Revenue tumbled 65.1% to RM2.32 billion in FY2022 from RM6.63 billion 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 68.1 % to RM1.99 billion in FY2022 as compared with RM6.26 billion in FY2021 due to the lower average selling price (ASP) and volume sold.
It also attributed the sharp drop in profit to market competition, customer destocking and higher cost due to lower plant utilisation. Additionally, the performance in FY2022 was affected by higher energy costs due to the increase in natural gas tariffs.
Net loss in Q4
The fourth quarter (Q4) results saw Kossan posting a net loss of RM2.49 million against a net profit of RM218.67 million in the previous corresponding quarter.
Revenue for Q4 declined 47.9% to RM481.45 million from RM924.56 million previously due to a decrease in revenue from all divisions.
“Clean-room division’s revenue decreased by 38.6% to RM125.33 million in FY2022 as compared with RM204.13 million in the previous year due to lower ASP in clean-room’s products.
The only bright spot was the technical rubber products (TRP) division which saw revenue rising 16% to RM197.01 million in FY2022 as compared with RM169.89 million in FY2021 mainly due to higher sales for TRP’s products, it said.
On its prospects, Kossan said the glove industry continues to be impacted by the oversupply of gloves.
It said the surplus installed capacity due to the surge in capacity additions during the Covid-19 pandemic, coupled with inventory destocking from customers, have forced the ASP to fall significantly. The industry also faces higher energy and labour costs.
No respite in FY2023
The group expects these headwinds to continue through FY2023 and has placed its near-term expansion plans on hold subject to the prevailing demand-supply situation.
As a result of the headwinds affecting the glove sector, Kossan expects the performance for FY2023 to be “severely challenging”.
“However, the group remains positive on the glove industry and will continue to focus on effective cost management and accelerating the transformation into digitalisation and automation across the operations to increase productivity and efficiency,” it said.
Over the longer-term, it expects global glove demand 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.
In addition, increased glove usage in emerging economies with low per capita consumption will also drive global glove demand in the long run, it added.
Kossan’s share price rose 4 sen to RM1.13 today, valuing the company at RM2.89 billion.