The Brazilian synthetic footwear manufacturer maintains that it will see 10 percent growth in revenues for the first half of 2008, consistent with 2007 trends, despite a domestic economic turndown and flat sales in the early months of the year. Orders have started to pick up again, but the company notes that volumes will continue to grow faster than values due to the strengthening of the Brazilian real.
As the company projected, the volume of shoes it sold grew by 21 percent in its fourth quarter, ended Dec. 31, reaching 50.9 million pairs. For the period the company reported record net profit, up by 2.2 percent to R$98.3 million (€36.85m-$57.86m) on 9.1 percent higher revenues of R$416.7 million (€156.22m-$245.27m). Higher volumes helped bring down production costs.
Meanwhile, adjusted net profit margins dropped by 1.6 percentage points to 23.6 percent of revenues in the quarter, compared with the year-ago period, as a result of increased transportation costs and 5.5 percent lower prices on the domestic market. Profit margins before depreciation and amortization, or EBITDA, also came down by 0.5 percentage points, although once adjusted to currency fluctuations, they remained stable.
Export volumes were up by 46.7 percent to 13 million pairs in the period, and foreign sales constituted a more important 13.7 percent of total sales in the quarter compared with 12.2 percent in the year-ago period. Sales outside Brazil grew by 22.3 percent in reals during the quarter, to R$72.4 million (€27.14m-$42.6m) and by 47.3 percent in US dollars. The ever weakening dollar may begin to discourage exports, however, after a depreciation of 3.68 percent against the real in the quarter. Grendene intends to develop sales in other markets in order to lessen its dependency on the American currency.
The company’s sales in Brazil grew by 7.9 percent in the quarter to R$457.9 million (€171.7m-$269.5m) compared with the same quarter the previous year, with volumes up by 14.2 percent. Despite tight competition at home, Grendene’s year-on-year growth resulted in a considerable market share gain.
Full-year revenues, up by 9.1 percent, grew as expected but the company missed its bottom-level guidance with adjusted profit margins down to 21.1 percent from 21.9 percent in the previous year. EBITDA margins dropped by 0.7 percentage points to 28.1 percent.
Although not extraordinary, Grendene’s performance during the full year contrasts strongly with the domestic market. Brazilian footwear exports on average grew by only 2.6 percent in US dollars in 2007 on volumes that were 1.9 percent lower, with 4.6 percent higher average prices. Grendene saw full-year export revenues grow by 36.8 percent in US dollars, with volumes up by 27.2 percent, and their average price increased by 7.6 percent.