The retail industry's global downturn is impacting an Australian company that supplies coat hangers to 32 countries, including the U.S.
In a report to investors, Melbourne-based Spotless Group Ltd. said falling retail volumes and increasing resin and general input costs have affected the profit of its polypropylene garment-hanger division, Braiform.
Braiform, which combines Spotless' London-based Braitrim Holdings Ltd. and New York-based Spotless Plasti-form, supplies garment hangers, packaging and hanger re-use programs worldwide.
According to Spotless' annual report for the fiscal year ended June 30, Braiform produced 2.5 billion hangers and reused more than 900 million hangers during the year. It accounted for 8 percent of Spotless's total sales.
Josef Farnik, Spotless managing director and CEO, said Braiform's sales declined 0.8 percent to US$219.3 million. The division's operating profit fell 32.6 percent to US$5 million. Hanger units manufactured dropped 5.8 percent to 2.45 billion.
Braiform's re-use hanger programs continued to grow, with re-use volumes rising to 41 percent of total volumes, up from 37 percent in the prior year.
Farnik said lower hanger volumes reflected poor retail conditions in North America, Europe and the United Kingdom. Resin costs at the end of the 2011 financial year were 30 percent higher than in 2010. The strong Australian dollar also affected earnings.
But he said Braiform is in the “strongest possible shape” to take advantage of any rebound in global apparel markets because it remains profitable and cash-flow positive.
Overall, Spotless Group's sales increased 11.1 percent to US$2.75 billion. But Andre Carstens, Spotless chief financial officer, said Braiform adversely affected the group's overall result.
There has been media speculation in Australia about Braiform's possible sale, and Spotless earlier confirmed it had started a confidential sale process after receiving “unsolicited approaches.”
But in August, Spotless said it had decided to retain the business and end discussions with potential buyers.
Last May, Spotless received an unrelated offer to buy the entire Spotless business, but the board rejected it.