Bagir in ‘advanced’ talks with possible investor, issues profit warning

By

Barbara Santamaria

Published
Nov 20, 2017

Clothing company Bagir has announced it is in 'advanced negotiations' with a leading global textile manufacturer to form a strategic partnership, a move which could help the company remain competitive in the face of weakening revenue.

The company warned on Monday that both revenue and adjusted EBITDA for financial year 2017 will be below expectations due to an order slowdown and delay in the second half of the year, coupled with an increase in manufacturing costs.

The potential deal with an investor could help Bagir inject extra money into the expansion of its manufacturing base in Ethiopia, where it plans to add new machinery to produce larger volume orders by the end of 2017. The site is expected to produce approximately 3,000 trousers per day by mid-2018.

The company said an alliance would significantly enhance the timetable for achieving the location’s operational potential, however it stressed that the negotiations might not result in a firm agreement.

The announcement comes as the textile group prepares to embark on a restructuring programme aimed at reducing the overall operational cost base by approximately $2 million on an annualised basis. It expects the strategy to be fully implemented by the end of the first half of 2018.

Eran Itzhak, Chief Executive Officer, said: "It is a highly competitive period for retail manufacturing, nevertheless, it is very disappointing that we are not meeting our order targets for this year. The Company has been through significant change and is now substantially better positioned to compete than it was and through our ownership and investment in Ethiopia we have the platform to build up market share. If a strategic partnership is formed with the global textile manufacturer we will be much quicker to achieve this objective."