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Pacific Brands posts A$131.5M loss on charges, weak sales

Pacific Brands posts A$131.5 mln loss on impairments, weak sales

By Jason Krupp

Aug. 24 (BusinessDesk) - Pacific Brands Ltd., the Australian clothing maker which sold its Sleepmaker and Dunlop Foams business to Sleepyhead this year, has reported a full-year loss of A$131.5 million, with its cost savings initiative unable to reverse losses from weaker sales and one-time charges.

The net loss for the 12-months ended June 30 compares to a profit of A$53.2 million in the previous year, mainly reflecting impairment charges of A$235.3 million related to non-cash write-downs, one-off transformational costs and divestments, the company said. Stripping out significant items, pretax earnings rose 4.6% to A$189.7 million in the year. Sales fell 7.3% to A$1.6 billion.

"The prevailing headwinds in the retail sector are presently masking some substantial underlying improvements we are making within the business," said chief executive Sue Morphet. "Our decision to source more of our products off-shore and manage with a leaner cost base was critical to the improved (underlying) result and will also help us deal with the significant cost pressures and other challenges we expect in the current year."

The company's results come amid stalled Australian consumer spending, with ongoing surge in the minerals and mining sector masking moribund performance in the rest of the economy.

The Melbourne-based company warned that next year's earnings are expected to come in lower than the 2011 results, with weak retail conditions expected to persist and input costs rising due higher cotton prices.

Drilling down into the company's business segments, underwear and hosiery reported a 0.8% decline in sales to A$493.6 million due to the discontinuation of non-core brands, although earnings before interest, tax and amortisation rose 11.4% to A$111.3 million in the period.

Workwear sales rose 4.6% to A$396.8 million with EBITA up 19.3% to A$49.9 million. Homeware sales fell 1.4% to A$398.7 million, with EBITA up 20.3% to A$40.4 million. Footwear, outerwear and sports sales fell 23.6% to $305.2 million, with EBITA down 95% to A$800,000.

The company resumed dividend payments, declaring a fully franked dividend of 3.1 Australian cents per share. Pacific Brand shares were unchanged at 80 cents today on the NZX, and have declined 38.5% so far this year.


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