FW
Textile major Arvind has recorded a 41 per cent decline in net profit for the year ended March from a year ago. Revenue for the same period grew 9.7 per cent. With demonetisation, and a sharp increase in cotton prices and appreciation of the rupee, Arvind feels it has had a satisfactory performance. It expects to continue to have double digit growth in the coming financial year led by robust growth in its brand and retail business.
The Ahmedabad-based company has a portfolio of own and licensed brands. Its own brands include: Flying Machine, among others, while its licensed product brands include Tommy Hilfiger, Calvin Klein, Arrow, Gant, Nautica, Gap, and Aeropostale.
Arvind’s textile business (denim and fabric) contributes 60 per cent to total revenue and the rest is by brands and retail business. Arvind is one of India’s largest integrated textile and apparel companies. The company is also one of the largest producers of denim fabrics and is supplier to a large number of fashion brands in the world.
Arvind has launched its ready-to-wear brand. The brand, also called Arvind, will initially be available in Gujarat and Karnataka at 50 Arvind stores. It will then go on to all such 170 stores across 100 cities and the company’s 10,000 points of sale. The ready-to-wear brand will have clothes under the categories of work, leisure and ceremonial.
The African Development Bank (AfDB) will have its annual meeting in Ahmedabad, May 22 to 26, 2017. Experts and practitioners will discuss methods of promoting textile manufacturing in Africa, where many of the textile and clothing firms are small and medium enterprises. It will also discuss how the involvement of African countries in the global textile industry could look like, from conception and design. Models will show how African fabrics are inspiring designers.
AfDB is supporting the development of creative industries that utilize products, especially cotton, in Africa. Through this initiative, AfDB is promoting investments in the fashion sector, increasing access to finance for entrepreneurs and incubating and accelerating starts-ups.
The bank is investing in high-growth sectors that have the potential to promote economic empowerment and create 25 million jobs over the next decade. It considers creative industries as offering massive potential for continent-wide job and gross domestic product growth. For instance, instead of exporting raw cotton, Africa needs to move to the top of the global value chain and produce garments targeted at the growing African and global consumer class.
The textile and clothing market is already worth more than $31 billion in sub-Saharan Africa and accounts for the second largest number of jobs in developing countries after agriculture.
"Backed by demand from the US and Europe, exports have once again seen an uptick from Asian countries. With the US President Trump focusing on pushing up US jobs by reducing imports, Asian exporters are in a state of flux about the fortunes of their business. Of the 16 countries facing scrutiny from Trump’s 90-day review of possible ‘trade abuse’, more than half are in Asia with the biggest bilateral trade surpluses chalked up in the region by China, Japan, Vietnam and South Korea. China was the largest at $327 billion in 2016."
Backed by demand from the US and Europe, exports have once again seen an uptick from Asian countries. With the US President Trump focusing on pushing up US jobs by reducing imports, Asian exporters are in a state of flux about the fortunes of their business. Of the 16 countries facing scrutiny from Trump’s 90-day review of possible ‘trade abuse’, more than half are in Asia with the biggest bilateral trade surpluses chalked up in the region by China, Japan, Vietnam and South Korea. China was the largest at $327 billion in 2016. Looking at the prevailing situation, Rob Subbaraman, Chief Economist for Asia ex-Japan at Nomura in Singapore says this is going to be a bigger issue next year than this year, especially between the US and China.
Sudhir Dhingra, founder of Orient Craft, has seen a substantial rise in export volumes to $181 million in 2016 from $129 million in 2012. But owing to a unstable political and economical scenario such as Brexit and Trump’s focus on curbing imports, Dhingra expects countries to pursue simpler bilateral deals than grand regional free trade agreements as politicians realise bringing jobs back home to high-cost labour markets isn’t so simple. There is a growing concern that the US might impose additional duties.
Current growth pattern
Giving signs of positive growth, Parag Khanna, a senior research fellow at the Lee Kuan Yew School of Public Policy at the National University of Singapore says the US services exports to Asia are rising and a burgeoning middle class in Asia offers huge potential. American exports to South Korea rose to a record in February and the nation’s year-to-date deficit with China has fallen by 2.5 per cent. That emerging demand could be the start of a trend. Asian economies are not just about manufacturing or commodities anymore. There is a strong services and consumption vertical emerging.
