Last year, Spanish textiles group Dogi raised headlines by launching an "anti-ageing" functional fabrics line it boasted was generating strong attention from key customers such as Victoria's Secret.

The move boosted hopes that the Barcelona-based stretch-fabrics maker would finally turn the corner after years of losses. But last night, it emerged that was far from the case.

The embattled company posted a EUR13.6m (US$18.8m) loss in the first half, more than four times the EUR2.97m reported in the same 2006 period, hurt by labour restructuring charges and higher raw-material costs.

This happened despite an 8.5% revenue jump to EUR72.6m, helped by the recent acquisition of US peer EFA.

Dogi said operating losses totalled EUR6.3m as it had to fork out EUR5m to compensate 170 workers it recently laid off (in addition to 90 in January) as part of factory closures to consolidate Spanish manufacturing in a new plant in El Masnou, Barcelona.

The move has triggered heavy protests from trades unions who say the company is "cheating" workers.

Dogi said a stubborn rise in Spanish raw material costs continued to squeeze margins as it was unable to pass them on to customers.

Analysts at Spanish broker Ibersecurities branded the results as "very bad", adding that profit margins fell to minus 9% from 1.6% in the year-ago period.

The broker slapped a "sell" rating on the stock and is reviewing its objective price.

Dogi said last year it would to post a profit in 2007 as it embarked in a restructuring to cut costs and shift most manufacturing to Asia to beat fierce competition from Chinese rivals.

But its targets were changed this summer after the firm ralised its Spanish business "was not going to be profitable." Dogi has devised a new turnaorund strategy that envisages shifting and additional 30% of its Spanish production to cheaper manufacturing posts in Asia to make more than two thirds of its products there.

The new plan, led by Dogi's recently-appointed chief executive, Karel Schroder, should enable the firm to deliver a EUR800,000 net profit in 2008 on sales of EUR189m.

Dogi makes lingerie and underwear fabrics for apparel giants such as Victoria's Secret and DBA Apparel.

By Ivan Castano.