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G B Aras, Director Textile Engineering Group, ATE
“One inherent advantage Indian textile industry has is that we are fully independent as far as the supply chain is concerned. Compared to other industries like pharmaceutical, electronics etc, their supply chain is dependent of global suppliers including China. So the industry that can really take advantage from global market with sustainable increase in exports is textile. If the government realizes this and gives proper support the industry will bounce back faster and increase its export share.”
What challenges is the Indian textile and garments industry facing right now? How can they be overcome?
The textile industry was already under a financial stress for entire 2019 and the sudden event, known as the ‘Black Swan Event’ when suddenly things like this happens was not expected. There will be a long term impact on individual business and the country’s economy. The industry was ailing and this came as a big blow. Most industries are not operating right now but whenever the lockdown ends and manufacturing starts, it will be very gradual for few reasons. One, there will be a lot of financial or liquidity cash crunch for textile makers. They will have to pay salaries and working capital will be required. Moreover some global buyers have cancelled their orders and held back orders which means whenever factories start they don’t know what to produce. Therefore, it will be a challenge for people to start.
Secondly most migrant workers have gone back home and no one knows when they will be back or will if they will ever comeback; moving to full production will be a challenge. I also believe recovery will be slow as there will many after effects mainly because during this period, workers will also have to be paid their salaries. Ours is a low margin, high working capital industry, given this scenario people are starving for cash and the pandemic came at wrong time. It will break the backbone of our industry. Bouncing back will take long.
The government announced certain packages and incentives for the industry. What are your expectations from the government towards the textile industry to overcome this challenge?
The government has already announced the first fiscal stimulus but I feel a larger one is yet to come The first one was about 0.8 per cent of the GDP, and the expectation is the next one should be at least 2 per cent of the GDP, which means a good amount of money will come in support of both the industry and the economy. Obviously, a large part will come to the industry. Apart from that some companies have taken bank loan and in the current situation many will not be able to return them in time hence, there will be more defaulters. The banks and the financial institutions should be instructed by the government to give a moratorium or at least be softer because the textile industry is working on low margins and high working capital, so they will always be starving for cash. Repaying loans in this situation will be a serious issue. Secondly, besides fiscal stimulus a lot of claims have not yet been recovered by the industry from the government or incentive pertaining to MEIS or ROS , CTL and GST. Money is stuck with the government which is due to the industry, if this money is released some financial stress will be relieved.
Since the textile industry is the second biggest employer, with high export potential and high employment potential, no government can afford for this industry to collapse. Hence some support measures are required from the government.
There is a positive fall out of Covid-19 as in future, many global buyers will increase their buying from countries like India, shifting partly from China and India can be one of the beneficiaries if we play our cards properly. If we build proper infrastructure, proper capacities in textile and eco system a lot of orders can come. India can take advantage of this situation and try to increase its textile exports.
One inherent advantage Indian textile industry has is that we are fully independent as far as the supply chain is concerned. Compared to other industries like pharmaceutical, electronics etc, their supply chain is dependent of global suppliers including China. So the industry that can really take advantage from global market with sustainable increase in exports is textile. If the government realizes this and gives proper support the industry will bounce back faster and increase its export share.
Have we learnt a lesson not to depend on one sourcing country? Are we ready to produce volumes to become the next sourcing hub? Will we be able to match their pricing?
It is not only about pricing but also about quality. Costs in China had gone up in the last few years but their share in world trade has not fallen drastically. One of reason is quality. They have focused a lot on quality. So while cost is important quality is equally important. Unfortunately for India, two or three factors are really not in our favor right now. We are in the lower segment of the market and not in the high value segment where we compete with countries like Vietnam, Bangladesh so this is due to costing only. If we have to come up, then we have to play a quality game like China. We have made high quality goods for exporting.
I also think cost is a big problem in India therefore, after the pandemic there will be a shake-up in the industry. Companies that have strong sustainability in terms of finance, quality culture, good leadership, good management, will not only survive but also prosper in future and those that are weaker, particularly in the small segment will find it difficult to survive or even reopen. So, bigger players have a lot of responsibility now. They have the capabilities to build further capacities, give the best quality at an affordable rate because once you have mass production costs will come down.
