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Gildan buys land in Bangladesh for capacity expansion

The land is intended to be used to expand the company’s global textile and sewing operations.

2nd May 2019

Knitting Industry
 |  Montreal

Knitwear, Knitted Outerwear, Sports & Activewear

Gildan owns and operates vertically-integrated, large-scale manufacturing facilities which are primarily located in Central America, the Caribbean Basin, North America, and Bangladesh. © Gildan Activewear

Gildan Activewear, a leading supplier of quality branded basic family apparel, has announced the completion of the purchase of a sizable land parcel in Bangladesh as part of its new capacity expansion initiative to develop large-scale vertically-integrated manufacturing in South-east Asia.

The land is intended to be used to expand the company’s global textile and sewing operations. “Our plans consist of the development of a large multi-plant manufacturing complex which is currently expected to include two large textile facilities and related sewing operations,” the company explains.

“Once fully operational, this complex is expected to provide capacity to service over US$ 500 million in sales. Over the next twenty-four months, the company plans to construct and develop the first textile facility at the complex. Initial production at the facility is expected to start in the latter part of 2021. The company believes the build out of a large-scale manufacturing hub in South-east Asia will significantly enhance its positioning to service international markets and support other key sales growth drivers.”

The company also announced its results for the first quarter that ended on 31 March 2019 and updated its full year guidance. Results were in line with expectations, setting the company on track to deliver on its full year sales and EPS targets for 2019. Net earnings for the three months that ended 31 March 2019 amounted to US$ 22.7 million, compared with net earnings of US$ 67.9 million for the same period last year.

During the first quarter, the company generated sales of US$ 623.9 million, down 3.6% compared to the prior year quarter. As expected, the decline in activewear, where Gildan generated US$ 493.6 million in sales for the quarter, was primarily due to lower levels of distributor restocking of imprintables. The slight sales decline in the hosiery and underwear category, where the company saw US$ 130.4 million in overall sales, was mainly attributable to lower Gildan branded socks and underwear sales in the mass retail channel.

“During the quarter, we continued to execute on supply chain initiatives aimed at driving increased operational efficiency across our manufacturing base and from which cost benefits are expected to start materialising meaningfully in the fourth quarter of 2019 and benefiting gross margins in 2020. We also continued with efforts to reduce SG&A as we work towards achieving a 2020 target of lowering SG&A as a percentage of sales to 12% or better,” the company added.

With the completion of the land acquisition in Bangladesh for around US$ 45 million in cash, the company has updated its capital expenditure projection to be approximately US$ 175 million compared to its previous guidance of US$ 125 million.

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