Brandix Textile subsidiary sales decline

09 Jan '08

3 min read

A continuation of the lean patch experienced by the customers of our subsidiary Brandix Textile, in the US and UK markets, has continued to adversely impact the performance of the company in 2nd quarter as well.

The revenue for the six months dropped by 11%, though in comparison to the 1st quarter the drop in revenue during the 2nd quarter has been a marginal 1%.

The main reason for this decline is due to the drop in prices and orders of key customers which resulted in a drop in average order sizes.

The adverse impact on revenue affected the gross profit and operating margins of the company which resulted in a decline in gross profit by 56% for the six month period, compared to the corresponding period of the previous year.

Although the company achieved a significant cost saving of over LKR 60mn through the coal power plant becoming operational, this could not be translated into higher profits due to the drop in turnover, which resulted in a drop in net profit for the year.

As pointed out in the last investor report, Company focused on capturing new customers, to off set the negative impact due to the lean patch experienced by our main customers.

This strategy resulted in a short term increase in Sales, marketing and sample costs during the year. The company recorded an operating loss of LKR 43.1mn for the past 6 months. The net loss recorded for the six months ended 30th September 2007 was Rs.75mn.

On the other hand the gearing has come down to 12.5% when compared to the last years 20% as a result of settling the term loans amounting to LKR 36mn during the 6 months period. This has also resulted in the finance costs declining by 36% causing less strain on the bottom line.

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