Seardel reports profit despite hiccups
South Africa's largest textile and clothing manufacturer Seardel has showed profit for the first time since 2007. The company has declared a profit of R8.5 million in the year ended in March 2011 compared to a loss of R203.4 million the previous year. The revenue of the company also saw an increase of 11.7 percent to R2.4 billion in the year.
Despite a rise in group turnover, the company's gross margin dipped by 2.8 percentage points to 23.4 percent. It was due to factors such as the strong rand, the surge in cotton prices from a long term average of US$ 0.58 to about US$ 2 per pound, and the inability to pass the increased input costs to customers.
During the period, the turnover of Seardel's textile division increased 11 percent to R982 million while its operating profit increased 218 percent to R56 million.
Seardel's clothing division, however, reported a R21 million operating loss during the same period, which is a modest improvement compared to the previous year's loss of R26 million. The clothing division is known for brands like Speedo, Brooksfield and After Eden.
Stuart Queen, the CEO of Seardel, has attributed the loss in clothing operations to external factors such as customs fraud and non-compliance of minimum wages by competitors, which makes it difficult to compete.
Customs fraud is perpetuated by either not declaring or under declaring goods. It is a problem because the benchmark price is being set by illegal imports. Similarly, when other companies do not comply with minimum wages rules, they are able to sell clothing at cheaper prices, the CEO said.
Another factor that added to the problems of the company's clothing operations during the period was a 22 percent duty applicable on imported fabric and trims.
Although the company has adopted measures to improve workflow efficiency, the apparel manufacturing operations are likely to remain under pressure, unless there is a change in the functioning of the external environment.
Meanwhile, the company has launched Brand Identity, a new division to manage the existing brands. Queen is hopeful that the new division would deliver significant results in the coming years.
Seardel, which has a workforce of 10,000 people, is planning to launch Love SA, a range of casual wear in August 2011. The new range to be sold through Cape Union Mart stores will highlight local products in order to save and create jobs.
The company has recently launched a unique brand 46664, a lifestyle range which is being sold through Stuttafords and independent retailers. 46664 was former President Nelson Mandela's prison number when he was confined to Robben Island. The company pays royalties for using 46664 and the funds go to the Nelson Mandela Children's Fund.
Seardel CEO said that his company is in talks with other companies in the UK and the US for partnering with them to sell the 46664 brand internationally.
Fibre2fashion News Desk - India