December 10, 2009 / 12:53 PM / 9 years ago

UPDATE 2-Gildan eyes options for its cash, shares jump

* Company has $99.7 mln in cash

* Mulls buybacks, dividend

* Sees 2010 sales rising 17 pct to above $1.2 bln

* Shares up 11.6 percent (Adds details and analyst comments. In U.S. dollars)

By Scott Anderson

TORONTO, Dec 10 (Reuters) - T-shirt maker Gildan Activewear Inc (GIL.TO) said on Thursday it would consider a number of options on how to spend its mounting pile of cash, and its shares rose more than 10 percent.

The Montreal-based company, which manufactures T-shirts, socks and underwear, said its options include a share buyback, a dividend, or acquisitions.

The company finished its financial year with cash and cash equivalents of $99.7 million. It said on a conference call with analysts that it has not decided how to use the money.

“As we go through the year, we will communicate what we think is the appropriate capital structure for the company and how we are going to deploy the cash that is accumulating on our balance sheet,” Laurence Sellyn, Gildan’s executive vice-president and chief financial officer, said on the conference call.

In the past, the company has used cash to fund acquisitions such as the 2006 purchase of sockmaker Kentucky Derby Hosiery, and to build a number of manufacturing facilities in Central America.

But analysts said a combination of dividends and share buybacks is the logical choice for the company this time around.

“The fact that they have a strong treasury and that they have got some money, means chances are they might decide to share it with shareholders in the form of dividends,” said Fred Ketchen, director of equity trading at ScotiaMcLeod. “Shareholders do like to hear that.”

The company’s shares, which have risen about 10 percent in the past year, were up 11.6 percent at C$23.49 on the Toronto Stock Exchange on Thursday morning.

Ketchen said another reason for the stock’s rise was Gildan’s forecast on Thursday that its 2010 sales will rise by about 17 percent to more than $1.2 billion with gross margins of 26 percent as it boosts its market share with new customers secured late in the year.

Gildan said it earned $42.4 million, or 35 cents a share, in its fourth quarter, up from $21.8 million, or 19 cents a share, in the year-before quarter, attributing most of the gain to lower manufacturing costs.

The 2009 results included a 7 cents a share charge for an inventory devaluation discount.

Revenue during the quarter fell 7.1 percent to $301.7 million.

Analysts, on average, expected profit of 35 cents a share and revenue of $309.4 million, according to Thomson Reuters I/B/E/S/.

$1=$1.05 Canadian Reporting by Scott Anderson; editing by Peter Galloway

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