Stella International Holdings, Ltd. reported that shipment volumes increased year-on-year, driven by the Sports Category orders and earlier shipments to certain customers, amounting to approximately one million pairs, compared to the company’s original shipment plan.
The Hong Kong-based developer and manufacturer of footwear and leather goods reported that shipment volumes increased 12.3 percent in the first half of the year, resulting in a 7.5 percent increase in revenue to $770.0 million. Average selling prices (ASP) decreased year-over-year, which is said to be due to the higher proportion of sports products with lower ASPs.
Stella International reports in U.S. dollar ($) terms.
As previously reported by SGB Media, shipment volumes for the three-month second quarter period moderated the growth for the first half after strong growth in the first quarter. Second-quarter volumes increased by approximately 5.7 percent year-over-year to 14.8 million pairs, while first-quarter shipment volumes increased by roughly 21.9 percent year-over-year to 11.7 million pairs.
First half gross profit margins expanded by 270 basis points to 25.8 percent of sales, due primarily to an “enhanced customer mix.”
” We will continue to enhance our customer mix, expand and diversify our manufacturing base, optimize management effectiveness and efficiency, and strengthen our use of working capital in order to deliver further growth and value to our shareholders,” added Lawrence Chen, chairman of Stella International Holdings Limited.
The company said its non-sports manufacturing facilities operated close to full utilization through the first half (H1) period. Stella reported continued gross profit margin improvement from an enhanced customer mix. This factor, along with improved operating leverage from the increased utilization of its Sports manufacturing facilities, drove an expansion of the company’s operating profit margin.
Operating profit margin for the first half increased 390 basis points to 12.9 percent of sales from 9.0 percent in the H1 period last year.
Company CEO Chi Lo-Jen said, “As we seek to further improve our product mix, we are prioritizing the ramp-up of our new factory in Solo, Indonesia, and improving worker skill levels in order to expand our capacity for higher-margin products and transition the production of some Fashion category products there from our factories in Vietnam. This will ensure that we continue meeting the profit growth targets of our Three-Year Plan.”
Stella recorded a net profit of $91.5 million in the first half. Excluding a market-to-market net fair value change from its investment in Lanvin Group, the company recorded an Adjusted net profit of $92.9 million, compared to Adjusted net profit of $60.3 million in the 2023 H1 period, a 54.1 percent increase year-over-year.
The company’s Adjusted net profit margin was 12.1 percent of net sales, a 370 basis-point jump compared to 8.4 percent in the 2023 H1 period.
Stella International Holdings net cash position at June 30, 2024 reached $326.1 million, compared to $162.5 million at June 30, 2023.
Cash Returned to Shareholders Maintain a Steady Payout Ratio of Approximately 70 Percent
After considering the company’s free cash flow position, the Board has declared an interim dividend of HK65 cents per ordinary share for the six months ending June 30, 2024, representing a payout ratio of about 71.5 percent.
Board Approves Plans to Return $180M to Shareholders
Given the company’s strong cash levels, the Board has also resolved to return additional cash up to $60 million per year for the next three years (2024 to 2026) to shareholders, not exceeding $180 million in total, through a combination of share repurchases and special dividends, on top of paying regular dividends with a normal payout of 70 percent, comprised of final dividends and interim dividends.
Outlook
For the full year 2024, Stella expects to maintain or expand on the same strong operating margin level it achieved in 2023 as it continues to implement the strategies and meet the targets set out in its three-year plan (2023 to 2025), namely achieving an operating margin of 10 percent and a low-teens annualized growth rate on profit after tax by the end of 2025.
The company expects its non-sports manufacturing facilities to continue operating at close to full utilization in the second half of 2024 as it further enhances its product category mix as part of its three-year plan. On a full-year basis, the company expects shipment volumes to grow moderately compared to 2023, led by its Sports category.
Image courtesy Stella International Holdings, Ltd.