The foray into North Africa by Hela comes after successful entry and growth in East Africa with operations in Kenya beginning five years ago, closely followed by Ethiopia.
Hela acquired a distressed asset – an apparel manufacturing factory in Alexandria in Egypt with 1,000 employees previously managed by a far eastern company. It is a vertical plant spanning 220,000 square feet with facilities for fabric and accessories manufacturing.
“Via the venture in Egypt, we hope to harness the potential similar to Turkey’s apparel export market which amounts to $20 billion. Via Egypt there is quicker access to European and US markets reducing lead time,” Hela’s Clothing CEO Dilanka Jinadasa said, adding that a “few other leading Lankan apparel firms are likely to follow suit.”
The latest acquisition and entry into Egypt strengthens Hela’s overall offering. At present Hela has two factories in both Kenya and Ethiopia, as well as 7 in Sri Lanka. It employs over 8,000 people in Sri Lanka and an equivalent number overseas.
Dilanka said Hela is also firming up two more strategic moves which will be made public over the next few months.
With the Egypt acquisition, Hela via its Mauritius registered investment arm Hela Investment Holdings, has invested close to $30 million in the past five years and increased its capacity to 1.2 million man hours with average year-on-year growth of %20.
Hela specialises in the manufacture of underwear, sleepwear and children’s apparel. Among major clients of Hela are PVH Corp. – the parent company of fashion brands Tommy Hilfiger and Calvin Klein. Operations in East Africa and Egypt also focus on men’s underwear and bras.
Working towards a listing on the Colombo Stock Exchange (CSE) shortly, Hela’s performance so far this year has been impressive.
In July it saw exports grow by a massive 92% year-on-year as against a 3% drop for the industry as a whole, whilst in the first seven months of 2021 the Company’s growth is a substantial 79% vis-à-vis 21% growth by the industry.
Dilanka said Hela has been able to navigate better amidst the third wave of COVID and resultant lockdown with its contingency planning and creation of back up capacity. “We were able to demonstrate resilience and proactivity thereby further reinforcing confidence customers have on us,” he added.
“Originally we had our historically best month in June this year and it was beaten in July and then again in August,” Dilanka said, adding that the order book is now stretched up to January 2022. For FY22, Hela’s forecast was just over $240 million up from $ 171 million last year and $ 183 million in FY19. Forecast for FY23 is to exceed $ 280 million.
“The momentum so far points to exceeding our FY22 target,” he added. Sri Lankan operations account for around 50% of Hela’s exports. Whilst focusing on core exports, Hela also continues to serve the Personal Protective Equipment (PPE) segment but with a more value-added industrial use.
Incidentally, Hela is among the handful of apparel firms which have added more jobs as opposed to cuts. “Our headcount rose by 4,000 since the pandemic and we will end up with 17,500 at the end of FY22,” he added.
Via the upcoming IPO offering a 20% stake in the Company, Hela plans to raise $ 20 million, part of which will go into financing its acquisitions and expansions.
“In the past our ownership structure has been driven by private equity, local investors and ESOPs. With our ambitious plans, we felt that listing is the best way forward. This will give flexibility to employees as they will now own liquid stock as well. It will also further improve our good governance practices,” Dilanka said.
With plans to enter into strategic partnerships and joint ventures, being listed reduces the reputation risk for international companies concerned.
From a country perspective, Dilanka believes apparel exports will rebound in August onwards. “With the onset of the third wave operating at full capacity was a major industry challenge. However, with 96% of apparel workers fully vaccinated there is a greater sense of stability. Demand remains robust and I feel the industry’s exports will rebound,” he added.
With a spike in COVID cases and closures in Vietnam, Indonesia as well as Bangladesh, Dilanka believes customer reliance on Sri Lanka will also increase in the next few months and this will augur well to step up exports.
However, he was of the view that for Sri Lanka to fully capitalise from these new opportunities, health authorities need to come up with a new rule book so that factories with fully vaccinated employees can continue to operate with revised protocols instead of opting for extreme measures.