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Tamil Nadu's textile sector will get a boost from a series of schemes and programs announced by chief minister J Jayalalitha. This state will extend financial support of up to Rs 2.50 crore to entrepreneurs who come forward to set up integrated textile parks. A State Textiles Consultative Committee would strive to aid the growth of the industry and strengthen hand and power loom, yarn and apparel.
A special 15 per cent discount for silk clothing would be given to further drive sales and bring down inventory with cooperative weavers’ societies and it would entail an additional expenditure of Rs 10 crores.
The state would set up a consultative panel to achieve integrated development. Tamil Nadu has also announced schemes with a subsidy support to the tune of Rs 22.55 crores, including a project to cultivate high yielding mulberry varieties in 5,000 acres by giving a subsidy of Rs 5.25 crores. Under the Centre’s scheme for integrated textile parks, 14 textile parks have been allocated for the state. Also, under the scheme for integrated textile processing development of the center, the state government would give financial support up to 25 per cent in the project estimate for textile industries.
India's overall exports of cotton textiles declined 0.1 per cent last fiscal. However, exports of cotton fabrics and made-ups registered 11 per cent and five per cent growth respectively. A steady growth in export of cotton fabrics and made-ups is expected to help the industry even as cotton textile shipments remain sluggish. Higher exports of value added products in the long run will lead to greater employment and higher level of investments.
The emergence of mega trade agreements by the US and the European Union among themselves and other key trading partners such as Korea, Vietnam and Japan poses fresh challenges for India. It would be in the best interest of the country to take an integrated approach rather than an ad hoc decision while negotiating new free trade agreements or re-negotiating old ones.
Given the country’s infrastructural drawbacks, un-rebated taxes on exports, high cost of inputs and preferential benefits given to competitors, the textile and clothing industry in India wants export concession from the government for a few more years. It wants an ensured supply of raw materials at par or below international prices. It wants the technology upgradation fund (TUF) to be reactivated and cotton yarn to be included in the Merchandise Export from India scheme.
Sangam India's revenues were down but earnings were above CRISIL Research’s expectations. Revenues declined 2 percent year-on-year to Rs 3.7 billion primarily because of 11percent year-on-year decline in yarn sales. Denim sales increased 20 percent and PV fabric sales increased 6 percent.
EBITDA margins expanded by 330 bps and 40 bps quarter-on-quarter to 16.9 percent driven by a profitable product mix and improvement in denim margins due to subdued cotton prices. Adjusted PAT increased 52 percent to Rs 172 million. Production at the new garments production unit has begun and is running at 20-30 percent utilisation. The segment expects to add Rs 500-600 million revenues in FY16.
CRISIL views it as incrementally positive and has maintained a fundamental grade of 3/5. It has raised EPS estimates and fair value and FY16 and FY17 EPS estimates from Rs 19.3 and Rs 23.7 to Rs 21.2 and Rs 25.4 on the back of higher EBITDA margin estimates. It has lowered cost of equity from 17.8 percent to 17.4 percent due to improved stock liquidity. As a result, CRISIL’s fair value has increased from Rs 115 per share to Rs 220. At the current market price of Rs 225, its valuation grade is 3/5.
Overcoming impediments
Yet, there are many hurdles that need to be overcome as African manufacturing is at present a blip on the radar compared to China. It will be a long time before a major upheaval takes place. After all catch-up growth takes a while to take off. There are many hurdles on its growth path, such as lack of basic infrastructure. Then, there is armed conflict and corruption, to overcome. Many Asian countries though, have grown rapidly without strict measures of corruption control. Economically, what’s more important is that destinations provide reliable electric power and a convenient location for the container ship to dock.
Finally, the million-dollar question is whether manufacturing jobs should be taken to Africa by profit-seeking companies, where such low wages are offered. An unequivocal answer would be a ‘yes’ as the perception is that moving jobs to anywhere in Africa is beneficial for their impoverished population.
A $21-a-month manufacturing job is certainly an improvement, but there are alternatives too, such as raising the garments factory workers’ initial wages. However, such measures mean adding cost to employing workers there. Manufacturers would look at Africa as an option, only if the wage difference was high compared to other countries.
An improvement for African workers may act as a step towards bigger improvements. As the economy strengthens, garment factories would move from country to country, until every country has become industrialised to the point where nobody anywhere is working for $21 a month. Such jobs provide an above-average standard of living. The more Africa’s economy grows, the more the rise in people’s wages. This would be possible if Africa achieves the same level of growth as Asia has done in the past 70 years.
The duty on Pakistani products, mainly textiles will be slashed by 50 per cent (from 10 to 5 per cent), by Australia. This is in response to rigorous efforts of the current government, especially the Commerce Ministry. Engineer Khurram Dastgir Khan, Commerce Minister disclosed this recently after a meeting with the Australian High Commissioner. Khan said the textile, clothing and footwear industry of Pakistan will be a beneficiary of reduced duty by the Australian Government. Duty has been slashed on 226 tariff lines out of which only eight are non-textile products and the remaining 218 are related to the textile sector, and 63 are home textiles.
The minister also stated that the Commerce Ministry would be chalking out a plan that is aimed at facilitating the Pakistani textile sector entrepreneurs with Australian buyers. Besides, reviewing the current state of bilateral trade relationship, an Australian trade mission would be visiting the country in October 2015. The Commerce Ministry gets a lot of support from Australia, especially through the World Bank on regional connectively issues. Khan added that they have requested Australia to also include Iran in the regional connectivity agenda and Australia was positive about it.
