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Gildan to expand its Central American textile production with Honduras plant

MONTREAL - Gildan Activewear is further expanding its Central American textile production capacity and looking for more acquisitions as the apparel maker pursues international growth.

The Montreal-based company announced plans Thursday to build a new plant at its complex in Honduras that will churn out products in 2016, a year before the opening of a planned facility in Costa Rica.

The two plants will contain modern equipment that will increase textile capacity by about 40 per cent and generate nearly US$1 billion in extra revenues, Gildan said.

Gildan has been building its textile and yarn spinning operations as the T-shirt, sock and underwear manufacturer builds its portfolio, especially of branded products.

The company disclosed for the first time that it is the industry's third-largest maker of men's underwear — after Fruit of the Loom and Hanesbrands — with a 6.5 per cent market share, according to the NPD Group.

It is currently doubling underwear capacity and expects to further increase its market share with planned growth in 2015.

Chief executive Glenn Chamandy said the company has quickly built its retail brand whereas it took a decade to generate a 10 per cent market share in the wholesale screenprint T-shirt channel.

"Our ability and our success so far in the share we've gained in such a short amount of time just gives you an idea of the huge momentum we have, our capabilities, our cost structure, our quality message, so we're very excited about our growth in underwear as we go forward in 2015," he said during a conference call.

Gildan, which reports in U.S. dollars, said it earned $116 million or 94 cents per diluted share for the quarter ended July 6, compared with $115.8 million, or 94 cents per diluted share a year earlier.

Excluding restructuring and acquisition-related costs, adjusted net earnings were $116.6 million. That's 95 cents per diluted share, meeting analysts' expectations.

Net sales for the quarter increased were $693.8 million, up 12.9 per cent from $614.3 million in the third quarter of 2013.

The positive impact of higher sales was offset by about a 17 cents per share of manufacturing inefficiencies and inflationary cost increases, along with about a 10 cents per share impact from higher cotton costs.

"While the rapid pace of change is resulting in some short-term stress in our manufacturing operations to support our growth, we're confident in achieving the significant cost savings which we have projected," added Laurence Sellyn, chief financial and administrative officer.

During the quarter, the printwear segment earned $129.7 million on $483.4 million of revenues. Branded Apparel earned $15.6 million as sales grew 16 per cent to $210.4 million.

The company anticipates posting all-time record quarterly results in the fourth quarter with sales expected to increase nearly 12 per cent to $700 million and adjusted EPS rising about 28 to 31 per cent to $1.06 to $1.09 per share.

For the full year, sales are forecast to exceed $2.4 billion with Branded Apparel growing about 19 per cent to $850 million. Adjusted EPS is projected to range between $3 and $3.03, slightly lower than its prior guidance because of charges related to its acquisition of pantyhose maker Doris Inc.

On the Toronto Stock Exchange, Gildan's shares closed at C$63.89, down $2.22 or 3.36 per cent in Thursday trading.

Follow @RossMarowits on Twitter

The Canadian Press


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