Springs sees deeper losses in ‘07
-- Home Textiles Today, 3/31/2008 8:48:00 AM
São Paulo, Brazil — The transition to a non-U.S. manufacturing base combined with a declining U.S. economy and a weakening dollar contributed to deepened losses on a further slide in sales during 2007, Springs Global Participações reported on Friday, Mar. 28.
Springs, which lays claim to being the world’s largest home textiles company, posted a net loss of R$429.1 million — 42% greater than the previous year’s R$302.2 million loss — on net sales R$3.55 billion, a 25.6% drop compared to R$4.77 billion in FY2006.
Exchange rates in effect as of Dec. 31, 2007, would have yielded a loss in U.S. dollars of about $242.6 million on sales of $2 billion.
Operating losses increased 57.5% to R$389.1 million compared to a loss from operations of R$246.9 million in 2006. Gross margins fell 283 basis points in FY2007 to 7.86%, Springs reported.
“While we successfully executed our business plan, we were also faced with the unforeseen slowdown in the United States marketplace in the later part of 2007, where consumer spending on home furnishings products was negatively affected by economic uncertainties from the significant turmoil in the housing and credit markets,” Springs said in a letter to shareholders. “The impact of the slowdown in the U.S. was partially offset by the strength in the Brazilian economy, our second largest market.”
Springs, as planned, closed nine U.S. manufacturing plants during 2007, transferring that capacity to Brazil, Argentina and Mexico, countries with significantly lower cost structures.
Josue Gomes da Silva, chairman of Springs, said on several occasions late last year that the company would return to profitability during the first quarter of 2008, which is coming to a close. But since that time the U.S. economy has slipped further. Springs executives said a conference call on the results was expected to be held Tues., April 1.
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