Our problem is the industry is fragmented logistically. Cotton is grown in MP Gujarat and Central India but spinning mills are in Tamil Nadu so cotton is transported all the way. For weaving and knitting it goes to some other place and for finishing it goes to Ahmedabad, Surat and Mumbai, then it goes to garmenting centers. The whole value chain becomes very inefficient and costs are added at every stage. If industry’s leaders realize the need to have big integrated units from start to finish goods don’t have to travel and a lot of will reduce.
The Textile Ministry has to work closely with the industry, not only spinning, weaving, fabric forming, processing or garmenting and we have to build huge capacities. If we build huge capacities then we can effectively bring down the cost and fight competition with costs also. Moreover India makes limited products, mainly cotton based for exports. Now we have to diversify our basket to synthetic and blends and it has to be done fast because we are losing a lot of market because of this. Once we have synthetics and blends we will have a larger product basket.
India’s growth engine is not garments it is mainly textiles that is home textiles etc. In home textile India’s position is very strong, though there are temporary hiccups with exports to US and Europe but I am sure that they will regain market as they are well entrenched but in garments we are lacking and therefore Bangladesh, Vietnam, China are scoring.
Garment is highly labour oriented and costing is critical. There are still some states in India which have low cost if big garmenting hubs are put up there, we can manufacture at a low cost, comparable to that of Bangladesh. Everyone needs to change according to situations. We can’t work in old ways then we will remain with 5 to 5.5 per cent of market share only. This is a great opportunity and India should put all its cards together to increase global market share.
Many industry stakeholders feel small players should move to making technical textiles like masks and PPEs. What is your take?
Indians have herd mentality and short term view of business. Now that this opportunity is coming everyone wants to jump into this. One thing is sure, demand for PPEs will continue for quite a long time because the fear of virus is not going go easily but we have limited capability right now. The mask that is actually recommended is a three layered one called SMS that is melt blown and spun burnt. Spun burnt India produces but melt blown there is only one manufacturer. So we have to see if we have capacities to produce these because somebody has to invest in this technology and in surgical gowns also there are people.
Everybody wants to jump in because people already active are facing difficulties due to high demand. Now those who are already in this business and have good experience of this trade can expand faster. Indeed India needs to invest in such things but every country will do the same and it should not happen that there is a work capacity for all this because world over everyone is enquiring about masks and gowns etc.
At present people are thinking of short term but we have to evaluate whether we have the requisite raw material, equipment available. The main raw material for WHO approved mask is melt blown and that is not available in India, we should first put up factories to produce the raw material and then move to producing masks.
It is a great opportunity but how long it will remain, how much competition will be there one does not know but players who are already into this have the opportunity to expand as they have business knowledge and are better placed than anybody else. The technical textile industry is getting support from the government and now there will be a new norm in hygiene. Now PPE (Personal Protection Equipment) will become compulsory for hygiene workers. Therefore, within our country there will be a huge demand for this. This is an opportunity to diversify business.
As for garments, sale will happen more through online now. Circular economy is also an important aspect that is picking up in Europe and the US where people don’t want to consume more but repair and reuse the same thing. Trends will change and there will be less consumption.
How is ATE facing this challenge?
We have formed teams for different things and are in touch with all our employees to keep their morale high. We are fully operating from home. We have regular conference calls and reviews and our first plan is prepared for post-lockdown and how to survive because what will happen to the machinery is that investment in machinery will be the last thing which will be on the mind of customers when the lockdown opens. It will take a lot of time to buy machines and for companies like us to earn. So we have to be prepared for a longer lull for our segment of business.
Cash management is extremely important and we are focused on how to manage the cash and reserve. First and foremost we take care of our employees. We have a dashboard which is updated if anyone is sick. Then we support the infected person and his family. We are also training our employees online on digital marketing, using software as business tools. Employees are updating their manuals normally they don’t get that much of spare time and to utilize this time to prepare a list as to how to restart the machines once we reopen as there are many processes involved for restarting machines which we will circulate to our customers.
