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February 28, 2022

Gildan Activewear presses forward with Bangladesh expansion

Canadian apparel maker Gildan Activewear is "rapidly moving forward" with the construction of the first "up-to-large-scale" textile and sewing facilities in Bangladesh, CFO Rhodri Harries has said.

By Beth Wright

Speaking on a call with analysts in the wake of the group’s fourth-quarter results, Harries said Gildan “accomplished a great deal in 2021”, adding as the company looks back to the launch of its Back to Basic strategy, it has delivered what it envisioned from the plan.

“We simplified and focused our business, allowing us to deliver adjusted operating margin expansion of close to 500 basis points, and our RONA (return on net assets) improved by more than 800 basis points during the 2018 to 2021 period,” Harries told analysts on last week’s call.

“It also put us in a position to continue to expand our capacity in Central America and the Caribbean, and resume our expansion plans in Bangladesh where we are now rapidly moving forward with the construction of the first up-to-large-scale, textile and sewing facilities.”

Gildan revealed plans to develop a new manufacturing complex in Bangladesh in May 2019 which it said, once fully operational, is expected to provide the capacity to service over US$500m in sales.

Six months later, the company announced the relocation of its Mexican operations to Central America and the Caribbean Basin.

Taking questions from analysts, Gildan CEO Glenn Chamandy said: “The capacity that we’re bringing on in Bangladesh, which is two large state-of-the-art facilities, will be geared and dedicated to 100%, making fashion T-shirts.”

Harries also pointed to Gildan’s recent acquisition of Frontier Yarns for $168m.

He told analysts: “Our clear focus allowed us to push forward with reinforcing our vertically integrated supply chain model through broadening our existing yarn capabilities with the acquisition of Frontier Yarns in December. We are very pleased with this acquisition, which is now allowing us to further internalise yarn production and support our textile expansion plans in Central America and the Caribbean.”

Gildan hails record results for Q4 and FY

The comments came in the wake of Gildan’s results for the fourth quarter and year ended 2 January.

“This time last year, when we reported our fourth-quarter results, we expressed confidence that we were entering 2021 as a fundamentally stronger company. We now believe our results and accomplishments for this year they are strong evidence of that. We finished the year with record top- and bottom-line performance in the fourth quarter, leading to record sales, earnings, and free cash flow for the full year,” Harries told analysts.

Net sales for the fourth quarter of $784m were up 14% over the prior year, consisting of activewear sales of $627m, up 17%, and sales of $157m in the hosiery and underwear category, up 3% compared to the prior-year quarter.

Gildan said the overall sales increase was largely driven by higher activewear sales volumes and net selling prices, partly offset by weaker product-mix related to the year-over-year timing of fleece sales.

Net earnings in the period increased to $173.9m from $67.4m in the prior-year period, while gross margin of 29.2% in the quarter was up 670 basis points over 2020.

For the full year, Gildan delivered record net sales of $2.92bn in 2021, up 48% from the prior year, reflecting increases of 58% in activewear and 16% in the hosiery and underwear category compared to 2020.

Net earnings for the 12 months amounted to $607.2m, compared to a net loss of $225.3m a year earlier. Gross margin of 32.2% compared to 12.6% in the prior year.

The company also provided a three-year outlook, which included net sales growth at a compound annual growth rate in the range of 7-10%.

“I am extremely proud of our team’s performance in 2021 which allowed us to capitalise on improving demand and deliver meaningful benefits from our Back to Basics strategy. We ended the year with a strong finish, growing above pre-pandemic levels and setting record results to build on,” Chamandy said in the group’s results statement.

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