Eclat Textile Co (儒鴻) is planning to outsource capacity and arrange overtime for workers to catch up on delayed orders once COVID-19 restrictions in Vietnam have been eased and its plants in the country can resume normal operations, analysts said last week.
The restrictions, which are to remain in place until the end of this month, are likely to affect Eclat’s garment sales by NT$1 billion to NT$1.2 billion (US$35.89 million to US$43.07 million), and fabric sales by NT$130 million to NT$150 million, analysts said after Eclat’s annual general meeting on Thursday.
“Earnings in the third quarter will likely be dragged by a pandemic resurgence in southern Vietnam, with production disruptions being a near-term risk,” Yuanta Securities Investment Consulting Co (元大投顧) said in a note.
Photo: Ashley Pon, Bloomberg
Vietnam is an important production base for Eclat, with up to 80 percent of the company’s garment capacity and 30 percent of its fabrics capacity in the country.
The company also has operations in Taiwan and Cambodia.
Amid Vietnam’s worst COVID-19 outbreak since the pandemic began in late 2019, Eclat in the middle of last month partially halted its operations in Dong Nai and Ba Ria-Vung Tau provinces, Eclat said in regulatory filings.
The company told shareholders that it has asked clients about rearranging orders and would add working shifts and increase outsourcing to compensate for clients’ shipment demands, which are expected to boost its revenue in the fourth quarter.
“Clients will mostly accept delayed shipments rather than transferring orders, given that the pandemic is a risk for everyone,” Yuanta said. “In addition, high entry barriers for production of Eclat’s functional sportswear and fabrics make it difficult for clients to transfer orders in the near term.”
Capital Investment Management Corp (群益投顧) agreed.
“There is a strong end-market demand for apparel,” Capital said in a note. “The Vietnamese plants’ lower output is temporary.”
Eclat’s revenue increased 26.75 percent year-on-year to NT$3.46 billion last month, with cumulative revenue for the first seven months of this year rising 51.11 percent year-on-year to NT$21.47 billion.
Net profit for the second quarter expanded 115 percent year-on-year to NT$1.53 billion.
Earnings per share were NT$5.56.
However, gross margin fell to 27.91 percent, from 28.64 percent in the April-to-June period.
In the first two quarters, net profit doubled to NT$2.88 billion from a year earlier, while earnings per share were NT$10.51 and gross margin was 28.24 percent, Eclat said in a financial statement on Aug. 5.
The company told shareholders that it remains positive about its order outlook for the end of this year and next year, but said that the New Taiwan dollar’s appreciation against the US dollar, as well as higher raw material and shipping costs, would weigh on its margin.
“We expect third-quarter revenue of NT$8.89 billion, up 20.6 percent year-on-year, but with higher shipping fees and rising pandemic prevention costs, we revise down gross margin to 27.9 percent for the third quarter, from the 29.8 percent we previously estimated, and forecast earnings per share of NT$4.90,” Jih Sun Securities Investment Consulting Co (日盛投顧) said in a note.
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