• Company to continue investment in Vietnam
  • H1 profit plummets 53.2% to US$7.8m
  • Revenue down 7% to $522m

Luen Thai Holdings says Vietnam will continue to be the country of choice for apparel manufacturing in the foreseeable future, thanks to prospects associated with the expected passage of the Trans-Pacific Partnership (TPP) trade agreement.

The apparel and accessories maker added that as a result it will continue to devote resources and efforts in its Vietnam projects, including Thien Nam Sunrise Textile Joint Stock Company (TNS) and Duc Hanh Garment Joint Stock Company (DHG).

It also noted the US's updated GSP trade preference could enable formerly excluded products like travel goods, handbags, luggage and wallets to be eligible for duty-benefits - most likely from the second half of 2016.

To cope with expected demand, Luen Thai will expand its production facilities for luxury and computer bags, as well as backpacks, in Cambodia and the Philippines. Although the group expects the expansion to increase costs in the short term, it should enable the business to “grasp the opportunity” of the trade preference to grow its accessories production in the medium term. 

The comments come as the group saw its first-half net profit more than halve, weighed down by an “unsatisfactory” performance at its casual and fashion apparel division. Net profit amounted to US$7.8m for the six months to 30 June, compared to $16.6m in the same period of the prior year.

Revenue fell 7% to $522m from $561.1m a year ago.

The casual and fashion apparel division recorded a 60% decline in profit to $9.2m, due to a poor performance at Ocean Sky Global and its subsidiaries due to the revamping of its factory operation and redeployment of workers in Cambodia. In addition, the orders placed by a major Japanese customer in the first half of 2015 fell more than the company had expected.

Luen Thai's sweaters business booked a loss of $1.8m, primarily due to the seasonal nature of its business.

The group said it expects to continue to experience challenging trading conditions in the second half of 2015, adding that recovery “can only happen in 2016”.

Click on the following link for further insight on the TPP talks: TPP may unravel unless it is agreed by Christmas.