Kossan Rubber Industries, a Kuala Lumpur-based glove manufacturer, is preparing for a share buyback program following a bounce in the Malaysian ringgit that sent the shares of the company to its lower level from a record high in December. Shares of the latex products exporter rallied in the stock market after the buyback news.
Lim Kuang Sia, chief executive officer and founder of Kossan Rubber, said Bloomberg in an interview that the 35% drop in the company's shares pushed Kossan to plan a share buyback program. He also advised long-term investors to split up the share because of its present low value. He continued that the glove producer, which is aiming for acquisitions, also anticipates reporting a record profit in 2016.
Investors are curious regarding the solidifying Malaysian ringgit, which could burden exporters, but Lim says they are wrong. According to him, business is moving in a usual trend and that the company has a command for buybacks. Kossan Rubber along with its peers like Malaysian Pacific Industries and Top Glove were the stock market superstars in 2015 as the ringgit dropped to a record low in a 17-year period, making their products cheaper for foreign buyers and thereby enhancing their sales in the international market.
However, the recent rebound in Malaysian ringgit led investors of these export companies to shed their shareholdings in the company. Kossan is the biggest loser in this race for foreign markets. The company's 2015 profit swelled 40% to 203.3 million ringgit while profit at Top Glove climbed 55% to 280.1 million ringgit. In 2015, the currency dropped 19% hurt by poor oil prices and weakening of Chinese yuan. But, ringgit managed to climb 3.9% in 2016.
INDUSTRY TODAY quoted a report from Transparency Market Research, which stated that disposal glove industry across the globe stood at a value of $5.21 billion in 2012. In addition, the industry is anticipated to reach US$7.85 billion within 2019.
Meanwhile, in connection with the Agreed Export Tonnage Scheme, rubber exporters in Indonesia has pledged to reduce their rubber exports until August 2016. According to Karyanto Suprih, director general of foreign trade, the main target of the scheme, which is approved by the International Tripartite Rubber Council's (ITRC) member nations, is to bolster the rubber market by reducing the supply to the global market, as reported by ANTARANEWS.
The supply reduction will start from March 1 to August 31, 2016. As per terms of the scheme, Thailand will trim its rubber export by 324,005 tons while Indonesia and Malaysia will reduce their supply by 238,736 tons and 52,259 tons respectively. The overall supply reduction by the ITRC member nations sums up to 615,000 tons during the reduction period.
Malaysia is the third largest exporter of rubber products in the world. The recent surge in the ringgit has nailed the export sector of the country, which is battling for the overseas market along with Thailand and Indonesia.
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