Apparel maker Makalot Industrial Co (聚陽實業) yesterday gave a conservative outlook for the company’s business in the second half of this year, as brand clients remain on the sidelines following US President Donald Trump’s tariff policy announcement early last month.
The company also faces potential earnings erosion amid the New Taiwan dollar’s fast appreciation against the US dollar this year, Makalot chairman Frank Chou (周理平) told an annual general meeting in Taipei.
With an order decline expected in the second half of the year, the company would slow down its capacity expansion, while employing flexible capacity allocation and pricing strategy to respond to market changes, and secure as many orders as possible to maintain its market share and steady its factory utilization, he said.
Photo courtesy of Makalot Industrial Co
Makalot, a manufacturer of ready-to-wear garments and functional sportswear products, counts GAP Inc, Fast Retailing Co’s GU sub-brand, Kohl’s Corp, Target Corp, Walmart Inc and Dick’s Sporting Goods Inc among its major clients.
In the first quarter, net profit grew 13.55 percent year-on-year to NT$1.28 billion (US$42.5 million), or earnings per share of NT$5.15, while revenue rose 15.29 percent to NT$9.92 billion from a year earlier.
The firm operates overseas production bases in China, Vietnam, Indonesia, Bangladesh, Cambodia, the Philippines, Guatemala and El Salvador.
However, Trump’s tariffs hit the company’s major overseas bases, with rates of 46 percent for Vietnam, 49 percent for Cambodia, 37 percent for Bangladesh and 32 percent for Indonesia.
Makalot said it would keep its business plans unchanged for new production lines in Bangladesh and El Salvador, while adjusting operations at its plants in Indonesia and Vietnam pending the development of order intake.
As all clients are waiting for the Trump administration’s final tariffs, which might become clearer in early July, the company is conservative about its order outlook for the second half of the year, Makalot CEO Chou Hsin-peng (周心鵬) said.
Despite Trump’s three-month suspension of his tariffs on major trading partners, the implementation of a 10 percent base tariff on all countries still has an impact on end-market demand, he said.
The company has negotiated the 10 percent tariff sharing with major clients, aiming to absorb less than 1 percent of tariff costs on average and no more than 5 percent at the most, he added.
However, the NT dollar’s appreciation against the greenback this quarter is weighing on the company’s earnings, with every 1 percent appreciation in the local currency affecting its operating profit by roughly NT$10 million, or 0.2 percent, Makalot said.
The company has used natural hedging and foreign exchange forward contracts to reduce the impact of exchange rate fluctuations and ensure its operational stability, it said.
Shareholders yesterday approved a company proposal to pay a cash dividend of NT$17.1 per share, the highest ever.
Makalot posted record net profit of NT$4.17 billion last year, up 3.39 percent from a year earlier, or earnings per share of NT$16.68. Revenue in the year increased 9.44 percent year-on-year to NT$35.52 billion.
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