Exchange gains boost Hela Apparel 1Q

Hela Apparel Holdings PLC reported strong financial performance for the quarter ended on June 30, 2022 (1Q23), partly due to the exchange gains stemming from the group’s US dollar-denominated revenue.
The group reported revenue of Rs.24.5 billion, a growth of 114 percent year-on-year (YoY), while the cost of sales rose Rs.20.9 billion, from Rs.9.8 billion, on the decade-high cotton prices. The gross profit for the period was Rs.3.5 billion, compared to Rs.1.58 billion a year ago.

Hela Apparel said the significant growth was partly driven by the depreciation of the rupee during this period, while the group’s underlying US dollar-denominated revenue also rose by 28 percent. 
“This reflects the continuation of strong consumer demand conditions in Hela’s key export markets and the ramp-up in production at its newly-established manufacturing facility in Egypt,” the company said in an earnings note.
Accordingly, the group posted a net profit of Rs.251.5 million for 1Q23, compared to Rs.64.6 million reported for the same quarter last year. 

During the period under review, the group saw its net finance cost more than doubling to Rs.669.6 million.
“I’m pleased to see Hela continuing on its growth trajectory despite the extremely challenging operating environment during the first quarter. These results are a reflection of the company’s successful customer engagement strategies and the initial implementation of the management’s focused margin-improvement strategy. This strengthened Hela’s ability to absorb the continuation of significant external cost pressures and global supply chain disruptions during the quarter,” said Hela Apparel Chairman 
A.R. Rasiah.

Looking toward the remainder of the financial year, Hela said it would focus on navigating the volatile operating environment by continuing to implement its margin-improvement strategy across the group. 
The company will also seek to continue delivering innovative apparel supply chain solutions to its customers, while proactively seeking opportunities to strengthen its value propositions.
“Hela has proved resilient during a challenging first quarter, though we feel there are opportunities to improve further,” said Hela Apparel Holdings Group CEO Dilanka Jinadasa. 

“The biggest challenge ahead is the likelihood of a softening order-book due to a slowdown in consumer demand in our key markets. That said, the new customer relationships we have established over the past 12 months should help us to offset this drop and the continued ramp-up of our operations in Egypt will help to ensure the group’s revenue remains resilient. The implementation of our strategic initiatives, including the digitisation drive powered by SAP S/4HANA, will assist Hela in being more data-driven and agile, placing us in a stronger position to navigate the challenges ahead,” he further added.