Analysts positive on Kossan’s Plant 16 and Plant 17

KUCHING: Following a recent plant visit to Kossan Rubber Industries Bhd ( Kossan) Plant 16, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) is feeling positive on the takeup rate for the group’s Plant 16 and Plant 17.

Kenanga Research also expects Kossan’s margins to improve going forward.

“We expect gradual margins expansion from fully completed Plant 16, Plant 17 and expected completion of Plant 18 and 19 to be commercially ready by 2019,” the research arm said.

“This is simply because the new plant is designed to save heating and electricity cost via the use of computerised control systems and efficient usage of a single boiler instead of two as in the older plants.

“Additionally, the introduction of robotic packing system would lead to two-third lesser manpower requirements at the packing division.

“The older plants could see stable margins emanating from lower downtime due to their focus on larger orders for single product type and specification, thus reducing idle downtime from frequent machinery setting adjustments to accommodate diverse specifications.”

According to Kenanga Research, Plant 16 is expected to anchor subsequent quarters’ earnings, which was fully commissioned in August 2018.

The research arm noted that Plant 16 has an installed capacity of three billion pieces per annum and will focus on the group’s patented Low Derma Technology gloves.

“The group has started commercial production of Plant 17 (1.5 billion pieces) in November 2018. Construction works for Plant 18 ( 2.5 billion pieces) and Plant 19 (three billion pieces) are currently on-track, with expected full commissioning by the second quarter of 2019 ( 2Q19) and 4Q19, respectively.

“Upon completion, these three new plants will add additional seven billion pieces of gloves per annum, bringing the group’s total installed capacity to 35 billion (up 25 per cent) pieces of gloves per annum by end-financial year 2019 (FY19).”