Gildan Activewear Inc. announced its intention to close its Montreal sewing plant, which currently provides approximately 2% of the Company’s overall sewing requirements. Due to the labour-intensive nature of sewing operations, the Montreal plant is no longer cost-competitive or economically viable in relation to a global competitive environment. The continuing growth in Gildan’s integrated sewing production will be supported by the further expansion of its offshore sewing facilities.
The closure will be effective as of May 2, 2003 and will impact a total of approximately 150 employees. Gildan is endeavouring to relocate employees where practical to its other Montreal-based operations.
H. Greg Chamandy, Chairman and Chief Executive Officer of Gildan Activewear, commented that “due to Gildan’s long history at our Montreal sewing plant, which has a number of long-term employees, we have postponed this inevitable closure as long as possible. However, our success depends upon our continuing unwavering commitment to be the global low-cost producer of activewear and to constantly drive down our manufacturing cost structure.”
Severance and non-cash write downs due to the closure are expected to amount to approximately $1.2 million after-tax, or $0.04 per diluted share. A provision for this amount will be fully reflected in the Company’s results for its second fiscal quarter, ending March 30, 2003. The Company is scheduled to release its second quarter results after market close on Wednesday, May 7, 2003. Gildan re-affirmed that it continues to be comfortable that it will meet or exceed market earnings expectations for the second quarter, even after taking into account the impact of the special charge for the closure of the Montreal sewing facility.
The ongoing cost savings from the rationalization of sewing capacity are expected to enhance annual net earnings by approximately $1.5 million after- tax, or $0.05 per diluted share, starting in the third quarter of fiscal 2003.
