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03. February 2006

MALAYSIA: Kossan capacity to expand by 30 %

Source: Daily "The Star", Kuala Lumpur; 3 Feb 2006

Kossan Rubber Industries Bhd's RM52 million expansion
is estimated to boost production capacity by some 30%,
said managing director Lim Kuang Sia.

The expansion, which will see 26 new glove production
lines added to an existing 40, is part of Kossan's
long-term plan to capitalise on rising global demand
for high-end gloves.

“Global demand grows at some 3.5% per annum and gloves
are very much sought-after by developed countries and
China, due to heightened awareness in the medical
field,” Lim said.

The expansion, expected to be completed this year,
will see the first 13 lines in operation after the
Chinese New Year. The rest of the lines are expected
to run in July.

Main board-listed Kossan produces 3.9 billion gloves a
year, with production estimated to hit some six
billion when the expansion is completed.

Lim said he was not too concerned about competition or
rising raw material prices, as he believed global
demand was healthy enough to keep all glove producers
busy. Currently, Kossan exports to the United States,
Britain, Europe, Scandinavian countries and South
America.

Kossan supplies some 4% to 5% of global demand and
aims to hit 6% upon the completion of its production
expansion.

On the whole, Malaysia supplies 50% of the global
glove demand, which stands at about 100 billion pieces
per year.

“Other than strong global demand, the substitution
effect for natural rubber gloves is virtually minimal.


“We believe that synthetic and PVC gloves are not a
threat and will not replace natural rubber gloves.
Instead, they can complement natural rubber gloves,”
Lim said.

He also said the rising price of raw materials might
affect the affordability of rubber gloves, which could
lead to cost-cutting measures such as reducing certain
properties in a glove’s composition.

“But this affects the quality of the glove. In Kossan,
we believe that high quality is the product's strength
and we do not compromise on this aspect,” he said.

Kossan's glove business contributes some 75% to its
earnings, while the balance comes from industrial
rubber products.

Lim projects that gloves will contribute up to 80% to
the company's earnings soon due to healthy global
demand.

The company, which plans to expand its industrial
rubber products business overseas, is in the midst of
conducting studies for this strategic move, citing
Vietnam as an example.



(Syed Rashid Ali, Karachi, Pakistan)

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