the prevailing supply-demand conditions.
"However, the company 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 added.