Apparel maker Makalot Industrial Co (聚陽) on Friday reported weaker-than-expected pretax profit for last quarter, dragged by weak sales growth and gross margin contraction.
The manufacturer of ready-to-wear apparel and functional clothing reported revenue grew 5.7 percent annually to NT$6.45 billion (US$215.29 million) in the October-to-December quarter, but pretax profit was NT$497 million, 0.2 percent lower than a year earlier.
Gross margin dropped by 1.8 percentage points to 19.2 percent, mainly due to the New Taiwan dollar’s appreciation against the US dollar, a slowdown in sales growth and rising wages for workers in Vietnam, Yuanta Securities Investment Consulting Co (元大投顧) said in a note.
Makalot operates factories in Taiwan, China, Indonesia, Cambodia, Vietnam and the Philippines. The company counts GAP Inc, Fast Retailing Co’s GU sub-brand, Kohl’s Corp, Target Corp, Walmart Inc and Hanesbrands Inc among its major clients.
For the whole of last year, revenue increased 13.03 percent to a record NT$27.05 billion from NT$23.93 billion a year earlier, Makalot said in a regulatory filing.
Pretax profit grew 25.46 percent to NT$2.45 billion last year, the highest in four years and up from NT$1.95 billion in 2018, it said.
Earnings per share were NT$11.14, it said.
However, revenue for this quarter could be flat from a year earlier, as there are no obvious signs that Makalot will add orders from existing clients or see orders transferred from China before the Lunar New Year, Yuanta said.
Gross margin might face more pressure this quarter, mainly due to continued appreciation of the NT dollar and increasing operating expenses, Yuanta added.
Makalot has maintained high cash dividend payouts of more than 90 percent since 2016, so Yuanta said it expects the company to distribute cash dividends of more than NT$7.7 this year, which implies a yield of more than 5 percent and should support the company’s stock price, which has been trending downward since July last year.
Makalot shares closed 0.32 percent higher at NT$156 on Friday in Taipei trading.
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