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Schiesser Buy Lifts Delta Galil Net

The July acquisition of the German underwear maker made an immediate contribution to sales, earnings and margins in the third quarter.

The July acquisition of German underwear maker Schiesser AG made an immediate contribution to Delta Galil Industries Ltd.’s sales, earnings and margins in the third quarter.

“This is Schiesser’s first quarter as part of the company, but it’s a very promising start,” Isaac Dabah, chief executive officer of the Tel Aviv-based maker of innerwear, hosiery and performance knitwear, told WWD following disclosure of the results. “It was a great fit for us strategically and it’s a consistent company with excellent shelf space. It was very profitable and there’s every reason to think it will continue to be so.”

In the three months ended Sept. 30, the firm registered net income of $20.2 million, or 82 cents a diluted share, more than two-and-a-half times the $7.7 million, or 32 cents, registered during the prior-year quarter. Excluding nonrecurring items that lifted profits, the most recent quarter’s net income was $10 million, or 41 cents.

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Advancing for the 12th consecutive quarter, sales rose 26.6 percent to $234 million from $184.8 million. Excluding the $48.4 million contribution of Schiesser, revenues were up 0.4 percent to $185.6 million. Gross margin leaped to 24.3 percent of sales from 20.1 percent in the third quarter of 2011.

Dabah credited Schiesser with adding “new markets, including Europe, while delivering a higher EBIT [earnings before interest and taxes] margin. With a strong and diversified portfolio of four business segments, we are also increasing our business with a wide range of existing customers and are adding new customers.”

With EBIT of $6.2 million, Schiesser’s EBIT margin — operating profit as a percentage of sales — was 12.9 percent, higher than Delta USA (4 percent), Global Upper Market (7.3 percent) or Delta Israel (2.3 percent). With Schiesser, Europe’s share of corporate sales rose to 35 percent from 24 percent a year ago.

He said the company was in the midst of evaluating opportunities for integration with its new subsidiary, including, as an example, using the Schiesser sales force to bring more DG products to European customers. “A lot of what we’re discussing will come to fruition next year, although we’ve already addressed some of Schiesser’s MIS needs,” Dabah pointed out.

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Profitability was pressured by the company’s decision to consolidate production from two of its Israeli plants into one as it moves more manufacturing to lower-wage countries in and out of the Middle East.

While reiterating its full-year guidance for 2012, the firm issued its first projections for 2013 results, including revenues of $910 million to $920 million, approximately 12 percent above 2012 estimates, and EBIT of between $55 million and $60 million, approximately 13 percent above the view for the current year. Directors also authorized $2.5 million for stock repurchases during the three months beginning Nov. 11.

For the nine months, net income more than doubled to $43 million, or $1.75 a diluted share, as sales increased 13.7 percent to $571.2 million.