Fabricato Posts Net Loss for Full Year 2023, Cites Strategic Plans

Medellin-based textile giant Fabricato on March 23 posted a full-year 2023 net loss of COP$122.5 billion (US$31.8 million), down from a net profit of COP$3.17 billion (US$442,000) in 2022.

Total sales also declined to COP$342 billion (US$89 million) in 2023, down from COP$481 billion (US$125 million) in 2022.

Earnings before interest, taxes, depreciation and amortization (EBITDA) also came-in at a negative COP$41.6 billion (-US$10.8 million), a sharp reversal from 2022.

While sales and profits dropped sharply in Fabricato’s core textile division, its real estate division still posted an improvement in revenues (COP$13 billion/US$3.38 million) and EBITDA (COP$8.48 billion/US$2.2 million). However, 2023 real-estate net income actually declined year-on-year, to COP$$11.3 billion (US$2.9 million), according to the company.

“Despite the challenges of the textile-clothing sector in 2023, including variables such as volatility in commodity prices, raw materials, and international market uncertainty due to various logistical and political factors, the company remains optimistic as we execute strategies in product innovation, circular economies and optimization of processes that help improve our competitiveness,” according toFabricato.

On the other hand, Colombia’s Minister of Finance Ricardo Bonilla recently pointed-out that what is mainly hurting the Colombian textile sector is illegal import smuggling, Fabricato noted.

“In recent days, a debate arose around the [textile and clothing smuggling] topic in Colombia, since the existence of tariffs of 40% on import of clothing have triggered illegal clothing” imports, Fabricato noted.

Ironically, “it is estimated that, during 2023, the fashion sector sales reached close to US$8 billion — 4% more in real terms than the year 2022 — marked by price variations, although unit consumption actually decreased by 2.5%,” the company explained.

One of the worst-hit clothing sectors is denim, where Fabricato had to slash production drastically because of huge losses.

“It is then pertinent to note that each meter of denim produced destroys value, taking into account the price of raw materials (cotton, threads, filaments and other costs). The production cost amounts to COP$8,455 [US$2.19] per meter but local market prices are around COP$8,971 [US$2.33] per meter — a difference of $516 pesos [US$0.13], which is insufficient to cover the other costs,” according to Fabricato.

Meanwhile, demand for uniforms in Colombia – a key market sector for Fabricato – plunged 34% year-on-year, “mainly due to the non-tendering of the National Police.” As a result, “instead of selling an estimated COP$58 billion [US$15 million] in 2023 as happened in 2022, we sold only COP$24 billion [US$6.2 million] in 2023” for Colombian uniforms, Fabricato added.

On the other hand, Fabricato’s foreign sales of uniforms in 2023 jumped 79% year-on-year, “mainly in Panama, Honduras, Brazil, Ecuador, Bolivia, Peru, Mexico, El Salvador, Nicaragua and Paraguay,” according to the company.

Despite continuing problems in the Colombian domestic textile/clothing markets, Colombian producers have “great opportunities to increase participation in the European international market, strengthen their U.S. markets and develop business mainly in Mexico, Brazil and Argentina,” according to Fabricato.

As part of that plan, Fabricato revealed that it now intends to focus production and sales in four strategic markets: “Fashion Brands,” “Care Wear,” “Technical Textiles” and “Textile Inputs” for third parties, especially in Colombia.

As for the “Fashion Brand” sector, “this is the unit that is dedicated to managing national and foreign brands – accompanied by a radical change in attention, based on working hand-in-hand with the main fashion brands, inserting ourselves into their production processes and development of their collections,” according to Fabricato.

As for the “Care Wear” sector, “this business unit is responsible for serving organizations that require specialized uniforms for their workers and requiring Fabricato to be relevant for them, offering functional materials and designs according to each activity and sector,” according to Fabricato.

As for the “Technical Textiles” sector, “this business unit has high potential for generating profitability and brand recognition for Fabricato. This unit serves industries where textiles meet technical and functional objectives for the military and police forces, agribusiness, construction, among others,” according to the company.

As for “Textile Inputs” sector for supplying third parties,” this is Fabricato’s single-largest product line, accounting for 85% of sales – all for local clothing makers of all types,” the company added.