Apparel maker Makalot Industrial Co (聚陽實業) last week reported stronger-than-expected earnings for last quarter, but said that this quarter could be dragged by weak demand amid the COVID-19 pandemic.
Makalot, which supplies ready-to-wear apparel and functional clothing for global brand vendors, posted net income of NT$416 million (US$13.8 million) for the fourth quarter, or earnings per share of NT$1.89, which beat Jih Sun Securities Investment Consulting Co’s (日盛投顧) forecast of NT$1.81.
Revenue last quarter grew 5.7 percent annually to NT$6.45 billion, while the gross margin fell by 1.88 percentage points from a year earlier to 19.16 percent due to the New Taiwan dollar’s appreciation against the US dollar and rising wages in Vietnam.
Makalot — with factories in Taiwan, China, Indonesia, Cambodia, Vietnam and the Philippines — counts GAP Inc, Fast Retailing Co’s GU sub-brand, Kohl’s Corp, Target Corp, Walmart Inc and Hanesbrands Inc among its major clients.
Its operating margin last quarter improved 0.64 percentage points to 9.16 percent, compared with Jih Sun’s 8.48 percent prediction, mainly due to better control of operating expenses.
The company ended last year with a net income of NT$1.93 billion, an increase of 7.13 percent from 2018, or earnings per share of NT$8.66.
Revenue last year increased 13.03 percent to NT$27.05 billion, the company said in a financial statement.
However, revenue for this quarter could fall by 9.53 percent from a year earlier to NT$6.08 billion, as the company faces disruptions in raw material supplies and shipping restrictions due to the pandemic, Jih Sun said in a note on Friday.
Operating margin faces more pressure this quarter amid the virus outbreak, declining to 9.5 percent from 9.55 percent a year earlier, Jih Sun said, adding that earnings per share might fall to NT$2.07 this quarter, down from NT$2.21 in the same period last year.
“Due to the rapid spread of COVID-19 worldwide, major brands have either closed stores or reduced business hours in response, which will drag consumer demand significantly in the short term,” Jih Sun analyst Channie Wang (王章妮) said in the note.
“In addition, the postponement of the Tokyo Olympic Games would increase inventory pressure on clients — who might seek to reduce inventories or cut orders between the second quarter and the third quarter to cope with shrinking end-market demand — while the company also expects production capacity for this year to be flat from last year,” Wang said, adding that Makalot’s shipments might contract 6 percent annually this year.
Makalot’s revenue this year is forecast to drop 9.57 percent annually to NT$24.46 billion, while earnings per share might fall to NT$7.29, down from Jih Sun’s previous forecast of NT$9.47, after factoring in the impacts of lower factory utilization, quarantine and work-from-home conditions, Wang said.
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