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CUSTOMS FRAUD HAMSTRINGS SEARDEL DESPITE PROFIT

Seardel, the largest clothing and textile manufacturer in South Africa, is in the black for the first time since 2007.

But its clothing division remains a concern as customs fraud and competitors’ non-compliance with minimum wages make it difficult to compete. The group reported an 11.7 percent rise in revenue to R2.4 billion in the year to March. Attributable profit was R8.5 million from a previous loss of R203.4m.

Seardel chief executive Stuart Queen said on Friday that the biggest factor weighing on the clothing operations was customs fraud – goods either not declared or underdeclared.

Queen said: “Customs fraud was a problem as illegal imports set the benchmark price.” p> Compounding problems for the clothing operations was a 22 percent duty on imported fabric and trims. On the minimum wage, Queen called for a level playing field.

The clothing division, which makes brands such as Speedo, Brooksfield and After Eden, reported a R21m operating loss, a modest improvement on the previous R26m loss.

The company has introduced programmes to address shortcomings under its control, including improving workflow processes to increase factory efficiency.

However, without meaningful changes to external factors, the company said, the apparel manufacturing operations were likely to remain under pressure, particularly those in higher wage areas.

It has launched Brand Identity, a division that will manage the group’s brands and which Queen said could deliver significant results in the years ahead.

In August Seardel will launch Love SA, a range of casual wear that will be sold in Cape Union Mart stores and will highlight local products to create and save jobs.

Another new brand, 46664, is a lifestyle range that will be sold at Stuttafords and independent retailers. The company will pay royalties for using 46664, which was former president Nelson Mandela’s prison number when he was incarcerated on Robben Island. Funds will go to the Nelson Mandela Children’s Fund.

Queen said the 46664 brand had the scope to be sold internationally and the company was in talks with potential partners in the UK and the US.

The group’s textile division did well, with turnover rising 11 percent to R982m and operating profit up 218 percent to R56m.

Although group turnover was up, the strong rand, the rapid increase in cotton prices to about $2 (R13.83) a pound, from a long term average of around $0.58, and the inability to pass input price increases on to customers, particularly within the clothing division, weighed on margins. The gross margin dropped by 2.8 percentage points to 23.4 percent.

The company’s turnaround follows restructuring that began in 2008, when the business was rescued by Hosken Consolidated Investments.

The process included the closure of divisions and the retrenchment of 4 000 people. It now has a workforce of 10 000 people. Shares rose 6.25 percent to close at 85c on Friday.

Source: Cape Times – Business – Samantha Enslin-Payne