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Garment manufacturer GTI reports $1M loss in Q2, says rising costs a major factor

Taiwanese-owned GTI, Grand Twins International (Cambodia) – a major supplier of global clothes brand Adidas – has reported a loss of $991,000 falling 647% compared to Q2, 2020. It said cost of raw materials and packaging materials, labor costs and overheads, have significantly increased over the last three financial years from 2017 to 2019.

According to the company report, for the first six months to June 30, 2021, the total revenue of GTI is $55.17 million which decreases by $6.75 million equal to 10.90% and net loss is $913,000 which decreases by $1.25 million equal to 370.69% if compared to the same period of 2020.

In 2008, GTI (Cambodia) (CSX:GTI) acquired QMI Industrial Co., Ltd, one of the first major garment manufacturers setting up operations in Cambodia since the 1990s. As of March 2021, GTI had 3,775 employees.

In the report, GTI referenced a GMAC report that stated Cambodia is struggling to compete with its neighbors due to low productivity, rising minimum wages and strikes by trade unions. Cambodia’s garment sector is the second least productive in the region, accounting for only 60% by comparison to China’s garment sector.

They added, the productivity of Vietnam and Indonesia has reached 80%, while Bangladesh is only 50%, which is lower productivity than Cambodia. The lower productivity and higher worker wages will be a real challenge for the Cambodian industrial while most overseas customers judge primarily on productivity and competitiveness when they choose partners to supply their products. Low productivity is due to a large number of workers’ unions in Cambodia.

According to the Company’s internal rules, all workers and employees are entitled to overtime (OT) compensation. Employees who work overtime on weekdays receive 1.5 times their basic wages. Employees who work overtime on weekends and holidays receive twice their basic wages.

Our employees also receive non-leave bonuses of $5 in a week and transportation allowance of $7, and seniority from $2 to $11 based on the length of their employment.

In addition to these benefits, our employees also receive KHR 2,000 (USD 0.5) for working overtime from 4:00 pm to 6:00 pm. Following Cambodian labor law from 2019 our employees also received work seniority

The company said: We commit to comply with Cambodia’s applicable law such as average wage for garment workers. The increase in average salary for the garment industry had caused to decrease in total revenue. At the beginning of 2021, the worker average salary in the garment industry is $192 and the increase in salary expense will directly impact company performance in 2021. Foreseen, salary will increase in consequently in further years.

GTI shares are currently trading at KHR 4,500 a share down from KHR 9,640 during the company’s IPO in 2014. According to official documents, the company’s substantial shareholders (=5%+) are GRAND TWINS INTERNATIONAL LTD (41%) and HOPE RIDGE LIMITED (9.6%).

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