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Moody's has a stable outlook for non-financial corporates in India (rated Baa2 stable by Moody's), except for telecom, which has a negative outlook. Moody's Indian affiliate ICRA has stable outlook on the passenger vehicle, construction, cement, and textiles sectors, but a negative outlook on real estate. The stable outlook is underpinned by the expectation that GDP growth of around 7.6 per cent will result in higher sales volumes, which along with new production capacity and stabilising commodity prices, will support EBITDA growth of 5 to 6 per cent over the next 12-18 months. Further, simplification of GST and other structural reforms, or improved commodity prices could result in higher EBITDA growth and provide means for deleveraging for some corporates.
Operating profitability is also expected to improve with the benefits of increased scale of execution, although this would also be sensitive to any steep rise in raw material and labour prices. Borrowing levels are expected to increase marginally to support working capital requirements with the greater scale of operations.
ICRA expects the credit profiles of domestic textile companies to remain stable. During the last 3-4 quarters, the industry witnessed multiple headwinds owing to demonetisation, the transition to GST, adverse currency movements, reductions in export incentives, sustained declines in yarn demand from China and rise in cotton prices which exerted pressure growth and profitability.
The sector's credit profile however demonstrated resilience, supported by declining aggregate debt, as the industry decreased debt-funded expansions. Favourable developments in the current year, especially an easing in cotton prices and an accommodative stance on GST/export incentives, are expected to subside growth and profitability pressures for the sector further, cushioning the impact on credit profiles.
KPR Mill, is one of the largest vertically integrated apparel manufacturing companies in India with a cumulative capacity of 3,53,616 spindles to produce 90,000 MT of yarn per annum, a knitting facility to produce 27,000 MT of fabrics per annum and the garmenting facility to produce 95 million pieces of ready-made knitted apparel per annum. KPR has been augmenting its capacities in the value-added segment. It has commissioned its large Greenfield garment manufacturing facility with a capacity to produce 36 million garments per annum under one roof. Currently with a total capacity of 95 million garments, KPR is one of the largest garment manufacturers in India.
Its ETP-embedded fabric processing unit with a capacity of 18,000 MT per annum is equipped with advanced cold processing technology. The company has invested in a state-of-the-art Printing Division with a capacity of 7,500 MT per annum and 66 windmills with total power generation capacity of 61.92 MW. KPR has also a co-gen-cum sugar plant with a capacity of 30 MW and 5,000 TCD in its wholly owned subsidiary company. KPR got their fundamentals right by establishing 12 state-of-the-art manufacturing facilities employing around 19,000 educated workers.
The brand’s quest for quality, excellence, transparency and good governance helped KPR emerge as one of the top 500 companies in India and its management as one of the top 100 CEOs of India for consecutive years.
KPR has recently established a new printing division with a highly sophisticated technology printing machine imported from Austria. This advanced technology empowers the company to print sharp designs with a high level of accuracy. The entire range of fabrics such as light and heavy and delicate and sensitive fabrics can be printed in the same machine without any friction. The sharpness and accuracy in printing designs and colour are its significant strengths. The new division would cater to the premium brands’ high-end garment requirements carrying higher revenue and margin.
Japanese fast fashion brand Uniqlo is looking at increasing sales of semi-made-to-order clothing worldwide to accelerating growth. Its fast retailing unit already offers made-to-measure clothing in Japan. Customers supply measurements or go to a store and get their measurements done, place their orders and receive items at home in a few days. A similar service was recently launched in the US, starting with men's shirts. Over 800 colours and style combinations are promoted online and they are delivered in three to seven business days. At $ 29.90, the pieces are as affordable as regular shirt selections. Chinese facilities producing quality clothing for Uniqlo will handle production of semi-custom apparel. Uniqlo plans to offer the service in Southeast Asia, Europe and elsewhere as well.
Uniqlo has kept prices low by mass-producing pieces designed and planned much in advance of sale but as consumer perceptions diversify, the company’s Fast Retailing Chairman and CEO Tadashi Yanai is pushing data-driven production and retailing as a new business model. The company is starting out with semi-custom clothing to establish the production and sales infrastructure for bespoke offerings down the road.
Uniqlo's online sales total an estimated 100 billion yen ($881 million) globally. Fast Retailing targets worldwide sales of 3 trillion yen, including from other brands. International online sales, propelled by semi-custom clothing should account for around 30 per cent, or 1 trillion yen, of overall sales, Yanai disclosed.
The US sees China as the go-to country for apparel sourcing. Agents find this country a reliable manufacturer of anything related to clothing. However, for several years now, U.S. imports from China have been going South. As per data from the US Commerce Department, for year ending October 2017, apparel companies imported $27 billion worth of clothing from China, which is a 4.6 per cent drop when compared to the previous year.
