Kossan hedged against latex and US dollar

  • Business
  • Thursday, 28 Jul 2005

AMID concerns among investors that rubber glove exporters' earnings will be hurt by record latex prices and a rising ringgit, Kossan Rubber Industries Bhd said it has hedged its positions in latex and the US dollar.  

The company said in a statement yesterday its earnings potential “remains intact and stable” although the current situation was temporarily not in its favour.  

It is the company's business strategy to plan for stability and it had therefore locked in a quantity of latex at a lower price and sold forward its US dollar receivables for six months.  

As a result, its latex cost is lower than the current market price of RM4.25 a kilo, as quoted by the Malaysian Rubber Board.  

“On average, we are paying RM3.70 to RM3.90 a kilo of latex up till September,” Kossan said. 

Companies that did not hedge would have to pay a lot more as the latex price has increased 40% from RM3 per kilo early this year.  

In its currency hedge, this is done to mitigate any sudden change in exchange rates and to shield the company over the transition period before its selling price adjustments take full effect.  

“All our US dollar-denominated receivables have been sold forward or locked in until December,” the company said.  

In addition, it had raised its selling price from a minimum of US$0.50 to US$1.50 per 1,000 pieces of gloves on a gradual basis for orders received from August onward.  

“Our buyers are receptive to our official notice to raise the price,” it said. 

Kossan said its size as a glove producer and its product quality were the reasons buyers were willing to bear with it during this tough period. 

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