Kingmaker profit plunges on loss of Timberland contract
Mainland shoemaker Kingmaker Footwear Holdings yesterday said its net profit plunged 31.59 per cent and its revenue declined 10.7 per cent year on year following the loss of its biggest customer, US shoe brand Timberland.
Kingmaker's turnover fell to $1.279 billion in the year ended March while net profit dropped to $60.14 million, below BNP Paribas Peregrine's estimate of $66 million.
The Hong Kong-listed company may have to contend with European Union anti-dumping duties on leather shoes from China and Vietnam as early as July 21, although any action would take effect only from September.
'Losing Timberland as a customer is worse than expected,' Mohan Singh, head of Hong Kong research at BNP Paribas, wrote in a report. 'Apart from this, operational risks remain high, related to labour issues, anti-dumping allegations and raw material costs.'
Kingmaker announced the loss of Timberland's business in March, a customer that BNP Paribas estimated accounted for one-third of the firm's turnover.
'Kingmaker will need to close some production lines in the short term, as it may take time for other customers to pick up the slack. Timberland was facing tough times itself but taking its business away from Kingmaker implies that Timberland is consolidating its suppliers,' Mr Singh said.
BNP Paribas forecasts that until 2008 at least, Kingmaker's turnover and net profit will remain below last year's levels of $1.43 billion and $88 million, respectively.
'The drop in orders from Europe had hindered the group's expansion in Europe and shrunk the total turnover for the year. One of the major reasons is the anti-dumping investigations by the European Commission which continued to create uncertainties which had deterred customers from placing orders with the group,' said Kingmaker chairman Mickey Chen Ming-hsiung.
The EC is recommending final anti-dumping duties lasting five years on leather shoes from China and Vietnam, including children's shoes which Kingmaker produces.