Garment manufacturer and down supplier Kwong Lung Enterprise Co (光隆實業) revised up its forecast for this year’s revenue growth by 5 percentage points to between 15 and 20 percent on the back of robust garment sales.
“Small to medium-sized orders for garments from new and old clients would continue to drive the sales momentum this year,” chairman and president Hebert Chan (詹賀博) told an investors’ meeting on Thursday in Taipei.
As garments offer better margins and orders remain bullish, the company will mainly produce garments in 2021, which it expects to also drive up demand for down and home textiles.
Garment profits surged 301 percent annually in the first half, accounting for a record 75 percent of total earnings, due to rising demand for outdoor and athletic wear, the company said.
However, profits from down declined 20 percent annually in the first half, accounting for 24 percent of overall profits, as prices fell from NT$66 to NT$54 (US$2.10 to US$1.72) per kilogram last quarter, special assistant and spokesman Jack Lee (李宗恆) said.
Although down prices have stopped falling this quarter, they are expected to remain low, as demand from China remains weak, he said.
Home textiles posted profits of NT$4 million last quarter, compared with net losses due to a fire a year earlier, he added.
As orders diverted from China rise because of the US-China trade dispute, the company said it would add eight production lines at its four Vietnamese garment plants in the second half, and another 10 lines next year, bringing the total to 124 lines, Lee said.
Total garment output is forecast to post double-digit growth in the following years, he said.
Thanks to rising orders and profits from its garment business, second-quarter net income surged 51.82 percent annually to NT$229.91 million.
Earnings per share improved to NT$2.04 from NT$1.41 a year earlier and NT$0.1 in the first quarter.
Garment companies usually purchase the bulk of their raw materials early in the year, resulting in lower profits in the first quarter, while shipments usually rise in the third quarter as consumers begin to buy clothing for winter, Kwong Lung said.
Gross margin improved 2.1 percentage points annually and 5.76 percentage points quarterly to 15.57 percent last quarter, as the company boosted garment shipments to ease the impact of falling down prices, it said, adding that it would continue to do so to raise gross margins.
Kwong Lung shares yesterday closed up 1.35 percent to NT$45.10 in Taipei trading.
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