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Rising cost of material slashes into GTI profits

Garment workers sew clothes at Grand Twins International Factory in 2014.
Garment workers sew clothes at Grand Twins International Factory in 2014. Vireak Mai

Rising cost of material slashes into GTI profits

Taiwanese-owned garment manufacturer Grand Twins International (GTI) posted a 70 per cent decrease in net profit for its 2015 fiscal year, citing a decline in average selling prices against a rise in the cost of raw material imports, according to its filing yesterday to the Cambodian Securities Exchange.

The firm’s accompanying annual report showed that while revenue remained virtually flat last year at around $56 million – a meagre 0.3 per cent year-on-year increase – gross profit fell to $6.5 million in 2015, compared to $11.5 million a year earlier. After-tax figures showed total income fell to about $1 million last year, from $3.4 million in 2014.

Neither GTI, whose primary customer is German sportswear giant Adidas, nor its Taiwanese parent company could be reached for comment yesterday.

According to the garment-maker’s filing, however, the sharp decline in net profit was the result of four factors: the rising average wages of its workers, costlier raw materials, higher printing and embroidery costs, and a decrease in the average selling price of its products.

The company’s annual report showed only a nominal increase in labour costs, which rose to $9.4 million last year, compared to $9.3 million in 2014. This was despite a hike in the minimum wage that came into effect in January 2015, raising the monthly wage threshold by 28 per cent to $128.

Meanwhile, the majority of the company’s $5 million gross profit loss came from overhead costs on direct raw materials, which were supplied nearly entirely by QMI Industrial Co Ltd, GTI’s British Virgin Islands-registered holding company. Raw materials purchases topped $32.2 million last year, up from $28.7 million in 2014.

“The increased costs of raw materials and other expansions to the production chain were needed to comply with Adidas’s standards,” GTI said in its filing.

While GTI’s fourth-quarter losses last year showed a massive 450 per cent drop in profits, the devaluation of the stock has been marginal.

Yesterday’s share closing price sat unchanged at 4,100 riel (about $1.03), a recovery from the early-March low of 3,920 riel (about $0.98). The firm’s earning per share dropped to $0.03 for 2015, compared to the $0.11 per share in 2014, according to the filing.

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