NTD Appreciation Causes Foreign Exchange Losses: Kuang Lung H1 EPS NT$1. Tariff Adjustments in Three Major Production Bases Finalized, Orders Rebound

Outdoor functional apparel giant Kuang Lung (8916) reported NT$0.67 earnings per share (EPS) for Q2 and NT$1 EPS for the first half of 2024, impacted by non-operating foreign exchange losses due to the strong appreciation of the New Taiwan Dollar. Looking ahead, with tariff adjustments in three major production bases finalized, market concerns have eased, and order visibility has improved. The company will also mitigate tariff and exchange rate challenges through multi-production base allocation and product mix optimization.

Kuang Lung’s Q2 consolidated revenue reached NT$2.43 billion, with post-tax profits of NT$101 million and EPS of NT$0.67. For the first half, consolidated revenue was NT$4.099 billion, post-tax profits were NT$153 million, and EPS was NT$1. The company noted that profits were affected by valuation losses due to the sharp rise of the NTD, but these are non-cash items and do not impact actual operating cash flow.

The company added that despite exchange rate and tariff pressures in Q2, years of digital transformation have made its cost structure more flexible, with ongoing control of operating expenses. As the NTD has recently depreciated, there is an opportunity to reverse some valuation losses in the second half of the year.

Furthermore, Kuang Lung emphasized its strengths lie in its flexible asset structure. Most fixed assets are commercial and rental buildings that can be liquidated at any time, while apparel production lines are almost fully depreciated. This allows the company to rely on fixed income to support operations and maintain stable dividends during economic fluctuations. The company reiterated its commitment to a robust shareholder return policy, with a cash dividend of NT$3.6 per common share this year, a payout ratio of 89%, and a cash dividend yield of nearly 7%, to be distributed on August 21.

Finally, regarding operational strategy, Kuang Lung mentioned that its new site in Bangladesh has received factory setup approval and partnered with multiple suppliers. It will initially focus on bulk casual wear and gradually expand production capacity. The overall strategy involves Vietnam handling high-end products, Indonesia focusing on mid-to-low-end products, and Bangladesh providing low-cost and production base diversification advantages. Through multi-production base布局 and ODM transformation, the company aims to build a flexible apparel manufacturing system. With tariff adjustments in the three major production bases finalized, market concerns have eased, and order visibility has rebounded.