As and when the lockdown opens we will have access the situation and have a separate blueprint to deal with it. But one thing is clear, the next two quarters will be challenging for the industry and for ATE also. We will first focus on business continuity. We also have to get back to customers to help them. We have asked our people to be in touch with customers and principals to enquire about their well-being and whereabouts regularly so that there is no discontinuation in business relationship.
What is your advice to the industry?
It is most important to keep positivity and be motivated. Read good books and articles because positivity is important. When we reopen also only people with a positive mindset will bounce back faster. We have to learn our lessons and can’t be complacent. There will be extremely difficult situations for the next two quarters and the first priority for everybody should be to survive. We also have to see that there are less layoffs because that is the first fear people have in their minds which is not possible without the government’s help. In the long term the industry is going to gain provided we change ourselves according to the situations and take advantage.
Following the announcement of the offer published in September 2019 for Freudenberg’s planned acquisition of Low & Bonar PLC, the formal application for approval under the EU Merger Regulation (“EUMR”) from the European Commission (“Commission”) was submitted in March 2020 following extensive preliminary discussions and in agreement with the Commission. A decision on the application was received on April 17, 2020.
The Commission has granted an unconditional Phase 1 clearance under the EUMR. Completion of the acquisition remains subject to the satisfaction or waiver of the remaining conditions to the offer, including the sanction of the scheme of arrangement by the Scottish Court. Given the current disruption due to the COVID-19 pandemic, it is not yet possible to establish a definitive timetable for completion of the transaction. Further announcements will follow as appropriate.
Taken together, there are 768 companies running in red, accounting for 48.72 percent of all the dyeing and printing companies, considered in a statistical study, a large increase by 16.15 percentage points over the corresponding months last year. The total loss of money in these red bottom-line companies added up to 1086 million Yuan, up by 46.41 percent.
From January to February, the beginning of the year 2020, production of dyed and printed fabrics was reported to have touched 4913 million meters, a two-digit reduction by 22.42 percent, and further drop by 29.88 percent for sales income that totaled 24.706 billion Yuan from 1560 dyeing and printing companies, in the size of the companies considered above a designated size. Much more jaw-dropping is the fact that profits had a freefall by 101.8 percent while the export were down by 23.9 percent as opposed to the same period in 2019.
Normally, the swim or sink of a corporate profit rests with many factors, but financial cost, management cost, and the sales cost are the big three cost factors critical for any company’s bottom line that appears in red or in black. These big three cost factors take up a lion-share of an average of 85.64 percent of the business income in dyeing and printing industry. In the dyeing and printing sector, these big three costs, increased by 9.39 percent in the first two months of 2020, whereas, sector wise the increase for cotton fabrics was by 8.87 percent, and for fabrics made from man-made fiber, it was 14.08 percent.
Taken together, there are 768 companies running in red, accounting for 48.72 percent of all the dyeing and printing companies, considered in a statistical study, a large increase by 16.15 percentage points over the corresponding months last year. The total loss of money in these red bottom-line companies added up to 1086 million Yuan, up by 46.41 percent.
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| Dye & Print Fashion amid Pandemic |
China Dyeing and Printing Association (CDPA) issued its annual report in late March 2020 for the economic performance in dyeing and printing sector (Annual Report 2019), stating that the twelve months 2019 witnessed 0.83 percent increase in business sales income totaling 283.153 billion Yuan, a drop by 2.15 percentage points, and the profit increased by 6.49 percent, but growth rate had a considerable downslide by 11.44 percentage as compared with 2018 due to the increase in the big three costs to amounting to 15.835 billion Yuan.
The number of companies running at a loss amounted to 309, representing 18.92 percent of the total companies included in the statistical study, up by 9.76 percent to increase by 21.24 percentage points higher over 2018. The year of 2019 saw an increase in international trade for $29.144 billion by 7.34 percent, resulting in trade surplus for $25.689 billion, up by 10.4 percent.