Invista and Aurizon Ultrasonics are cooperating on a new joint development project. Invista is a producer of polymers and fibers, and owner of the Lycra brand. Aurizon is a supplier of ultrasonic processing equipment to the hygiene industry. The project will focus on the collective development of novel ultrasonic bonding equipment and novel stretch fibers for the construction of stretch laminates without the use of hot melt elastic attachment adhesives. It’s hoped this will allow hygiene producers to improve product fit and comfort without the cost and complexity of glue.
Invista is the market leader in stretch fibers and the collaboration hopes to bring to the hygiene market the next generation stretch materials, leverage the strengths of both companies and accelerate the development of new materials and processes for customers. Aurizon’s current technology to ultrasonically secure elastics in nonwovens without the need for adhesives can enable lower material costs, increased operational efficiency, and improved product comfort and performance.
The collaboration hopes to discover the potential synergy between Invista’s new fiber innovations and Aurizon’s high speed rotary ultrasonic bonding technology. The two partners hope innovations in diaper design and cost reduction will result from this joint effort.
www.invista.com/, www.aurizon.com.au/
Hennes and Mauritz (H&M) is scaling up its fair living wage efforts with plans to add all of its strategic suppliers by 2018. The Swedish apparel giant is updating its purchasing practices to support those suppliers. H&M launched its fair wage method in 2013, with pilots in a few role model factories. The initiative is aimed at driving wage improvements through a sustainable pay structure, wage levels and wage adjustments, and through enhanced communication and social dialogue with suppliers. The strategy is showing progress and will now be scaled up to more markets and suppliers.
As a part of this strategy, H&M is updating its purchasing practices to support its suppliers in implementing fair living wages. The overall goal is to make it easier for suppliers to plan their capacity and thereby reduce production peaks and overtime. The company feels its purchasing practices should always provide reasonable lead times, fair pricing, timely payments and transparent communication. H&M is finalising tailor-made projects for industrial relations projects in Myanmar and Ethiopia.
In Bangladesh, H&M is hoping to get all of its supplier factories covered by its social dialogue program by the close of 2018. At present 88 factories are participating, 43 have elected participation committees, and the 580 committee worker representatives who have received training are now representing 108,303 workers.
www.hm.com/
Les Miller is to be promoted as the CEO of American & Efird (A&E), while the current CEO, Fred Jackson is to retire and would be elevated as non-executive chairman of A&E's Board of Directors. A&E made the announcement recently and both would step into their new roles from September 28, 2015.
Since almost two decades, Fred Jackson has acted as the CEO of A&E and achieved tremendous growth. A&E turned into a global supplier of premium thread under Jackson’s vision and leadership, achieving record revenues, and strengthening the company's culture of continuous improvement and focus on safety and sustainability. Besides, three transformative acquisitions reached completion successfully in China, Bangladesh, and Sri Lanka. Also, Gütermann, which is the fourth largest company in the global thread industry, was an extremely accretive acquisition under Jackson’s leadership. A&E thus, was able to expand its footprint, diversify its end-markets, and enhance its ability to serve customers globally.
Since February 2008, Les Miller has served as Chief Operating Officer and led A&E Global Sales as Senior Vice President. A&E believes that Miller embodies the company’s core values and possesses the skills and experience to successfully lead the company into the future.
The Trading Corporation of Pakistan (TCP) has received a poor response in the fourth cotton tender as only two bids were submitted for procurement of 4,600 bales against the offered quantity of 88,600 bales. The state-run grain trader is facing difficulties in offloading cotton, procured on federal government directives during the last season to support farmers and stabilise prices in the domestic market. So far, cumulatively, TCP has conducted four tenders for the sale of 95,400 cotton bales of which two tenders were scrapped by the state-run grain trader as bids were lower than the reserve price.
Some 10,800 cotton bales have been sold through the remaining two tenders. In response to the fourth tender, opened on August 31, 2015, only two parties participated and submitted five offers for procurement of 4,600 cotton bales against the offered quantity of 88,600 bales.
TCP is likely to issue a fresh tender for the sale of the remaining 84,600 cotton bales as any delay in the sale of the commodity will increase losses. In November last year, TCP procured some 95,400 bales from ginners. However, presently it is compelled to offload these stocks at lower prices due to the lower price trend in domestic and international markets. The Federal government has pledged to pay the price difference in procurement and sale of the commodity.
For nearly two months China has been having daily auctions of its huge cotton reserves. But only a fraction of the stocks have been sold. The reason: high pricing and a slowing of economy. With sufficient inventory still available in the market and state auction prices relatively high, mills largely stayed away. Discounts would have risked pushing down market prices and led to increased costs for the government under a new subsidy scheme that has replaced stockpiling.
The poor auction results raise questions about how the government will get rid of the rest of its stock. Both yields and quality of China’s new crop, expected to start harvesting soon, are better than last year and prices are likely to be lower than the sales price set in the latest auctions. If prices remain relatively low, reserves would be under pressure to reduce their selling price in any future sales, increasing already substantial losses on the fiber that was bought at prices well above the market.
Beijing had been under pressure to release stocks to recover part of the cost accrued while building a stockpile of around 11 million tons of cotton under a now-abandoned state buying scheme to support farmers.
