Denim and chino fabric maker Novel Denim Holdings Limited has stopped production at its South African textile factory after failing to halt its ongoing losses. 

The company on Tuesday said it will try to sell the Cape Town-based business or its assets, and has taken a $3.7 million charge in the third quarter ended 31 December 2004 to write-down fabric inventories and provide for severance payments.

"Unfortunately, due to the ongoing losses, we have no choice but to halt production in our South African Textile plants," commented Mr KC Chao, chief executive officer and president of Novel Denim.

Following this wind-down, the company's sole operation will be NDP, its fabric and dyeing business, in Shenzen, China.

For the third quarter, Novel Denim said net sales increased by 36.1 per cent to $20.9 million, up from $15.3 million for the same quarter last year.

Net loss narrowed to $6.0 million from a net loss of $6.9 million in last year's quarter.

Net loss from discontinued operations decreased to $0.6 million from a net loss of $5.2 million. This figure includes the company's South African garment operations and all operations in Mauritius.

Net loss from continuing operations rose to $5.3 million in the third quarter of fiscal 2005 versus a net loss of $1.7 million in last year's quarter.

"Our operating results during the last quarter reflect the significant ongoing production and competitive challenges faced in returning the company to profitability," commented Mr Chao.

For the nine months ended 31 December 2004, net sales increased 48.5 per cent to $56.4 million, from $38.0 million for the same period last year.

Net loss for the nine month periods ending December 2004 and 2003 were both $8.1 million.

Novel Denim makes a broad range of denim, chino, twill and printed fabrics for customers primarily in the United States and Europe.