Speaking of the import, the eight big categories of dyeing and printing textiles, including the dyed and printed cotton or manmade fiber or their blended fabrics in different textures of weaves and knits, as per CDPA’s own standards for identifying the product lines in the sector, were registered for 878 million meters for $1727 million, 12.62 percent down in volume and 10.94 percent drop in value, about 1.97 dollar/meter on average, up by 1.92 percent.
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| Blue-print Fashion Town in Keqiao, Shaoxing city of Zhejiang Province |
The export of the eight big categories from January to December in 2019 amounted to 26.823 billion meters, and to 27.417 billion dollars, enjoyed an increase in volume by 12.83 percent and in value by 8.75 percent, but the average unit prices of sales decreased by 3.62 percent and decreased 1.02 dollar/meter in terms of weighted average.
In the report, CDPA predicts that the global pandemic impacts will slow down the world economic growth as it is the severest challenge since the financial crisis in 2008, and will weaken the support force to the market recovery. The dyeing and printing industry will bear even greater pressure in sustaining a continually smooth run and a more arduous task for reshaping the industry for better development.
And sure enough, if the opening two months of 2020 and pandemic thereafter is to be looked at, China’s Dyeing & Printing Industry is far away from being termed as a “good beginning” is “half done”.
Contributed by Mr. ZHAO Hong
He is working for CHINA TEXTILE magazine as Editor-in-Chief in addition to being involved in a plethora of activities for the textile industry. He has worked for the Engineering Institute of Ministry of Textile Industry, and for China National Textile Council and continues to serve the industry in the capacity of Deputy Director of China Textile International Exchange Centre, V. President of China Knitting Industry Association, V. President of China Textile Magazine and its Editor-in-Chief for the English Version, Deputy Director of News Centre of China National Textile and Apparel Council (CNTAC), Deputy Director of International Trade Office, CNTAC, Deputy Director of China Textile Economic Research Centre. He was also elected once ACT Chair of Private Sector Consulting Committee of International Textile and Clothing Bureau (ITCB)
Ermenegildo Zegna Group, the Italian menswear label has reopened its facilities in both Italy and Switzerland to produce protective medical suits for hospital staff in the Piedmont region and Canton Ticino, with a production goal of 280,000 units. Zegna’s relief efforts are made possible by a partnership between the Zegna Group, Fondazione Zegna, the Piedmont region in Italy and Canton Ticino, Switzerland.
The medical suits produced are made from a non-woven fabric produced by Pratrivero Spa in Biella, Italy. The Zegna Group is proactively collaborating with the Piedmont Crisis Unit and Canton Ticino relevant authority to speed up the production process in an effort to meet the pressing need for vital medical supplies.
ZDHC Foundation has launched a dummies manual aimed at detoxing the fashion industry.
The manual focuses on educating the textile and apparel industry and consumers on chemicals used in the making of apparels and creating awareness about the harmful chemicals and keeping them away from the environment.
The manual offers various levels of understanding on the chemistry involved in the apparel manufacturing, while also educating industry on the use of these chemicals for creating a sustainable environment.
The manual aims to enlighten the apparel industry professionals on the adverse effects of manufacturing practices on the environment and people, while also sharing alternative and best practices to motivate them on the revolution.
Under Armour recently appointed Lisa Collier as its chief product officer. Until recently, Collier served as president and chief executive officer of NYDJ Apparel LLC. Her more-than-30-year career has also included time at Levi Strauss & Co., Sunrise Brands and Limited Brands.
Collier will begin her new role on April 27 and report to Patrik Frisk, Under Armour’s president and CEO. Collier will direct the Baltimore-headquartered company’s product and merchandising in addition to other responsibilities.
Under Armour, Inc. manufactures footwear, sports, and casual apparel.[Under Armour's global headquarters are located in Baltimore, Maryland with additional offices located in Amsterdam, Austin, Guangzhou, Hong Kong, Houston, Jakarta, London, Mexico City, Munich, New York City, Panama City, Paris, Pittsburgh, Portland, San Francisco, São Paulo, Santiago, Seoul, Shanghai and Toronto.
The European textiles and clothing sector needs urgent support, if it wants to remain a strategic pillar of the European economy. Euratex President Alberto Paccanelli held a constructive dialogue with Commissioner Breton to develop quick and effective solutions.
