Garment maker Nien Hsing Textile Co Ltd (年興紡織) yesterday said its new plant in Lesotho is to begin production by the middle of next year in a move to tap into the knitwear market.
“The Lesotho plant is expected to be running at its full capacity of 480,000 knitwear units by the end of next year,” Nien Hsing president Tsai Shu-Hsuan (蔡樹軒) told an investors’ conference in Taipei, without disclosing the proposed capital spending for the facility.
The expansion comes as the firm aims to reduce reliance on denim-related products and secure more orders from its existing brand customers in the US, who generate more than 80 percent of Nien Hsing’s total revenue.
By product breakdown, denim textile and jeans are the company’s two largest revenue contributors, making up 30 percent and 60 percent of its total revenue respectively.
Nien Hsing has a monthly capacity of 4.4 million yards of denim textile and 1.8 million units of jeans, company data showed.
The Miaoli-based firm said it would also be capable of manufacturing 600 tonnes of spun yarn per month in Lesotho.
In the July-to-September quarter, the company posted net profit of NT$79.73 million (US$2.64 million), representing a 51.9 percent plunge from NT$165.73 million a year earlier.
Earnings per share were NT$0.39, compared with NT$0.41 a year earlier.
Sales over the period slid 33.6 percent from NT$3.26 billion to NT$2.17 billion, with gross margin falling from 11.9 percent to 7.05 percent, the company said in a filing with the Taiwan Stock Exchange.
The company blamed last quarter’s sluggish performance on soaring cotton prices and fluctuations in foreign exchange rates, including the appreciation of the rand against the US dollar.
Global cotton prices have risen by nearly 30 percent so far this year, a company official told investors, adding that cotton takes up more than 30 percent of Nien Hsing’s total production costs.
However, the company is relatively positive about its business outlook for the coming quarters, as cotton prices are expected to return to normal levels.
The undersupply problem in the global cotton market is forecast to stabilize by the end of this year, Nien Hsing said.
Shares in Nien Hsing dropped 1.18 percent to NT$29.4 in Taipei trading yesterday ahead of the news conference, underperforming the benchmark TAIEX, which edged down 0.7 percent to 10,743.27 points.
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