Grendene's sales increased by 6.9 percent in the first quarter to 621 million Brazilian reais (€145.7m-$172.9m), led by a recovery in volumes and gains in industrial efficiency that led the Brazilian group to post a record operating profits.
The parent company of Ipanema, Melissa, Rider and Grendha recorded sales growth both in Brazil and abroad. Domestic revenues improved by 7.5 percent to R$506.1 million (€118.8m-$140.9m), while export revenues rose by 4.9 percent to R$150.3 million (€35.3m-$41.8m).
However, while the volume of pairs sold in the domestic market was up by 9.7 percent 26.9 million, reflecting a recovery in the market, the volume of pairs sold in the export market was down. It declined by 0.2 percent to 11 million pairs, which the management attributed to a difficult comparison base with the year-ago quarter, when exports sales had gone up by 42.7 percent. The company believes this probably resulted in clients postponing purchases in the first quarter of 2018. The management also blamed the end of Proapi's export incentives in March 2017 for the slightly reduced foreign deliveries.
The group's gross margin declined by 0.9 percentage points to 47.5 percent, due to the end of the Proapi incentive and extra deposits required by the Ceara State Fiscal Balance Fund. However, the Ebitda margin increased by 0.6 percentage points to 25.0 percent. Operating profit after amortization (Ebit) improved by 9.8 percent to R$109.7 million (€25.7m-$30.5m), representing Grendene's largest-ever Ebit level for a first quarter of the year.
The management said that Ebit is a better indicator for the company's performance, as its business is low capital-intensive, with Grendene regularly investing an amount equivalent to its depreciation to keep its production capacity updated. It also noted that Grendene maintains positive net cash and has no interest charges that need to be paid out with funds from operations.
The group's quarterly net income declined by 9.2 percent to R$156.1 million (€36.6m-$43.5m), also due to a difficult comparison base with the year-ago period, when the company received a tax credit of R$10.2 million (€2.4m-$2.8m) as part of the government's former Proapi incentive program.