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Pac Brands suffers loss

Pac BrandsBonds underwear owner Pacific Brands expects challenging market conditions to continue in the second half of its financial year.

The company made a $109 million loss in the six months to December 31, following one off writedowns and a slide in earnings from its underwear division.

However, the result was an improvement on a net loss of $219 million a year ago.

The latest result was weighed down by $138.5 million in writedowns to the company’s goodwill, brand names, plant and equipment.

Earnings before interest and tax from Pacific Brands’ underwear division were down 26 per cent to $26.7 million as weak wholesale sales and margins offset stronger retail sales.

A company statement on Tuesday said Pacific Brands “expects a continuation of challenging and variable market conditions”.

CEO, David Bortolussi, said the declining Australian dollar had added pressure on the industry and would lead to price increases.

“We have been working hard in challenging market conditions, endeavouring to stabilise earnings and improve cash flow,” he said in a statement.

“However, the significant drop in the Australian dollar over recent months places increasing pressure on the industry, which will need to respond operationally and also through price increases from the winter 2016 season when most hedge books unwind.”

Bortolussi said lower exchange rates were expected to “adversely impact margins, inventory balances and cash conversion” in the fourth quarter of 2015 and into 2016 and 2017.

He said the retail business performed well during Christmas trade but the wholesale business, particularly in discount department stores, struggled.

Full year results will largely be dependent on trading in May and June, two significant months for the group.

The company sold its Workwear and Brand Collective business in 2014.


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