Logo of Phnom Penh Post newspaper Phnom Penh Post - Rising cost of material slashes into GTI profits

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.

MOST VIEWED

  • Bodhisattva statue unearthed

    The Apsara National Authority technical team uncovered a sandstone statue of a Bodhisattva while carrying out excavation work at the east entrance of the Ta Nei temple on October 8. The team was trying to find the temple’s roof stone, which had fallen into a

  • Artefact is seized from American auctioneers

    Cambodian and US archaeologists on Thursday discussed the formalities and procedures of returning to Cambodia an artefact which was recently seized by US Homeland Security Investigators (HSI) from an auction house in San Francisco. On Monday, the HSI said US Immigration and Customs Enforcement (ICE),

  • World Bank: Challenges facing the Kingdom

    Cambodia’s economy currently faces challenges including credit growth in the construction and real estate sectors, rising indebtedness and the possible withdrawal of the EU’s Everything But Arms (EBA) agreement, said the World Bank Group’s latest forecast report on the Asia-Pacific economies. The

  • PM visits three EU members in crunch diplomacy mission

    Prime Minister Hun Sen left for Europe on Sunday as he embarked on a five-day diplomatic visit to three EU countries, in a trip analysts have speculated could be crucial in deciding the Kingdom’s ‘Everything But Arms’ (EBA) fate. According to a Ministry of