Fabricato Posts 3Q 2024 Net Loss, but EBITDA Improves
Medellin-based textile giant Fabricato — in bankruptcy since July 2024 – on October 30 posted a COP$33 billion (US$7.47 million) net loss for third quarter (3Q) 2024, although that was an improvement over the COP$78 billion (US$17.67 million) net loss in 3Q 2023.
Revenues in 3Q 2024 dropped 28% year-on-year, to COP$198 billion (US$44.8 million), but earnings before interest, taxes, depreciation and amortization (EBITDA) actually improved 144% year-on-year, to a net-positive COP$9.6 billion (US$2.17 million), up from a net-negative COP$22 billion (US$4.98 million) in 3Q 2023.
Fabricato blamed the continuing losses in revenues and profitability on “a textile market with contracted demand both nationally and internationally.”
“However, the company remains optimistic as it executes strategies in product innovation, circular economy and process optimization that help improve its competitiveness [. . . ] as can be seen in the reduction of costs and operating expenses year-on-year and in the transformation of production processes seeking the greatest efficiencies.
“Inventories decreased by 40% compared to 3Q 2023 — due to the company’s approach to produce what is ordered by our clients — and greater efficiency was obtained in the process of purchasing raw materials and in the evacuation of slow-moving inventories.
“Assets classified as held for sale increased by 407% compared to the same period of the previous year, due to the decrease in the installed capacity of the manufacturing plant, in order to implement an operation that generates maximum efficiencies, eliminating business lines that are not profitable for the company,”
As for the drop in sales, “the stagnation of the [Colombian] textile manufacturing sector continues as a result of the continued decrease in consumption in fashion and varieties, in addition to smuggling via under-invoicing as well as open smuggling — since fabrics that are offered in the market illegally enter the country at prices that do not even cover the cost of raw materials for national products,” the company added.
As a result, “between January and September 2024 sales decreased by 30.6% in value and 27.8% in quantity, compared to the same period in 2023, which affected the working capital required for the timely supply of raw materials and the payment of obligations,” Fabricato explained.
Crucial problems facing Fabricato include “smuggling and money laundering through textile products, clothing, fabrics and threads; importation and dumping of these same products; increase in the cost of inputs and raw materials; loss of consumer confidence; low growth of the national economy; and atypical behavior and the closure of the Denim line, which reflected a decrease in local sales and production, as well as a low utilization of production capacity.
“The financial impact of the cost of cotton and financing costs — high interest rates versus market prices — had a greater impact in the second and third quarters of 2023.
“After a series of proposals by Fabricato and a negotiation process with financial creditors that could not be realized, the results of the year 2023 and so far in 2024 have strongly impacted the company’s cash flow, preventing the timely fulfillment of our obligations with suppliers, employees, financial creditors and tax obligations,” all of which triggered the bankruptcy filing earlier this year, the company concluded.
