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26. October 2006

MALAYSIA/VIETNAM: Kossan’s Viet ops to focus on technical rubber products

Source: Daily "The Star", Kuala Lumpur; 26 Oct 2006

KUALA LUMPUR: Kossan Rubber Industries Bhd's RM6
million venture into Vietnam will initially focus on
developing its technical rubber products (TRP)
division.

The venture, slated to take place next year, is
expected to help grow this business segment. The TRP
division currently contributed some 20% to the
company’s earnings, said a source familiar with the
company.

“But Kossan expects to grow its contribution to around
25%,” he said recently.

He said the investment in Vietnam was a small part of
an initial strategy to test the market there. For a
start, the Vietnam operations will cater to the local
market.

“Depending on this market's response, the company
could possibly start exporting its TRP to other
countries,” the source added.

Vietnam was selected for its strategic location and
competitive business environment, he said. “The cost
structure is competitive and there are tax benefits
and other incentives for foreign investors,” he said,
adding that these made it an attractive place for
investment.

He also said labour cost in the country was 50% lower
than in Malaysia.

Kossan was also exploring possibilities of exporting
its TRP to Japan, China, the US, Australia and
Germany, the source said. Its TRP segment mainly
caters to the marine, motor vehicle and construction
sectors. The company’s current capacity utilisation
for TRP stands at about 80%.

On Kossan's glove business, the source said the
company, prompted by rising demand in powdered and
medical gloves, had decided to bring forward its
2007/2008 plans to install another 26 lines for glove
production. The first 13 lines are expected to be
fully operational next April.

For this expansion, the company is expected to set
aside RM60 million to RM65 million for capital
expenditure.

The source said this growth plan was part of a larger
programme to install 76 more lines in stages up to
2009. Up to September, Kossan has 75 lines, including
26 installed this year and fully operational.

He also said the company was on track to produce about
6.5 billion gloves this year, surpassing its target of
6 billion pieces set several months ago.

Under this expansion programme, the company expects to
produce close to 10 billion pieces per year by the
first half of 2008.

For the second quarter to June, the group registered
net profit of RM9.6 million on RM133.2 million in
sales. In comparison, it achieved net profit of RM7.2
million and revenue of RM88.5 million in the previous
corresponding quarter



(Syed Rashid Ali, Karachi, Pakistan)

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