The Board of Directors (Board) of Mainland Headwear Holdings Limited (Mainland, Group), which manufactures headwear for New Era, Dickies, Oakley, and other major brands, reported that the global business environment remained complex and volatile in the first half of 2026.

“Geopolitical risks, weak consumer demand in major markets, rising costs and supply chain restructuring continued to intertwine, heightening operational challenges for enterprises,” the Board noted in its earnings report for the 2026 first half period (H1) ended June 30.

In response to external changes, the Group said it built on its strong manufacturing capabilities and global operational footprint to promote synergies across production capacity, R&D and design, brand building and sales channels.

“During the period, the Group continued to strengthen its multi-location production platforms, enhance supply chain flexibility and delivery capabilities, and deepen the integration of its Trading business, gradually unleashing the complementary benefits of its European and the United States market resources,” the Board said. “Despite the challenging market environment, the Group maintained stable overall operations and continued to consolidate the foundation for its long-term development.”

Mainland Headwear reports in the Hong Kong dollar (HK$) currency. Conversions to the U.S. dollar ($), where indicated, were calculated at 1 HK$ = 0.1276 U.S. dollars, the average conversion rate for the 2026 first half period as published by Wise.com.

Group revenue increased 9.5 percent year-over-year (y/y) to HK$925.9 million (~$118.1 mm), and gross profit improved 8.9 percent y/y to HK$277.9 million (~$34.5 mm), with gross profit margin losing 20 basis points to 30.0 percent of revenue.

Profit attributable to shareholders increased 10.0 percent y/y to HK$65.9 million (~$8.4 mm), compared to HK$59.9 million in the 2025 H1 period.

The Board reportedly resolved to declare an interim dividend of 3 HK cents per share (cps), flat to the year-ago level.

“The Group is in a healthy financial position with stable operating cash flows,” the Board concluded.

At period-end, Mainland held cash on hand of ~HK$226.6 million (~$28.9 mm) and unutilized banking facilities amounting to ~HK$495.5 million (~$63.2 mm).

The borrowings over total equity ratio of the Group is at 13.5 percent. “In view of the strong financial and liquidity position,” the Group said it has sufficient financial resources to meet its commitments and working capital requirements.

Manufacturing Business
The Group manufactures headwear products, bags and accessories for sale to its Trading Business as well as to external customers. The principal manufacturing facilities are located in Bangladesh, Mexico and Cambodia. Customers are mainly located in the U.S. and Europe.

In the first half of 2026, the Group said its Manufacturing business maintained steady development amid changing market conditions, further consolidating its competitive advantages in the international headwear manufacturing market.

Manufacturing Business revenue increased 12.3 percent y/y to HK$604.0 million (~$77.1 mm) in the 2026 first half period, accounting for 65.2 percent of total Group revenue. Segment operating profit increased 12.5 percent y/y to HK$135.2 million (~$17.3 mm), compared to operating profit of HK$120.2 million in the 2025 H1 period.

The Group said its Bangladesh factory remained the core revenue and production hub of its Manufacturing business.

“Leveraging its well-established management system, mature production processes and experienced and skilled workforce, the Bangladesh factory undertook a large volume of orders during the Period and maintained a stable and smooth production pace,” the Group said in its H1 report.

The Group also said it continued to optimize production line workflows, increase the use of automated equipment, and enhance the operational efficiency of high-value-added embroidery products.

The Group said the Mexico factory enables the Group to fully meet the needs of North American customers in terms of delivery speed and supply chain flexibility. Following initial equipment commissioning and staff training, the plant’s production processes have reportedly “gradually matured,” and overall operational efficiency has continued to improve.

A leased production facility in Cambodia commenced full-scale operation, though various operational optimization measures continued to be implemented during the H1 period.

“Establishing a presence in Cambodia represents a key strategic move by the Group, as it not only complements the production capacity of the Bangladesh factory, but also diversifies geopolitical risks associated with reliance on a single region – optimizing the Group’s global production capacity footprint,” Mainland emphasized. “However, the training period required for local employees has been longer than anticipated, and the factory’s capacity utilization remains in the ramp-up phase. Consequently, the operational benefits have yet to be fully realized.”

Mainland’s Shenzhen factory reportedly completed its transformation and is now focused on providing internal support for the Group, including product R&D, cross-regional operational coordination, supply chain support and related services for overseas production bases and subsidiaries. The facility is no longer engaged in production and manufacturing operations.

At period-end, the Bangladesh factory had 7,500 employees; the Mexico factory, 700 employees; and the Cambodia factory, 660 employees, with Cambodia more than doubling its headcount since 2025 year-end.

