Kossan to spend MYR1.5b on new Malaysian glove city

Glovemaker Kossan Rubber Industries (Kossan) expects to spend close to MYR1.5 billion (US$358.8 million) on its new advanced glove manufacturing plant in Perak, Malaysia.  Construction on the 824-acre (333ha) land, acquired at a bargain price of MYR82.4 million from Perak’s State Development, will begin in June 2020 and is estimated to be complete by 2022.

Group MD and CEO Tan Sri Lim Kuang Sia said the massive plot in Perak is adjacent to a river, which could supply the plant and save Kossan some MYR10 million annually on water costs. The strategic expansion includes the making of a glove city in the area. “We could use 300-400 acres and subdivide the surplus land to people who supply goods to us and create an ecosystem,” he said.

Kossan has also primed for production from two more plants in Klang which will boost its annual production capacity to 32 billion pieces per annum by end-2019, translating to earnings early next year. Lim is confident of a double-digit growth by 2021 with the expansion and added production lines.

At the same time, there are fears of an oversupply in the industry as rival companies have swiftly ramped up capacity in recent years.

Malaysia is home to four glove manufacturers -Top Glove, Hartalega Holdings, Kossan, and Supermax – that collectively account for an estimated 80 % of the world’s supply of rubber gloves used in sectors ranging from healthcare to food preparations. It was estimated that by December 2020, the Malaysian glove manufacturers would collectively have over 180 billion pieces in capacity. Top Glove, the largest of the four companies, is expected to produce over 70 billion gloves per annum by the end of next year.

According to Lim, Kossan is looking to sell off its unused land to invest instead in active contracts: “We are not a property company. Any land we don’t use, we should dispose of. It is better to cash it in, take the money and put it into the business.”