In IMF’s annual outlook released recently, Asia will grow 5.5 per cent in 2017 compared to 5.3 per cent last year, though it warned that downside risks could include rising trade barriers. Other worries include signs that China’s economy may be slowing as authorities clamp down on excessive credit, meaning demand for commodities will soften and hurt producers such as Australia and Indonesia. Exports from China, the world’s biggest trading nation, held up in April after hitting a two-year high in March. South Korea’s exports expanded for a sixth month in April, contributing to the biggest trade surplus in decades. Japanese exports grew at the fastest rate in more than two years in March. India’s merchandise export growth was up 4.7 per cent in the fiscal year ending March 2017, after a drop of 16 per cent in the previous fiscal year. India is now poised for a year of accelerating trade growth, according to Bloomberg Intelligence.
Textile and garment companies of India are looking to promote trade cooperation with Vietnamese enterprises. The country’s textile and garment materials export turnover to Vietnam in recent years has increased on an average by 20 per cent a year.
Vietnam is one of the five largest textile and garment exporters in the world. However, the country is also one of the world’s leading importers of fabrics and materials. The shortage of high-quality materials for production is the biggest barrier to Vietnam’s textile and garment industry, hindering the country from taking advantage of free trade agreements.
Cooperating with Indian businesses will be an effective measure to diversify material supply resources for Vietnam. Vietnamese and Indian textile and garment firms see this as a good time to enhance links in investing, exporting materials and technical assistance for mutual benefit.
Apparel occupies a large proportion in India’s exports. The country’s textile and garment industry has developed a complete product supply chain and the country is also one of the suppliers of high-quality materials and fabrics at competitive prices in the world.
Trade promotion programs can help Indian businesses make deeper inroads into the Vietnamese market. These can also help Vietnamese businesses seek more material suppliers and learn from effective production models.
Vardhaman Textiles’ consolidated revenue for the fourth quarter registered a 8.9 per cent year on year increase. This was primarily driven by a 10 per cent year on year decline in income from acrylic fiber. EBITDA for the quarter fell nine per cent year on year with a corresponding margin contraction of 405 basis points. EBITDA margin for the quarter stood at 20.6 per cent. This margin contraction was aided by 17 per cent year on year growth in cost of material consumed. PAT for the quarter saw a year on year decline of 9.5 per cent.
For the full year, revenue jumped by three per cent while EBITDA rose by two per cent. Net profit was up 60 per cent year on year. Vardhaman makes almost all types of yarn, barring a few synthetic yarns like 100 per cent polyester. Otherwise it is a pioneer in cotton, cotton blended, cellulosic. Vardhaman has 1.1 million spindles and it makes 6, 00,000 tons of yarn a day. Of the total capacity one-third goes for captive consumption. Another one-third goes for the Indian market. And one-third goes for exports. The company uses innovative fiber blends and it has special products to cater to customers’ needs. Today 50 per cent of its production is of value added yarns for India.
Trident’s net profit jumped 63.6 per cent for the fourth quarter ended March 2017. Revenues for the home textiles and paper products maker were up 36 per cent for the quarter under consideration.
The revenue growth was led by 40 per cent growth in the home textile segment in the fourth quarter of 2017 compared to same quarter last year, as a result of sustained focus and efforts on marketing, designing and product innovation.
For the year 2016-17, net profit was up 39 per cent while net revenue grew 29 per cent compared to the previous fiscal. Apart from headwinds pertaining to rupee appreciation and global uncertainties, Trident foresees buoyant times for its stakeholders.
Trident's customer base spans the likes of Ralph Lauren, JC Penney, Target, Wal-Mart, Macy's, Kohl’s, Sears, Sam's Club, Burlington, etc. Exports account for about 55 per cent of its total sales. Trident exports its textile products to nearly 70 countries across the globe.
Trident has an installed capacity of 5.55 lakh spindles and 5,500 rotors capable of manufacturing 1,15,200 tons a year of cotton, compact and blended yarns. It has ten manufacturing units. The product range services the needs of the knitting, weaving, denim, hosiery, shirting and suiting segments.
