SURFWEAR giant Billabong International (ASX:BBG) continues to struggle with profitability after diving to a loss in the latest half-year.

The Gold Coast-based company, headed by US-based CEO Neil Fiske (pictured), slipped $1.6 million into the red for the six months to the end of December.

However, the result would have been much worse but for a favourable exchange rate in the past year. The weaker Aussie dollar even failed to push the company's underlying earnings in the Americas into the black.

The $1.6 million group loss compares with a $25.7 million net profit a year earlier, a result that was boosted by a $13.5 million one-off gain, largely from the sale of assets.

Overall, Billabong's Asia-Pacific operations, including Australia, performed well despite a slight fall in group revenue.

However, the US suffered from weaker retail conditions and discounting by the group which put pressure on margins. Earnings in Europe also retreated despite higher revenue.

Group revenue rose 4.5 per cent to $563.7 million. However, underlying earnings, reflected in EBITDAI (earnings before interest, tax, depreciation, amortisation and impairments) of $35.2 million, compares with $53.7 million the same time last year.

Australasian EBITAI surged 74.5 per cent to $29.5 million, while in Europe underlying earnings slumped 72 per cent to $7.5 million.

EBITDAI in the US retreated to a loss of $3.7 million from a modest $8.4 million profit a year earlier.

Despite the result, Fiske says the company's focus on its core brands is paying off for the group with Billabong growing wholesale revenue by 2.6 per cent in constant currency terms, with Element up 9.1 per cent and RVCA up 20.6 per cent.

"This is a brand-led turnaround and our big three brands, where we placed our focus, grew globally," says Fiske.

"Europe continues to gain momentum and the Asia-Pacific region has delivered a solid performance given currency pressures.

"The result has been impacted by conditions in the Americas, as highlighted in our November update, including sector weakness in retail and short-term margin pressures associated with clearing excess inventory.

"As we get inventories back in line, we believe margins will recover.

"The essence of our seven part strategy is building strong global brands operating on global platforms.

"This year we have begun the implementation of four major platform initiatives that will sustain our growth and improve profitability over the long run.

"The transformation of Billabong into a brand-led, global company is well under way."  

While the lower Australian dollar bolstered the latest results, it had the opposite effect on Billabong's term debt which is set in US dollars.

At the end of December, Billabong had total borrowings of $282.5 million, up from $266.9 million at the end of June. Net debt over the same period surged to $144.1 million from $113.5 million.

On a positive note, Billabong says EBITDA for January and February this year are expected to be ahead of the same time last year.

The company's fortunes for the rest of the year are tied to its June trading in North America, which is the peak period for the group.

"Overall, the company expects the second half to benefit from the implementation of our key initiatives and a less pronounced bias of the group's earnings to the first half than the last financial year," says Billabong.

Billabong's shares rose 8 per cent to a high of $1.69 in early trading.

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