Trading Business
The trading and distribution business of headwear, small leather goods, bags and accessories of the Group is operating through H3 Sportgear LLC (H3), San Diego Hat Company (SDHC) and Aquarius Ltd. (AQ), which all focus on the U.S. market, and Drew Pearson International Ltd. (DPI) and Difuzed B.V. (Difuzed), which focus on the Europe market.

The Group said the retail markets in Europe and the UK remained subdued in the first half.

“Against the dual pressures of geopolitical instability and persistently high energy and fuel prices, consumers generally cut back on non-essential spending, while traditional channels such as department stores adopted a more cautious approach towards procurement,” the Group noted. “The U.S. market was comparatively less affected by external shocks; however, demand growth lacked momentum, and the external operating environment continued to present numerous challenges.”

The Group did say that, amid weaker industry sentiment, several of its licensing collaboration projects progressed more slowly than expected. At the same time, the ongoing integration of the Group’s branch companies resulted in short-term additional administrative and related expenses, netting higher overall operating costs for the Trading segment.

“Persistently high marketing and selling expenses further weighed on the segment’s profitability,” the Group said.

The Group said it has effectively aligned Europe’s established design capabilities with the needs of the North American retail market, allowing it to secure a number of brand licensing collaborations and cross-regional cross-selling opportunities during the period.

“Through ongoing optimization of its organizational structure, the Group has steadily implemented cost control measures, and certain business units have begun to show improvements in gross profit and operating performance,” Mainland stated.

Trading Business revenue increased 4.5 percent y/y to HK$321.9 million (~$41.1 mm) in the first half of 2026, accounting for approximately 34.8 percent of total Group revenue. The segment operating loss for the H1 period was HK$48.5 million (~$6.2 mm), compared to an operating loss of HK$43.8 million in the 2025 H1 period.

Outlook
Looking ahead, the Group said uncertainties in the external environment are expected to persist.

“Geopolitical risks, fluctuations in energy and logistics costs, weak consumption sentiment, and rising labor costs will continue to pose operational challenges to the industry,” Mainland forecasted. “The Group will remain cautiously optimistic and capitalize on its global footprint to seize opportunities arising from customers’ supply chain restructuring and nearshoring trends. It will also continue to strengthen risk management and enhance cost efficiency, with the aim of achieving sustainable growth amid a rapidly evolving market environment.”

Manufacturing Business
The Group reported that it will continue to optimize production processes and management systems at its Bangladesh factory, while promoting automation and AI-assisted management to enhance efficiency through technology and alleviate operational pressure arising from rising labor costs.

The Mexico factory will focus on the North American market and seek to secure more orders of meaningful scale and with reasonable profitability levels by leveraging its competitive advantages in proximity to customers, shorter delivery cycles and enhanced supply chain flexibility.

The Cambodia factory will continue to improve employee proficiency and capacity utilization, with its operating performance improving gradually. As for the plan to acquire land and build a self-owned factory in Cambodia, the Group said it will proceed steadily in accordance with actual circumstances to support its medium- to long-term needs for capacity expansion and product diversification.

Trading Business
The Group reported that it will continue to integrate resources across Europe, the U.S. and emerging markets. By realizing synergies from its acquisitions, prior investments are expected to deliver tangible business benefits, improving the trading segment’s operating efficiency and profitability.

The Group is advancing the planned free trade zone project in the Mexican industrial park, including the construction of warehouses and related ancillary facilities. It is also maintaining engagement with potential customers to enhance its service capabilities in the North American market.

In line with plans to transform the Shenzhen factory into a cross-border e-commerce industrial park, the Group expects to further improve cross-border logistics efficiency, provide cross-border e-commerce enterprises with a better logistics platform, and create conditions for the future expansion of multi-channel sales and diversified business development.

“Over the past 40 years, Mainland Headwear has weathered various economic cycles and challenges in becoming a market leader in the headwear manufacturing industry,” the Group commented. “With its leading market position, global production layout, diversified product mix spanning headwear to accessories, and keen business acumen, the Group is confident in its ability to overcome various challenges and create long-term value for its customers and shareholders.”

Capital Expenditures (CapEx)
In the first half of 2026, the Group spent approximately HK$44.5 million on additions to equipment and machinery to further upgrade and expand its manufacturing capabilities. Also the Group spent HK$1.5 million on additions of equipment and systems of Trading Business.

The Group has budgeted HK$232.0 million for CapEx, of which HK$189.0 million is budgeted for the construction of a warehouse and dormitory in Mexico, and construction of a factory in Cambodia. The Group said it also authorized a capital commitment of HK$43.0 million for the acquisition of machinery and equipment upgrades.

Image of ShenZhen showroom courtesy Mainland Headwear Holdings Ltd