Century Textiles and Industries is selling its paper business to JK Paper. Century Textiles is part of the BK Birla Group. The decision to sell the paper business is part of the group’s overall strategy to realign its businesses with those of the Aditya Birla Group.
The company’s pulp and paper division, called Century Pulp and Paper, was established in 1984. The division has rayon-grade pulp capacity of 31,320 tons per year, and writing and printing paper capacity of 1,97,800 tons. It also has a capacity of 36,000 tons of prime grade tissue paper per year.
JK Paper is one of the largest producers of paper products in India with a combined capacity of 4,55,000 tons per annum and the deal will help the company strengthen its domestic market position, It is currently the market leader in the branded copier paper segment and among the top two in coated paper and high-end packaging boards.
Century Textiles, established in 1897, began with a cotton textile mill in Mumbai and expanded to manufacturing cement, textiles, chemicals, pulp and paper products at plants located across India. A large portion of the proceeds will go towards retiring the debt of Century Textiles. In fact the transaction is expected to make the company completely debt-free.
Textile exporters in India are looking to explore opportunities in Japan. So far they have been focusing on the Western market. Of the total textile and clothing exports from India, just about two per cent goes to Japan. Of the total textile and clothing imports by Japan, only one per cent is from India.
The major supplier to Japan is China but Japan is now looking at suppliers from other countries too. Japan is a sophisticated market, leaning towards small-lot and short cycle delivery of supply. Consumption is diversified and quality expectations are very high. Specialty retailers and private labels are the in-thing and the market is open, transparent and competitive.
High quality and expensive Indian garments are gaining popularity in Japan. Customers like selecting garments that have a different character when compared with dresses and kimono worn at such occasions as weddings and parties. Many Japanese perceive Indian garments as ethnic, and since garments made from such materials are selling well in Europe, they are likely to gain popularity in Japan as well.
But Japanese buyers want the products to be tested at laboratories as their quality requirements are high and some of the standards are different from those accepted in western markets.
Cotton planting in India is likely to rise by 15 per cent in the 2017-18 planting season. Higher output in India could kill a rally that pushed global cotton prices to their highest in three years this month.
A 15 per cent rise in crop area would lift India's cotton planting to around 12.08 million hectares in the marketing year starting in October. Most Indian farmers start planting cotton - a crop that requires lots of moisture - with the onset of rains in June, although some with irrigated fields start as early as May. India looks likely to receive above average monsoon rainfall as concern over the El Nino weather condition has eased.
Oilseeds and pulses compete with cotton in key producing areas like Maharashtra and Gujarat. Prices of oilseeds and pulses plunged as much as 60 per cent due to bumper production this year, which will force many of them to switch to cotton. Pakistan, Bangladesh, China and Vietnam are key buyers of Indian cotton.
However, in the last few months Indian textile mills have been aggressively importing cotton due to an appreciation in the rupee. The country is likely to import a record three million bales in the current year.
Bangladesh’s garment exports rose two per cent over exports in 2015-16. Kintwear shipments, jute and leather products and leather footwear helped the country maintain positive export growth amid a protracted slowdown in the European Union and uncertainty in the US.
Knitwear exports rose 4.81 per cent in July-April. Exports of raw jute, jute yarn and twine and sacks and bags all went up 25.22 per cent, 12.91 per cent and 15.17 per cent respectively. Furniture sales also grew 10.36 per cent. Leather products shipments rose 19.08 per cent while that of leather footwear went up by 14.05 per cent in the July-April period.
Home textiles registered a growth of 6.58 per cent in the first ten months of the ongoing fiscal year. On the other hand, overseas sales for woven garments decreased by 0.14 per cent during the period. Exports of frozen fish fell by 10.46 per cent, shrimps 3.02 per cent, terry towels 9.34 per cent, leather 6.34 per cent and bicycles 11.05 per cent.
At the current pace of growth, Bangladesh could beat last fiscal year's total exports, but may find it difficult to hit the full-year target for 2016-17, which is eight per cent higher than receipts in 2015-16.