Despite this, China accounted for 33.7 per cent of all the apparel brought into the US. That was before India and Vietnam began to raise production in their clothing factories to compete with lower wages and costs. Vietnam was the second favourite for apparel importers and was poised to become a big apparel exporter to the United States through a free-trade pact called the Trans-Pacific Partnership that would have given Vietnamese-made clothes duty-free status. But after President Trump decided to bow out of the TPP, Vietnam lost a great opportunity.
Despite this, the United States enhanced its apparel imports from Vietnam by 6.2 per cent for the year ending October, for a total of $11.4 billion worth of goods. Vietnam now oversees 14.3 per cent of the US apparel import market. Sourcing agents have made Bangladesh the third-largest apparel supplier to US companies.
The textile sector in Cameroon is largely dominated by China which controls around 82 per cent of the market, reports the Cotton Industry Cameroon (CICAM). And this unusual situation is detrimental to the local sector. These figures are opposite of the position three decades ago when the CICAM controlled 85 per cent of the market. Despite the huge influx of textiles from China and West African countries along with counterfeiting, smuggling and fraud for more than 50 years, unique local producers, cannot meet market requirements. Adding to their woes, is the low quality and quantity of locally produced raw material.
Cameroon, which has an annual production capacity of 3,50,000 tons of cotton, will be able to double production, given the availability of labour and arable land. Another problem is the cheaper prices of Chinese products which lures consumers to purchase them. Since last year, the government has embarked on an investment program of 5 billion CFA francs, their aim is to boost production tools to make it more competitive.
Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has urged all RMG owners to invest more in human capital development to increase their productivity. BGMEA President Siddiqur Rahman exhorted, mid-level management is the major part for any garments industry to sustain their activities. BGMEA has already started a ‘capacity development program’ for mid-level managers for RMG Industries. Sin e India is the competitor, Bangladesh needs to focus more on skill development. If the Indian government give support to its industry owners, Bangla government to should try to give all facilities for industry owners, he feels.
BGMEA, recently awarded 52 successful participants of the training program for mid-level managers from 9 factories: Islam Group, MB Knit Fashion, Ananta Garments, Knit Concern, KC Print, Tim Ltd., Natural Denim, Shin Shin Apparels, and the Apex Group. The training program was organised by the Center of Excellence for Bangladesh Apparel Industry (CEBAI) in collaboration with Bulidtek Consultancy, Sri Lanka and supported by BGMEA, ILO and H&M. CEBAI President and Former President of BGMEA, Atikur Rahman disclosed, they are working to decrease foreign dependency of our industry. Mohammed Nasir, Vice President, BGMEA reported, every year $1 trillion is lost due to lower productivity of workers post mentality problem or barriers. Therfore, manufacturing needs to get more skilled manpower to attain the targeted export of $50 billion by 2021.
All Pakistan Textile Mills Association (APTMA) Punjab Chairman Ali Pervaiz has sought restoration of 28 per cent system gas supply to textile mills to carry forward the over 10 per cent growth in exports due to the textile package. Ali analysed, a revival of the Punjab-based textile industry is only possible through availability of energy at a regionally and internationally competitive price. He said industrial capacity valued at $4 billion in exports has been closed down due to the high cost of doing business in Punjab. Textile exports can easily be doubled in 3-4 years if enabling environment is in place. He demanded immediate removal of all tariff and non-tariff barriers on import of cotton.
Speaking on the occasion, Gohar Ejaz pointed out that revival of 140 mills should be the key aim of the government. It is only possible through the availability of affordable energy at a tariff of Rs 7 per unit of electricity and Rs 600 per MMBTU gas all across the county. He lauded the efforts of Federal Minister for Textile Pervaiz Malik for taking proactive steps towards revival and growth of textile industry.
The APTMA leadership has appealed to the Prime Minister Shahid Khaqan Abbasi and Chief Minister Punjab Shahbaz Sharif for ensuring continuous system gas supply to mills in Punjab to keep the industry running.
After falling for two consecutive years, national textile and textile product exports grew in 2017, valued at $ 12.4 billion, up by 4.4 per cent from 2016 at $11.87 billion. The amount exceeded the target of the Indonesian Textile Association (API) of $11.87 billion. The increase was largely due to enhanced demand from Asean, Japan, China and the US as well as improved quality of national textile products.
Kemenperin data predicts textile exports will continue to increase until 2019 to $13.5 billion, then rise again to $15 billion a year later. Last year, the textile industry entered the top four major manufacturing sub-sectors. Out of the total 17 million workforce, the industry ranked third, below processed food and beverage industries of 3.3 million and automotive 3 million people. The fourth position is taken by the furniture industry 2.5 million people.
