Shoemaker Pou Chen Corp (寶成工業) on Friday reported a net loss in the second quarter due largely to declining sales and operating losses.
The world’s largest contract maker of branded athletic and casual footwear also has investments in footwear retailing and land development, as well as in financial services providers such as Nan Shan Life Insurance Co (南山人壽).
In the April-to-June quarter, net losses were NT$525.97 million (US$17.8 million), compared with net profit of NT$4.03 billion in the same period last year and net profit of NT$1.19 billion three months earlier, the company’s financial statement showed.
It posted losses per share of NT$0.18 in the second quarter, compared with earnings per share of NT$1.37 a year earlier and NT$0.4 the previous quarter.
Revenue decreased 21.6 percent year-on-year to NT$63.41 billion, but the number rose 6.7 percent quarter-on-quarter.
The company’s shoe original equipment manufacturing (OEM) business made up about 59 percent of its revenue, sliding from 63.9 percent in the first quarter, while retail business increased from 35.8 percent to 40.7 percent, Pou Chen said.
The company’s second-quarter financial results came in lower than expected, affected by weak order visibility for its shoe OEM business and slowing China retail business sales amid tanking consumption demand and promotional discounts, Yuanta Securities Investment Consulting Co (元大投顧) said.
“Second-quarter losses of NT$525 million were dragged by an operating loss of NT$2.11 billion, which offset Nan Shan Life’s contribution of NT$2 billion to nonoperating income, as well as foreign exchange losses of about NT$700 million and about NT$1.37 billion in taxes on undistributed earnings,” Yuanta analyst Peggy Shih (施姵帆) said in a note on Saturday.
Shih said that the NT$2.11 billion in operating losses were due to operating margin staying negative at minus-3.3 percent, compared with 4.6 percent in the second quarter of last year, as the company’s shoe manufacturing business saw operating margin drop to minus-9.6 percent.
In the first half of the year, Pou Chen’s net profit was NT$659.71 million, down 90.5 percent from NT$6.95 billion a year earlier, with earnings per share of NT$0.22.
Revenue dropped 22 percent year-on-year to NT$122.86 billion.
Shih said that Pou Chen’s shoe OEM business in the second half of the year would remain troubled, expecting it to drop up to 30 percent annually this quarter due to low order visibility, while brand clients’ inventory adjustment is likely to drag on fourth-quarter order demand.
Shoe OEM sales dropped 20.1 percent year-on-year in the first half, and the overall sales this year are forecast to fall by between 25 and 30 percent annually, Shih said.
The company’s retail business would also continue to face challenges, she said, predicting its retail business sales for this year to be flat from last year after falling 24.6 percent annually in the first half.
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