The Brazilian company continued its expansion in the third quarter of the year, with gross revenues rising by 3.9 percent to 475.5 Brazilian reais (€181.9 m-$274.2m). However, while Grendene recorded an 8.2 percent sales increase to R$421.9 million (€161.4m-$243.3m) in its domestic market, revenues from exports dropped by 21.0 percent to R$53.6 million (€20.5m-$30.9m). The gross profit margin fell by 5.7 percentage points to 43.7 percent due to inadequate manufacturing structures that the company is now planning to fix.
Quarterly earnings before interest and taxes (Ebit) fell by 43.4 percent to R$35.7 million for an Ebit margin of 8.9 percent, 7.5 percentage points down from last year. Earnings before interest, taxes, depreciation and amortization (Ebitda) declined by 38.9 percent to R$42.3 million, with the Ebitda margin also dropping by 7.5 percentage points, to 10.5 percent. Net income was off by 10.5 percent to R$65.6 million.
Grendene sold 2.7 percent more pairs of shoes for the quarter compared with last year, up to 40.2 million pairs. Domestically, unit sales grew by 8.3 percent to 32.4 million pairs, but the average price dropped by 0.1 percent to R$13.00. Export deliveries fell by 15.5 percent in volume to 7.7 million pairs, by 21.0 percent in reais and by 29.4 percent in U.S. dollars.
For the first nine months of the year, Grendene’s gross revenues were up by 13.2 percent to R$1,219 million (€66.4m-$703.1m), with Brazilian revenues up by 12.2 percent to R$973.3 million and export sales increasing by 17.6 percent to R$245.4 million. The gross profit margin dropped by 1.2 percentage points to 42.1 percent. Net income grew by 19.5 percent to R$187.2 million (€71.6m-$108.0m) - a new record for the company.
In terms of volume, the number of pairs sold increased by 4.0 percent to 108.1 million over the nine-month period. This was a 10.2 increase at home to 76.5 million pairs and a drop of 8.6 percent in exports to 31.6 million pairs.
During the latest quarter, Grendene hired 5,000 people, expecting increased demand in the fourth quarter, something the company says has been proven wise given order levels. It said that despite the good results, it felt it could have done better. It noted that at one point during the quarter, demand exceeded its capacity to manufacture and deliver with margins comparable to 2008’s third quarter, which hurt its results but gives it reason to be optimistic for the future. In fact, Grendene is looking at plans to expand its production capacity, a project it hadn’t expected for two or three years down the road.
The company is anticipating that its gross revenues will grow at a compound average annual growth rate of between 8 percent and 12 percent by 2013, and that net profit will increase by 12-15 percent a year in the same time frame, although advertising expenditures will be kept at between 8 and 10 percent of net sales. It hopes to expand more on the export market in the long term, depending on currency exchange rates.