Makalot Aims for 25% Surge in Annual Profits This Year

With efforts on improving product mix, customer base and operating efficiency gradually paying off, Makalot Industrial Co., Ltd., Taiwan's largest apparel manufacturer by size, optimistically aims for a 25% year-on-year growth in annual profits this year compared to last year.

At an investors conference held in late June, Makalot's chairman, Frank Chou, said that this year his company will not focus merely on attaining strong shipment growth, but on boosting sales of mid-to-high-end products—mainly functional, fashion and sports apparel,— and finding quality customers to enhance overall performance.

To that end, Chou said that Makalot has been expanding output at its factories in Indonesia, Cambodia and Vietnam, with brand new production lines at a plant in northern Vietnam all to start up this year.

Additionally, Makalot is also working on vertical integration of supply chain, a trend that the chairman said is growing in the apparel contract manufacturing sector. Part of this effort is its fully owned subsidiary, Ecolot Textile, which sources fabrics in China and Vietnam and will help raise supply to the parent company by 50% this year. With such sourcing arm, Chou stressed, Makalot can better adapt to the latest market changes and secure profits.

Proving that Makalot's efforts on improving operational efficiency works is that the gross profit rate and operating margin in Q1 this year increased around 3 and 1.5 percentage points, respectively, to 24.16% and 11.44%, compared to a year ago. This has greatly enhanced the company's optimism about higher profits in the year than last year, when its annual revenue and net profits both beat record highs of NT$17.91 billion (US$597 million) and NT$1.341 billion (US$44.7 million), respectively.

Institutional investors project the company's annual shipment to soar 19% from 10.5 million dozens last year to 12-12.5 million dozens this year, with the growth rate of the average selling price to increase more than 2 percentage points. Presently, 15-20% of the company's production is outsourced.

Makalot chalked up a yearly growth of 21.3% in consolidated revenue of NT$5.213 billion (US$173.4 million) for Q1, 2014, including NT$1.656 billion (US$55.02 million) generated in March alone, up 16% year-on-year (YoY). For the quarter, the firm's total apparel shipment totaled about 3.2 million dozens, growing 17% YoY, with the average selling price of around US$55 per dozen, up 2.5%. (SC)

Makalot's Performance by Quarter
Period	Q1, 2013	Q2, 2013	Q3, 2013	Q4, 2013	Q1, 2014
Consolidated Revenue	NT$4.29 Bn.	NT$4.12 Bn.	NT$5.16 Bn.	NT$4.32 Bn.	NT$5.21 Bn.
Earnings per Share	NT$2.33	NT$1.76	NT$2.19	NT$1.76	NT$2.89

Source: Market Observation Post System