On the other hand, APIs are more conservative in setting export targets. This year, TPT exports are projected to be stagnant. However, exports may jump twice, if Indonesia establishes a FTA with the EU. Currently, national textile exports to the EU are subject to import tariffs (BM) of 11-17 per cent, while Indonesia, Vietnam, get 0 per cent tariffs starting this year, because they have FTAs with the EU. Every year, the average export of Vietnamese TPT goes beyond $20 billion. The government is speeding up FTA discussions with EU, post last year's successful FTA with Chile. The FTA discussion with Australia is also the focus of the government.
In 2015 Adidas first sued LA-based fast fashion retailer Forever 21 for using its trademarked stripes, a lawsuit which was settled in early 2016. At present, Adidas has agreed to an out-of-court settlement in a recent trademark case arising from the brands' long-term disputes concerning Adidas' allegations that Forever21 is wrongfully using the registered "three stripe" mark. But terms of the settlement were not immediately disclosed.
In March of 2017, Adidas America sued Forever 21, as well as a group of its suppliers in Oregon, for using Adidas' registered "three stripe" mark. The complaint alleged trademark infringement and dilution, unfair competition, and deceptive trade practices.
Forever 21 had stated in a court document, that since 2006, Adidas has commenced a pattern of complaining about striped apparel sold by Forever 21, and it has steadfastly increased its threats to encompass virtually any item of clothing with decorative stripes. At that time, Forever 21's legal team went on the offensive and asked a California court for a declaratory judgement saying it could use the stripes in question on "six items of clothing." Less than a month later, Adidas filed the current trademark lawsuit in Oregon.
Adidas actively sues over its trademarks in the US, a strategy intellectual property holders must employ to protect their rights in this country. The brand has already sued Ecco, Marc Jacobs, Skechers and Tesla for infringing on its registered thee stripe mark.
"A recent seminar by the Nigerian Institute of Social and Economic Research, Ibadan highlighted the rich textile heritage that Nigeria possesses. While the industry has defied all policy measures, sustenance would depend on path breaking initiatives, creativity and strong political will. The seminar, ‘Competitiveness of the Nigerian Textile Industry’, stated factors such as smuggling, high costs, lack of power, shortage of locally-sourced raw materials, prohibitive borrowing rates, inconsistent policies and low patronage were hampering industry growth."
A recent seminar by the Nigerian Institute of Social and Economic Research, Ibadan highlighted the rich textile heritage that Nigeria possesses. While the industry has defied all policy measures, sustenance would depend on path breaking initiatives, creativity and strong political will. The seminar, ‘Competitiveness of the Nigerian Textile Industry’, stated factors such as smuggling, high costs, lack of power, shortage of locally-sourced raw materials, prohibitive borrowing rates, inconsistent policies and low patronage were hampering industry growth. Bashir Adelowo, Senior Researcher with NISER, said WTO’s trade liberalisation policies, to which Nigeria signed on in 1997, had failed to revamp the industry, instead, favouring rich and major exporting countries like China and India, which have since taken control of the market.
The resurgence
With its estimated population of 186 million, advantage in cotton farming, the sub-Saharan African market and the popularity of its African prints – Ankara and Adire – reviving the textile industry is key to the resurgence of Nigeria’s manufacturing sector and the economy. The federal and state governments need to adopt workable, consistent policies and muster the political will to realise the dream. As per World Bank, low income economies like Nigeria should leverage their cheap labour to develop textile industries.
The National Bureau of Statistics revealed in the three months to September 2016, Nigeria spent N24.7 billion importing textiles. According to the Nigerian Textiles Manufacturing Association (NTMA) annually N1.29 trillion is spent on such imports. The government should put a stop on smuggling that accounts for 80 per cent of our local market in defiance of a ban and import restrictions re-imposed since 2005. There should be a thorough reform and massive shake-out at the Nigerian Customs Service to get rid of corruption. The government should rally all stakeholders to revive and prosecute the National Cotton Textile and Garment Enterprise Policy under the Nigerian Industrial Revolution Plan launched in 2015, but has been damaged by the lack of interest by the states.
Measures in the right direction
Nigeria should make massive job creation and development of agriculture, mining, manufacturing and non-oil exports the pre-eminent objective of all policies. There should be measures to protect agriculture and local industries as around 26 of its 36 states are suitable for cotton growing. They have to renegotiate with the WTO or pull out of the 164-nation global organisation. Both the World Bank and the IMF have criticised it for favouring rich nations at the expense of developing countries. According to the United Nations Conference on Trade and Development, market distortions caused by its free trade policies cost developing countries $700 billion in lost exports annually, while the World Bank added that its textile quotas of 1994-2005 augmented advanced economies, but had cost developing nations 27 million jobs and $40 billion in lost exports each year. Nigeria’s market is said to sustain 2.5 million jobs and more in China, India, Bangladesh, Turkey and Europe.
Through domestic and foreign content textile export, the industry must increase participation in global value chain. It has been shown that trade-induced accumulation of productive knowledge creates increasing productivity in the economy.
