KUALA LUMPUR, April 27 (Bernama) -- Kossan Rubber Industries Bhd (Kossan) posted a net loss of RM24.25 million for the first quarter ended March 31, 2023 (1Q 2023) compared to a net profit of RM90.10 million in 1Q 2022.
Revenue dropped 42.55 per cent to RM394.71 million from RM687.01 million previously, due to the lower revenue from the gloves and clean-room divisions.
In a filing with Bursa Malaysia today, Kossan said the gloves division's revenue decreased by 47.9 per cent year-on-year (y-o-y) to RM317.54 million during the quarter under review compared with RM609.26 million last year due to the lower average selling price (ASP) and volume sold.
"The company also registered a loss due to market competition, customer destocking and higher costs due to lower plant utilisation.
"Additionally, the performance during the quarter was also affected by higher energy costs due to the increase in natural gas and electricity tariffs," it said.
The clean-room division's revenue decreased by 26.1 per cent y-o-y to RM21.02 million in 1Q 2023 from RM28.43 million in 1Q 2022 due to lower ASP in clean-rooms products.
"The demand-supply imbalance continues to negatively impact the glove sector, as the oversupply of gloves arising from the pandemic-driven surge in additional capacity as well as inventory destocking from customers saw ASPs falling significantly.
"This is also exacerbated by some overseas competitors selling the gloves at lower prices in order to capture the market," said Kossan.
At the same time, it said the sector faced higher energy and labour costs, noting that these headwinds are expected to persist throughout financial year 2023 (FY2023), hence the group has placed its near-term expansion plans on hold in line with the prevailing market conditions.
Meanwhile, the group's technical rubber products (TRP) division's revenue increased by 13.9 per cent y-o-y to RM56.15 million from RM49.32 million in 1Q 2022 due to higher deliveries of TRP.
The group said the anticipated gradual uptick in economic activity and infrastructure spending globally will continue to spur the infrastructure and automotive segments, and the group expects the TRP division to deliver a satisfactory performance for FY2023.
Kossan said its performance in FY2023 is expected to be challenging due to the headwinds affecting the glove sector.
"Beyond the near term, the 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.
"Emerging economies with low per capita consumption will also drive glove demand in the long run," it said.
Moving forward, the group said it will continue to focus on effective cost management and specialised products that meet specific requirements while accelerating the transformation into digitalisation and automation across its operations to increase productivity and efficiency.
-- BERNAMA