According to a recent survey among European textile and clothing companies, short term prospects for the industry are dramatic: 60 per cent of companies expect sales to drop by half 70 per cent of companies has serious financial constraints and 80% of the sample has reduced workforce, using temporary unemployment schemes where available. Production companies report problems in their supply chains, whereas retailers face the problem of a “lost Summer season”. 1 out of 4 companies is considering to close down.
These dramatic figures were presented recently by Euratex President Alberto Paccanelli in a videoconference with Commissioner Breton and other key actors of the industry.
Despite this unprecedented situation, the European textile and clothing industry responded immediately to the situation provoked by COVID-19. Over 500 companies reconverted part of their sites or invested in new machineries, to produce protective masks and garments. They are showing great sense of solidarity and want to overcome the crisis.
To safeguard the industry, short term measures are needed, such as accessing liquidity, re-opening shops as quickly as feasible (to create demand), guaranteeing a smooth functioning of the internal market and avoiding any disruption in export markets. The Commission should also refrain from adding any regulatory burden in these difficult times.
In the longer run, a strategic plan needs to support the relaunch of our industry and enhance the global competitiveness. Critical supply chains should be brought back to Europe, and we need to ensure a level playing field on the global market and, especially, on imported goods. Innovation, digitalisation and green economy remain a target for the industry, but they need to be reviewed in light of a relaunch programme for the sector.
Pakistan’s federal government has decided to lift the ban on the export of textile masks and sanitizers. This is a reflection of Pakistan’s successful policy to contain COVID-19 in a situation when the developed countries have succumbed to it. But will the government be able to satisfy the Supreme Court of Pakistan about its successful policy?
This was decided in a meeting of the National Command and Opera¬tion Centre (NCOC), working under the Nati¬onal Coordination Committee. He stated the decision will help boost the country’s exports by meeting the demand for these products within the international market.
The export of all types of surgical masks and sanitizers was banned at the start of the coronavirus outbreak in the country. Though there was no export ban on washable cloth masks, mainly used as anti-dusk pollution masks, but customs authorities were not allowing such exports.
The adviser said that the commerce ministry will issue further clarification with reference to the export of the products. He reiterated that surgical masks and N-95 masks which are in short supply within the local market, will not be exported.
It is worth noting that Pakistan Young Pharmacist Association (PYPA) has recently submitted an application to Federal Investigation Agency (FIA) in which they alleged that 20 million face masks were smuggled out of Pakistan in connivance with government officials.
Nasa Garment Plc has become the first Ethiopian company from the Hawassa Industrial Park (HIP) to export its products to Canada.
Founded in 2019, the firm on April 8 exported to Canada a container with 21,000 units of apparel, including shirts, trousers, active wear and sweaters. Canada offers duty-free privileges to the East African country’s products.
The company is owned by Saron and Goitom Afework and can make 30,000 pieces of clothing a day with its 30 production lines. It employs 340 workers and it is expected to hire 2,100 more when it becomes fully operational. Nasa started production in January 2020 and will ship products to Canada every week, according to Ethiopian media reports.
The company plans to earn $1.5 million from exports this year and expects to earn $7 million dollars next year.
During the past eight months of this fiscal, the country’s textile and garment industry generated $129 million from exports, a 32 per cent increase over the same period last year. The volume also registered a 4,100 tonne increase from the preceding year.
Canadian athleisurewear maker Lululemon Athletica is the latest to announce the exit of its CFO, after a string of company’s announcement of the resignation of top-level executives.
Patrick Guido, who joined the company in 2018, after seven successful years at VF Corp, will be taking his leave on 8 May to pursue interests outside the apparel industry.
The role will now be fulfilled by senior Vice President Meghan Frank and Controller Alex Grieve who will jointly oversee the workings of the finance team till a suitable successor is found.
Lululemon had earlier announced that the executive-level management will be taking a pay cut of 20 per cent during this crisis as the company’s stores in Australia, New Zealand, Malaysia and all of Europe remain shut due to lockdowns.
