Denim, fabric and garment maker Novel Denim Holdings Limited has reported a 23.7 per cent drop in its fourth quarter net sales to $28.6 million, compared to $37.5 million for the same quarter last year. The net loss widened to $13.4 million, from a net loss of $9.4 million in the same three months of 2002.

Garment sales fared even worse, decreasing by 39.5 per cent to $15.8 million, compared to $26.2 million for the same period last year as the company continued to operate in what it describes as "a very competitive environment."

Partially offsetting its results for the three months ended 31 March 2003 was a 12.8 per cent increase in third party fabric revenues which increased to $12.8 million, compared to $11.3 million in the same quarter last year.

The fourth quarter included approximately $9.3 million of non-cash, one-time charges relating to the closure of one of the company's garment factories in Mauritius and the effect of exchange losses.

Mr KC Chao, president and chief executive officer, said: "We are making substantial changes to our operating platform in order to improve our positioning in the volatile global markets.

"Our historical competitive advantages such as a low-cost production base and favourable trade relationships with the EU and the US for our Mauritius and South Africa operations are diminishing, requiring us to re-align our manufacturing and operating costs to those of our competitors, primarily in Asia."

In the near term the company says it will focus on returning its African operations to profitability within the current fiscal year and ramp up its new garment manufacturing facility in Cape Town.

Sales to US customers represented approximately 61 per cent of total garment sales in the fourth quarter against 71 per cent in the same period last year. Garment sales for the quarter consisted of 58.8 per cent denim and 41.2 per cent chino.

For the fiscal year ended 31 March 2003, net sales decreased 8.6 per cent to $145.0 million, compared to $158.6 million last fiscal year. Net income decreased to a loss of $26.2 million, compared to a profit of $2.1 million in fiscal 2002.

Looking ahead to fiscal 2004, the company expects sales to increase by 3-6 per cent and expects breakeven net income for the year as a whole. First half new losses are likely to be followed by a return to profitability in the second half, driven by stronger garment sales and reduced production costs it says.