The world’s third-largest glovemaker, Kossan Rubber Industries Bhd, has allocated up to MYR 1.5 billion in capital expenditure for the construction of its new plant in Bidor, Perak. Group MD and CEO Tan Sri Lim Kuang Sia said the land clearing process is expected to begin in September, while construction works for the new rubber glove manufacturing plant will commence in June 2020. The state-of-the-art plant is estimated to be completed in three years.
Speaking at a news conference after Kossan’s AGM in Shah Alam, Lim said the company has opted to build the plant after acquiring the 824-acre (333ha) land from the Perak State Development Corp at a bargain price of MYR 82.42 million. The initial plan was to construct the new facility in Banting, Selangor. Lim said the massive land plot in Bidor is also situated near the banks of a river which could save the company MYR 10 million annually on water costs. “We could use 300-400 acres of land and sell the rest. We could subdivide it to people who supply goods to us and create an ecosystem,” he said.
The planned expansion comes amid fears of an oversupply in the industry as rival companies such as Top Glove Corp Bhd and Hartalega Holdings Bhd have swiftly ramped up capacity in recent years. Malaysia is home to the world’s top four manufacturers 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, Malaysia’s top glove manufacturers — which also include Supermax Corp Bhd — would have over 180 billion pieces in combined 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. Kossan will now look to sell off the Banting land at about MYR 30 to MYR 40 per sq ft, Lim said. The company purchased the land — measuring 4.27 million sq ft for MYR 95.99 million or MYR 22.50 per sq ft — on 30 Aug 2017, from a subsidiary company controlled by steel magnate Tan Sri William Cheng Heng Jem. “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,” Lim said.
Kossan is also expecting two more plants in Jalan Meru, Klang — known as Plant 17 and Plant 18 — to be up and running by August and December this year respectively. The two plants will boost its annual production capacity by 5.5 billion pieces to 32 billion pieces per annum by year-end. Lim said the production at the two plants is projected to contribute to earnings beginning next year. With the expansion, he is confident that the company will see a double- digit growth in revenue between 2019 and 2021.
Source: Daily “The Malaysian Reserve”, Kuala Lumpur; 24 May 2019
(Syed Rashid Ali, Karachi, Pakistan)