Novel Denim Holdings made it back into profit, just, in the first quarter of its current year thanks to a helping hand from the South African government''s export credit program. It expects to report a first half loss, however, and only a small profit for the full year.

From sales down 3.2% to $39.6 million, the three months to June 30, 2003, yielded a net income of $300,000 versus a loss of $6.2M. in the corresponding period of last year. Third party fabric sales increased to $16.9M (+3.7%) and went some way towards cushioning a 7.4% fall in garment sales to $22.7M.

Mr. K.C. Chao, Novel Denim''s chief executive said: "We are relatively pleased with the Company''s financial performance during the past quarter as we worked to improve our garment operations and reached profitability in Mauritius. While our new South African garment operations lost money on an operating basis, we benefited from the receipt of $1.4M. as part of the South African government''s export credit program, allowing us to report a profitable quarter."

The company says that it has made a number of significant changes to its manufacturing in both Mauritius and South Africa to improve profitability. It warned, however, that its African operations are continuing to come under pressure from competitors in Asia, in particular China. Novel has hinted before that it may supplement or replace existing facilities with plants in the lower cost centres of Asia.

"We believe that the improvements in our Mauritian operations and the expected operating cost reductions in South Africa will allow us to report a small profit for the full fiscal year, assuming the current economic climate remains constant," concluded Mr. Chao.