MALAYSIA: Limited stretch for small glove makers

Kossan Rubber Industries Bhd managing director and CEO Datuk Lim Kuang Sia opines that technology is a new ball game that will change the entire industry in a significant way. However, this is a game that most small-sized rubber glove firms cannot afford to play, as they will find themselves in a tough position transforming technologically.

"Let me put this straight; the big players will get bigger and bigger, while the small players will either become stagnant or slowly phase out," he said.

The rubber glove industry has come to a serious transformation stage, Lim said, where all companies must be able to improve their rubber technology and processing technology, as well as shift from labour-intensive towards automation. Failing to do so, will get the small-scale rubber glove maker in trouble, said the rubber glove tycoon.

"The game has totally changed. Unlike the old days, this industry is no longer about production capacity expansion. You will die if you just keep on expanding and put up another plant. I'm telling you, it won't work," he said.

Lim, who is also the founder and substantial shareholder of Kossan, acknowledged that any rubber glove firm, which had the courage to expand its production capacity in the early days, should have gained a strong foothold today. "But going forward, we must transform. This industry is becoming more and more interesting like what we have seen in the developed countries, where one must really compete on technology," he said.

Alliance Research in a note in January, estimated that the "big four" local glove makers have a total production capacity of 88.3 billion pieces in 2013. Top Glove Corp Bhd, Supermax Corp Bhd, Kossan and Hartalega Holdings Bhd contributed 42.1 billion, 17.8 billion, 15.5 billion and 12.9 billion pieces, respectively.

On a broader perspective, the statistic of Malaysian Rubber Glove Manufacturers Association (Margma) showed that Malaysia, being the world's largest rubber glove producing nation, exported some 96 billion pieces, which supplies 63 % of the global demand amounting to 150 billion pieces.

In other words, out of the 96 billion pieces of local-exported rubber gloves, the "big four" have a combined market share of some 92 %, while all four firms also have a global market share of close to 60 %.

"If you look at the manufacturing sector in any part of the world, either you are big, or you are very small. In the developed countries, big corporations dominate the market while the small players cannot survive," said Lim. He envisaged that Malaysia's rubber glove manufacturing industry is now coming to this stage. "Can the small firms survive? Yes or no.If they are focusing on low-end products, which the big companies usually do not produce, maybe they can (survive), but whether or not they can make money is another question mark," said Lim. However, he warned that the market demand for low-end products is temporary, but a quality product is more sustainable.Lim also said, despite a challenging time ahead for the small-scaled glove makers, leaning towards mergers and acquisitions (M&A) is not a solution. "M&A? No. Do you know why? If you ask me to buy a company, what is the rationale? All their machines are probably outdated.Market, technology, marketing and equipment, I have them all," he said. Lim further said that Kossan's future expansion plan will focus on building new production lines and scrapping the old machines.

Source: "The Sun Daily", Petaling Jaya; 14 May 2014
(Syed Rashid Ali, Karachi, Pakistan)