Springs ceo Gomes da Silva sees more expense controls  

São Paulo, Brazil – Springs Global Participações S.A. recorded continued sales declines and another net loss during the third quarter 2008, but ceo Josue Gomes da Silva feels vindicated by his unrelenting emphasis on expense control, and sees a positive turn in the textile maker’s fortunes.

“The company continues to demonstrate its ability to reduce costs – it has been working hard to reduce manufacturing costs,” Gomes da Silva said during the Springs Q3 conference call this afternoon. “If there was any doubt about the company’s strategy to cut costs, I think they are proving even more needed now, given the economic environment we are in, and are showing up by the fact that operationally the company has been able to present some level of profitability – although a reduced level of profitability – before interest expenses,” taxes and other exchange rate variations.

Gomes da Silva was referring to about a line in Springs’ income statement that lists income before financial results: R$11.5 million earned before interest, exchange variations and taxes. That figure compares well to a loss in Q3 2007 of R$22.9 million, a R$34 million swing.

He acknowledged that the company has a long way to go and that in no way does this amount equate with real profitability. Gomes da Silva promised further cost cutting, particularly in U.S. operations. But that one line in the income statement is a sign, he suggested, of better things to come.

It would be a welcome development. Overall, Springs’ third quarter net sales fell more than 32% but cost cuts and improved margins in its shrinking business slashed the net loss by 30.5% to R$56.8 million – roughly USD$33.8 million, based on an average exchange rate during the quarter. The net loss in last year’s third quarter was R$81.7 million.

The company cited the U.S. economic slowdown and a 9.9% depreciation of the Brazilian real among the factors most influencing its results. It did not cite any remaining operational challenges – Springs has over the last two years migrated much of its direct manufacturing to Mexico and South America, with some limited outsourcing to Asia.

Expansion of its comparatively small Brazilian business helped tamp down some of the U.S. declines, the company said.

Springs reported Q3 net sales of R$698.1 million – about USD$409.4 – compared to R$903 million during the third quarter of 2007. 

By business segment, sales fell 21.9% in fashion bedding; they decreased 25.9% in bath; declined 22.9% in utility bedding; and dropped 31.2% in the “Other” segment, including Springs Direct and Canadian sales. Intermediate products, which include yarn, greige and finished fabrics, grew 27.7% during the quarter.

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