Gildan: Until Honduras Situation Improves, Share Price Will Remain Volatile - Desjardins

Sunday’s military coup in Honduras has compromised the country’s growing reputation for stability and investors are reacting with nervousness about companies with operations there. Gildan Activewear Inc. (GIL), which has its Central American manufacturing hub in Honduras with three large integrated textile facilities, saw its shares fall almost 10% on Monday.

Gildan plans to further expand production of t-shirt, socks and underwear in the country, so it is therefore key to its operations, according to Desjardins Securities analyst Martin Landry. Until the situation improves, he told clients Gildan’s share price will remain volatile.

The analyst said:

President Zelaya had alienated Honduras’ congressional politicians by joining the Bolivarian Alternative for the Americas, an alliance led by Venezuelan president Hugo Chavez that seeks to integrate left-leaning Latin American countries.

President Zelaya also led efforts to bring Cuba back into the Organization of American States and increased the minimum wage in Honduras substantially. But his attempt to abolish the four-year presidential term was seen by many as a first step toward more socialist policies, with echoes of Chavez-style politics.

While the day-to-day operations of Gildan’s manufacturing facilities are unlikely to be affected, an estimated 60% of its activewear and more than 50% of its socks are made in Honduras.

So after 30 years of peaceful democracy, Mr. Landry now believes investors will apply a geopolitical risk discount to Gildan. The analyst sees little risk that the country’s assets will be nationalized and suggested the coup may turn out to be a positive for Gildan if it brings back a more business-friendly government.

He cut his price target on Buy-rated Gildan from $18.50 to $16.50 per share.

Comments

[safariman:]

But the Honduran "Coup" was NOT a Coup. If the new government continues, Honduras will clearly be a BETTER place to invest!

I live in Honduras. My wife and I retired here, 14 years ago. We love living here. It is a beautiful Country populated by mostly hard working, honest people who wish to live with peace and opportunity.

Three and a half years ago, Mel Zelaya was elected President of Honduras. He ran in the Liberal Party, roughly the equivalent of the Democrat Party in the USA. He campaigned on a conservative note. Things changed pretty rapidly after he took office. He has been a disaster to private initiative of every kind; personal, entrepreneurial, and industrial. He ignored all but his own executive branch of Government. (Honduras, like the USA, has a "checks and balances" system comprised of a Congress and Supreme Court.) . Zelaya's support was very limited from rich and poor alike, the only exceptions being some indigenous (no doubt deserving) that he showered with benefits and promises of much more.

Zelaya's removal was a Democratic move (Impeachment Equivalent) to try to restore order in a country falling into the abyss because of a corrupt President that was becoming more dictatorial by the day, under the tutelege of Hugo Chavez. The Supreme Court and Congress worked together for several days to assure continuance of Democracy, in lieu of the Dictatorial Socialist path Zelaya was following. There has been NO rupture of Democracy here. Roberto Micheletti, President of the National Congress and a member of Zelaya's own Party was named interim President, to remain until elections scheduled in November (which Zelaya had wanted to abrogate to remain in power). Micheletti has already appointed a cabinet of good advisors, a couple of them I've met, and in whom I have confidence. I can pretty well assure you that if the new Government continues, it will be more democratic and transparent than the Zelaya Government.

It seems most inappropriate that world leaders roundly oppose the replacement of Former President Mel Zelaya, when they know little or nothing about the situation here.

I would appreciate it if world leaders would come to Honduras and review the situation on the ground before pontificating about Law and Constitution. It is Zelaya who did the first "golpe de estado" through a large number of actions. The National Congress simply did its part to preserve Democracy here.

Please pass this message to everyone who might be interested. We don't need brickbats, we need support. We do not need to be the next Socialist victim.

Jun 30 12:40 PM

[darbyroberts:]

I have been thinking of moving to Ecuador but the actions of their leftist president have recently made me have second thoughts.
Chavez is evil and doesn't really have anyone's interests at heart but his own.


On Jun 30 12:40 PM safariman wrote:

