Knitted fabric and garment maker Fountain Set swung to a loss over the 16 months ended 31 December amid "one of the more difficult years for the textile and apparel industry and the group."

The company said losses reached HKD324.2m from a profit of HKD210.9m over the 12 months ended 31 August

Sales reached HKD9.2bn over the 16-month period, against HKD7.6bn in the 12 month period ended 31 August. Gross margin fell to 8.6% from 15.3% in 2011.

Fountain Set said that it changed the end of its financial year from 31 August to 31 December, leading to the different lengths of the financial periods being compared.

"The adverse economic environment in North America and Europe caused by factors including high unemployment rate and concerns over default of European debts continued, resulting in weak demand for textile products and further deterioration in the demand for textile and apparel products," the company said.

"At the same time, some large-scale local brands and retailers in China have experienced over-inventory situation which negatively affected demand for textile products.

"During the period under review, there was unusually high price premium of Chinese cotton over that of the rest of the world which mainly as a result of the purchase of domestically produced cotton by the Chinese government at a guaranteed minimum price.

"Coupled with the surging labour cost, high energy cost and RMB appreciation, each operator of the industry value chain has experienced one of the toughest operating environments in the past decade."