NEW YORK — A currency exchange loss of $1.7 million along with $2.3 million in impairment charges relating to the “winding-down” of its garment works in South Africa, left Novel Denim Holdings with more than double the loss for its...
NEW YORK — A currency exchange loss of $1.7 million along with $2.3 million in impairment charges relating to the “winding-down” of its garment works in South Africa, left Novel Denim Holdings with more than double the loss for its third quarter ended Dec. 31 compared with the same period last year.
The net loss at the Hong Kong-based supplier swelled to $6.9 million, or 86 cents a diluted share, for the most recent quarter from $3 million, or 34 cents a share, in the prior period, while sales rose 11.1 percent to $42.1 million from $37.9 million.
“As announced two weeks ago, our financial results for the quarter reflected an increase in production costs as a result of appreciating local currencies versus the U.S. dollar and weaker-than-expected production efficiencies, particularly in South Africa,” said K.C. Chao, chief executive officer and president of the company, in a statement.
The $1.7 million exchange loss relates to borrowings that are denominated in South African rands and Mauritian rupees, the company said, adding that the recognized exchange loss in the same period last year was about $2.2 million.
To stem these losses, Novel previously said it was ceasing garment production in Cape Town. “The significant appreciation of the South African rand versus the U.S. dollar has effectively doubled our production costs compared to our original plan,” Chao said. “That increase, coupled with lower-than-expected production efficiencies, has resulted in continual operating losses since the plant opened.”
Novel, however, will continue its textile operations in that country.
For the most recent quarter, garment sales increased 0.5 percent to $21.6 million from $21.5 million in the prior year. The mix was 62 percent denim and 38 percent chino, which compares with a 50-50 mix in the third quarter of the prior year.
Meanwhile, third-party fabric sales experienced a 20 percent gain, coming in at $19.7 million for the most recent quarter from $16.4 million in the prior year’s quarter.
For the nine-month period, the net loss came in at $8.1 million, or $1.01 a share, from $12.8 million, or $1.42 a share, in the same period last year while sales fell 1.5 percent to $114.6 million from $116.4 million.For the current quarter, the company expects to post a net loss of $2 million to $2.5 million, which is before accounting for an exchange loss.
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