> But the Honduran "Coup" was NOT a Coup. If the new government continues,
> Honduras will clearly be a BETTER place to invest!
>
> I live in Honduras. My wife and I retired here, 14 years ago. We
> love living here. It is a beautiful Country populated by mostly hard
> working, honest people who wish to live with peace and opportunity.
>
>
> Three and a half years ago, Mel Zelaya was elected President of Honduras.
> He ran in the Liberal Party, roughly the equivalent of the Democrat
> Party in the USA. He campaigned on a conservative note. Things changed
> pretty rapidly after he took office. He has been a disaster to private
> initiative of every kind; personal, entrepreneurial, and industrial.
> He ignored all but his own executive branch of Government. (Honduras,
> like the USA, has a "checks and balances" system comprised of a Congress
> and Supreme Court.) . Zelaya's support was very limited from rich
> and poor alike, the only exceptions being some indigenous (no doubt
> deserving) that he showered with benefits and promises of much more.
>
>
> Zelaya's removal was a Democratic move (Impeachment Equivalent) to
> try to restore order in a country falling into the abyss because
> of a corrupt President that was becoming more dictatorial by the
> day, under the tutelege of Hugo Chavez. The Supreme Court and Congress
> worked together for several days to assure continuance of Democracy,
> in lieu of the Dictatorial Socialist path Zelaya was following. There
> has been NO rupture of Democracy here. Roberto Micheletti, President
> of the National Congress and a member of Zelaya's own Party was named
> interim President, to remain until elections scheduled in November
> (which Zelaya had wanted to abrogate to remain in power). Micheletti
> has already appointed a cabinet of good advisors, a couple of them
> I've met, and in whom I have confidence. I can pretty well assure
> you that if the new Government continues, it will be more democratic
> and transparent than the Zelaya Government.
>
> It seems most inappropriate that world leaders roundly oppose the
> replacement of Former President Mel Zelaya, when they know little
> or nothing about the situation here.
>
> I would appreciate it if world leaders would come to Honduras and
> review the situation on the ground before pontificating about Law
> and Constitution. It is Zelaya who did the first "golpe de estado"
> through a large number of actions. The National Congress simply did
> its part to preserve Democracy here.
>
> Please pass this message to everyone who might be interested. We
> don't need brickbats, we need support. We do not need to be the next
> Socialist victim.

Jul 01 08:36 AM

[darbyroberts:]

Perhaps the National Congress should have used judicial means to "impeach" Zelaya if that is possible. That's what Obama will say anyway.


On Jul 01 08:36 AM darbyroberts wrote:

> I have been thinking of moving to Ecuador but the actions of their
> leftist president have recently made me have second thoughts.
> Chavez is evil and doesn't really have anyone's interests at heart
> but his own.

Jul 01 08:39 AM

[safariman:]

Ecuador has been a good place. Maybe if Honduras succeeds in throwing off the yoke of Chavez, others will too. Chavez sees this as a threat, and a test. Obama isn't helping much.

Following is a more legal comment on what happened here in Honduras:

June 28, 2009- Honduras- The Result of a Legal Process in Defense of Constitution NOT a Military Coup

The international press and foreign governments based mostly on Manuel Zelaya’s dramatic comments are extending their support to him. We welcome the international community’s attention and coverage of such sensitive news, however we only ask that analysts and foreign dignitaries reserve their assertions and acts of either support or condemnation until they have been properly informed.

In today’s democratic societies, it is an understandable initial reaction to condemn any event that has been referred to as a Military Coup or event that infers the forced imposition of an unelected leader. We, Hondurans, more than anyone strongly condemn such events as we have lived through various military coups in the past. However, the events that have transpired today were neither.

On June 28, 2009 there was NO MILITARY COUP. On June 28, 2009 the military proceeded to arrest Manuel Zelaya following a court order released by our Judicial system. Upon capture, Manuel Zelaya was taken outside of the country and released in Costa Rica. I am first to recognize that we should have detained and judged him in our courts, as this would have lent additional confidence to the international community. However, taking him out of the country was done in order to minimize any potential violence. Unfortunately, it also means he now remains with impunity outside of Honduras and planting a seed of doubt in the international community, regardless of the clear proof of illegality committed by Manuel Zelaya.



On June 28, 2009 there was no forced Imposition of an unelected leader on Honduran people. What transpired today in Congress, resulting in the naming of Roberto Micheletti (him being the next elected official in the order of succession) as the new President of Honduras was a legal and Constitutional succession of powers and involved the unanimous vote of all congressmen, which included members of four of Honduras’ political parties, including Manuel Zelaya’s.

On Sunday June 28, 2009 our Constitution and our Democracy, were in DANGER due to Manuel Zelaya’s illegal actions, knowingly undermining our judicial system, in order to pursue his personal ambitions to remain in power (he only had 6 months left in government). I am attaching a document drafted yesterday (in spanish) by Union Civica Democratica that provides a fuller explanation of the context leading to today’s events.

Sunday June 28, 2009 is a painful yet historic day in which our young democracy, despite its faults, demonstrated it had established the necessary institutions that would defend the Constitution and provide the necessary checks and balances to assure none of the three branches of government (Executive, Legislative, and Judicial) would abuse its power.

The Supreme Court, Congress, Office of Human Rights in Honduras, State Attorney, Attorney General, Supreme Electoral Tribunal, all have recognized the illegality of Manuel Zelaya’s actions and recognized the legality of today’s events.

We hope that in the following days and upon proper review of the facts the international community recognize and lend support to our institutions, to the newly appointed president and to the Honduran’s painful but real victory establishing that Honduras is a state based on law and that no man is above it, regardless of wealth, power or status.

Jul 01 10:03 AM

[hugh hairell:]

they better hope things get better since they have closed most of n. american operations.

Jul 09 05:37 PM

[hugh hairell:]

Gildan better hope things go well in Honduras, since they shut down three sock mills in Alabama last week.

Jul 09 05:40 PM