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Fabricato Textile Factory Fabricato Textile Factory Source: Fabricato

Fabricato Posts US$2.6 Million Net Loss in 2Q 2018

Published in Companies Written by  July 31 2018 font size decrease font size increase font size 0
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Medellin-based textile giant Fabricato on July 31 posted a COP$7.4 billion (US$2.6 million) net loss for second quarter (2Q) 2018, down from a COP$16 billion (US$5.5 million) net profit in 2Q 2017.

Earnings before interest, taxes, depreciation and amortization (EBITDA) came-in at COP$2.8 billion (US$970,000) in 2Q 2018, an improvement over the COP$1.6 billion (US$554,000) EBITDA in 2Q 2017.

So far this year, first half (1H) net loss stands at COP$19 billion (US$6.6 million), an improvement over the net loss of COP$25 billion (US$8.6 million) in 1H 2017, according to the company.

“Despite the expectation generated by the [Colombia] presidential elections [won by pro-business, moderate conservative Ivan Duque, rather than socialist-populist Gustavo Petro] and the great interest that the [World Cup] soccer world arouses -- both events that took place in this [2Q 2018] period -- we saw the same recovery trend of the economy already perceived in the first quarter of the year,” according to Fabricato.

“Inflation remained under control and the price of oil remained above the budgeted target, two good elements that allow us to suppose that the trend of recovery in economic activity will continue,” according to the company.

However, “the point of alert in this second quarter was the deviation between the exchange rate of Colombia with the exchange rates of Argentina [Argentine peso down 35% against Colombia peso] and Brazil [Brazilian reais down 17% against Colombia peso], countries with which the free trade agreement entered into force in January of this year.

“The proximity of these countries with Colombia, associated with the devaluation of their currencies, makes the commercial effects immediate, making us [suffer] the increase of Brazilian products both in Colombia and in Ecuador and Peru, main destinations of our exports.

“In addition to the macroeconomic factors, in the textile sector there are positive effects of the measures against unfair competition adopted by the government at the end of last year, that is, the intensification of programs to combat smuggling, the decree with import price thresholds and especially the anti-dumping measure against China denim fabrics.”

However, “we still had many [cost penalties] due to the transfer of the [Riotex affiliate] plant from Rionegro to Bello, with the inevitable difficulties and cost overruns that this represents.

“EBITDA in the [latest] quarter was 3.2% on sales versus 1.8% in the same quarter of the previous year, despite the fact that sales in value were practically the same, a sign that operating efficiencies are beginning to be reflected in the results.

In addition, thanks to Fabricato’s move to meet U.S. environmental and social responsibility standards, “by complying with the standards, values and products required, Fabricato today is a licensed and recognized company in this segment,” the company added.

“Regarding the Colombian domestic market, we perceive a higher level of activity in the [clothing] trade and a lower level of activity in the industry, which can be explained both by the increase in the imports of manufactured clothing and by the excessive stock of imported fabrics in the last year.”

Meanwhile, as for Fabricato’s investments in commercial real-estate businesses, “the start of construction of the [Bello, Antioquia] shopping center is scheduled for September this year. For the defined business model, from the start of construction Fabricato will receive 49% of the revenue that corresponds to future cash flows and the remaining 51% with participation in the areas of the center that will be leased.

“With this income from leases, Fabricato will cover in the future a high percentage of the cash flow needs demanded by our pension liabilities. The approximate value for this year of the shopping center is approximately COP$6 billion [US$2 million].

“For the ‘Ciudad Fabricato’ [real-estate] project, the company has an estimated value of revenues of COP$162 billion [US$56 million] up to the year 2025, being that part of these resources must be received in the first four years of the project.”

As for its Ibagué real-estate project, “Triada S.A.S. continues to advance with the definition of the project and processing the proper permits for the launch of the development, which is scheduled for October of this year. The estimated value of revenues for this project for Fabricato is COP$25 billion [US$8.6 million] over a period of eight years, after the start of construction.”

As for the re-purposing of its former Riotex industrial park in Rionegro, “at the end of June, 45% of the available area is already leased. The objective is that by the end of this year the occupation is 100% or close to this,” according to Fabricato.

“In the case of full occupancy, we estimate that for leases and services, the industrial park should generate annual revenues between COP$5.5 billion [US$1.9 million] and COP$6 billion [US$2 million],” according to the company.

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