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Springs aims at recovery from steep 4Q decline

-- Home Textiles Today, 3/31/2008 2:07:00 PM

Sao Paolo, Brazil – Home textiles titan Springs Global posted its fourth quarter results today, after making its full year results available late last week, and the trends were significantly more difficult in the final period of 2007. However, a presentation posted today by the $2 billion company indicated that its cost-cutting plans are showing results, and pointed to one-time restructuring charges that demonstrated willingness to take its bad-tasting medicine now in order to prosper in the future.

Still, the negative momentum was clear. Across the board, the fourth quarter was rougher than the year as a whole. For example, total 2007 sales of R$3.55 billion were down 25.6% from R$4.77 billion in 2006 – but fourth quarter sales of R$742.1 million fell 32.4% from the year-prior period.

And the sales declines in three key divisions were all steeper in the fourth quarter than for the full year:

* Fashion bedding, -24.2% FY, -30.7% 4Q

* Bath, -21.8% FY, -37.0% 4Q

* Utility bedding, -18.6% FY, -25.2% 4Q.

While Springs reported a net loss of R$429.1 million, or US$242.6 million (based on exchange rates in effect as of Dec. 31, 2007), fully $R69.9 million of the loss was in the form of non-recurring charges for the previously announced U.S. plant closings and outlet store liquidation.

Ahead in 2008 for the U.S. infrastructure are final plant and store closings followed by the consolidation of warehousing and distribution activities.

The company in 2007 also cut its debt in half, from R$984.6 million to R$464.7 million over the course of the year.

Strategic branding initiatives ahead include:

* Relaunch of Springmaid at retail in spring 2009

* Debut of a Cindy Crawford licensed line

* Relaunch of Wamsutta in 2010

* Fulfilling the Wamsutta alliance with Walt Disney World Resort in 26,000 hotel rooms

Springs is also eyeing entry into European and Asian markets via acquisitions and strategic partnerships.

Without giving specific projections for the year ahead, the company cautioned, “The impact of the slowdown in the United States, our largest marketplace is uncertain and may impact our 2008 results.”

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