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Delta Galil reports decline in profit in 1Q 2016

Net income was US 7.9 million in the first quarter of 2016, compared to US 8.9 million in the same quarter of 2015.

16th May 2016

Knitting Industry
 |  Tel Aviv

Knitted Outerwear, Intimate Apparel, Sports/​Activewear

Net income was US 7.9 million in the first quarter of 2016, compared to US 8.9 million in the same quarter of 2015. Excluding the mark to market valuation mentioned above net of tax effect, the net income in the first quarter of 2016 amounted to US 9.0 million compared to US 7.9 million in the first quarter of 2015, an increase of 13%.

“Our 2016 first quarter results were in line with expectations, reflecting a moderate top-line growth and a double-digit increase in operating profit before the effect of hedging. During the quarter, we began to benefit from investments made in 2015 to improve our business, as we saw a significant increase in Delta USA’s operating profit and meaningful improvements in our global upper market performance resulting from efficiencies in our owned factories,” said Isaac Dabah, CEO of Delta Galil.

Sales and earnings

The company reported sales of US 256.7 million for the first quarter of 2016, an increase of 2% from US 252.8 million for the same quarter last year. The growth in sales primarily reflected a significant improvement in Europe and in Israel, the company reports.

Operating income was US 14.8 million for first quarter 2016, versus US 15.3 million for the first quarter last year, representing a 3% decrease. The decline in operating income was primarily a result of the impact of mark to market valuation on hedging transactions, which resulted in a loss of US 1.5 million in this quarter, versus a profit of US 1.4 million in the first quarter of last year.

Diluted earnings per share attributed to shareholders were US 0.31 for the 2016 first quarter, compared to US 0.35 for the 2015 first quarter. Excluding the mark to market valuation mentioned above, net of tax effect, the diluted earnings per share in the first quarter of 2016 amounted to US 0.35, compared to US 0.31 in the first quarter of 2015, an increase of 13%.

Other results

EBITDA was US 20.2 million, or 7.9% of sales in the 2016 first quarter, increasing 3% compared with US 19.6 million, or 7.8% of sales in the same quarter of 2015. EBITDA increased 18% excluding the effect of mark to market effect of hedging transactions in both Q1 2016 and Q1 2015.

Operating cash flow was negative US 23.6 million in the 2016 first quarter, versus negative US 19.8 million in the same period of 2015. The increase in negative operating cash flow was due to a US 36.8 million increase in working capital, compared with a working capital increase of US 33.5 million in the same quarter of 2015, reflecting the seasonality of the business. Operating cash flow for the twelve-month period ending March 31, 2016 was US 66.7 million, compared to US 40.1 million for the same period last year.

Net financial debt as of 31 March 2016 was US 112.4 million, compared to US 83.7 million as of 31 March 2015, and US 74.5 million as of 31 December 2015.

Guidance for 2016

The company is reiterating its 2016 financial guidance, excluding non-recurring items, which is based on current market conditions and current exchange rates of US 1.12 per euro and 3.80 NIS per US $.

Full-year sales expected to range between US 1,090 million-US 1,110 million, rising 1%-3% from 2015 actual sales. Full-year 2016 diluted EPS is expected to range between US 1.93-US 2.02, representing an increase of 2% -7% from 2015 actual EPS of US 1.88.

“Looking ahead, we are focused on attaining double digit EBIT growth in 2017. We remain committed to investing in new products and resources to drive sustained profitable growth and long-term shareholder value, and with a strong balance sheet and cash position, we have the necessary financial resources to continue to invest, innovate and grow,” commented Mr Dabah.

www.deltagalil.com

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