FW
Investors don’t get expected dividends from Bangladesh’s textile and garment companies. The share price of many companies is trading below their face value. Among the reasons are: high costs of production, over capacity, competition, an unfavorable exchange rate and lower prices from international buyers. Public shareholders account for over 60 per cent of the stakes in a company while sponsor shareholders have a less than 14 per cent share.
Many companies expanded their business seeing lucrative growth in the sector and their sales volume soared and so did their revenue. However, with higher costs to meet compliance after Rana Plaza, the price per unit dropped in the international market. Overall, the sector is suffering from lower profits. The cost of production of apparel items increased 30 per cent between 2014 and 2018. Further, the minimum wage of garment workers has increased 51 per cent since December last year. Between 2015-16 and 2018-19, the industry’s value addition has gone down 1.61 per cent though apparel exports have increased during the period.
At present, some 15 textile companies are ranked as junk stock due to their failure to provide dividends or hold an annual general meeting or shuttering of their factory.
Poor credit availability is posing serious problems for Tirupur garment manufacturers. One problem is that exports from Tirupur have been stagnant. Banks are becoming averse to risk. There has been a rise in non-performing assets (NPAs) in the country. Bank officials fear their decisions will be questioned if the loan turns into a non performing asset.
Tirupur has predominantly small and medium enterprises whose working capital requirements are huge. They are seeking an expansion in credit limits. Many apparel manufacturers feel the need for a concept change in NPA norms. Their opinion is that NPA in the present context is a wrong connotation under Basel norms, which is a banking supervision accord. They want India to take up the issue to either modify the Basel norms to suit the Indian industrial climate or shift small and medium units from Basel norms regulations.
The Index of Industrial Production contracted 4.3 per cent in September, the worst fall in eight years. The share of Tirupur knitwear exports in India’s total garment exports is 20 per cent. Exporters want a one-time long term initiative to be undertaken to uplift the skill proficiency of existing laborers in order to increase productivity at par with competing countries and at the same time reduce waste.
A loan which Prada has taken from a bank carries with it stringent provisions relating to sustainability which the luxury brand has to implement. One condition relates to the brand’s physical stores. There must be a certain amount of stores that are certified either gold or platinum by the green- building rating system Leadership in Energy and Environmental Design, which takes into account the construction of a building, its management, and the number of resources it consumes or waste it produces. Secondly, Prada will have to increase its training hours for its employees.
Also the brand has to reduce and phase out the use of virgin nylon by 2021 and instead move to Econyl, a recyclable yarn made from upcycled plastic waste. Phasing out nylon in any case is of paramount importance for the Italian fashion house, given the long-standing success of its cult Tessuto bags, which have traditionally been made with non-biodegradable nylon. Prada currently uses around 7,00,000 meters of the material annually. Prada has been making ongoing efforts for engaging in and cultivating virtuous behavior that contributes to its sustainable growth.
Brands are clambering to hop onboard the sustainability train as people are increasingly demanding that their clothes are made in an ethical manner.
Textile industry’s initiative Samarth has the broad objective of skilling youth for gainful and sustainable employment in the textile sector.
It aims at training 10 lakh people, of which nine lakh will be from the organised sector and one lakh will be from the traditional sector. The scheme covers the entire value chain of textiles (except spinning and weaving in the organised sector). The focus will lie on apparel and garmenting, knitting, metal handicrafts, textiles and handlooms, handicrafts and carpets, among others. District-wise tailoring opportunities for women will be identified as part of the outreach for skilling across states. A few courses and modules have been developed under Samarth in the area of garment manufacturing. Women form 75 per cent of the work force in the textile sector. Another objective is to promote skilling and skill upgradation in the traditional sectors of handlooms, handicrafts, sericulture, and jute. It also seeks to enable provision of sustainable livelihood either by wage or self-employment to all sections across the country.
India’s textile and apparel industry is one of the oldest such industries in the world. The country is the world’s second largest exporter of textiles and apparels. The industry is a significant contributor to the economy and one of the largest sources of job creation in the country, employing about 45 million people directly.
With the easing of trade tensions between the US and China, textile-related exports are likely to register a positive growth by the end of this fiscal. Besides handicraft and jute products, exports of all the other textile-related products declined in October. The exports of cotton yarn, made-ups and handloom products declined by 6 per cent while the exports of man-made yarn, fabrics and made-ups declined by 5.69 per cent during the seven-month period from April to October.
Textiles and apparels declined by 3.21 per cent. Of this, textile exports slid 4.15 per cent. For the seven-month period, these exports declined by 8.84 per cent. Though apparel exports also declined in October, they moderately rose during the seven-month period over last year.
Production of textiles and clothing in September was down by 2.6 per cent and almost flat for the 6-month period. Carpets witnessed the steepest decline in percentage terms — 16.87 percent. A saving grace was handicraft exports, which grew by 7.66 per cent. Jute product exports also went up by 9.75 per cent.
Demand for Australian wool in China has improved slightly. Overseas customers are waiting and reviewing again as caution prevails. The fake-fur season is considered over for now so processing trade must look to more normal regular items and lines of production. Gone are the traditional worsted suits and cheap V-neck sweaters that made up the corporate wardrobe for millennials entering the workforce. They are replaced by chinos (containing a high percentage of wool) and polos, tees and a multitude of knitted garments in various layers. High worth millennials are choosing a natural product like Merino while those with less worldly experience are buying polyester/nylon. Topmakers and traders are just looking to survive on a daily basis given the battering they have weathered with the recent downturn in prices.
Retailers are hoping that consumer confidence will not get waylaid in the lead up to Christmas. Spinners and knitters are looking at the topmakers and scouring parties and wondering how they can transfer some of their pain from previous high contract prices back to them. Unlike other fibers such as cashmere or silk, angora or mohair, it’s only wool that has so many different organisations and boards to oversee the production, packaging, testing, selling and shipment of the underlying raw material.
Australia’s cotton crop production has fallen 16 per cent compared to two years ago. The main reason is the drought. This year's cotton crop production in Australia is going to be the lowest in a decade. Just a few cotton producers have been able to access water—primarily groundwater—to grow crops this summer. Growers are resilient and used to managing through volatility, but the relentlessness and severity of this drought is taking its toll. In some cotton producing valleys, no cotton was planted this year. The beginning of the northern wet season was sluggish, with only a few cotton-producing regions receiving heavy rains. The Indian Ocean dipole positive event that has contributed to the ongoing dry spell is so strong it may not break down until mid-summer. While the planting window is still open if there is no significant rainfall in the coming months, cotton growers will face the harsh reality of a further reduced crop this season.
There are more than 1200 cotton farms in Australia. On an average, Australia’s cotton growers produce enough cotton to clothe 500 million people in a year. The major buyers of Australian cotton are: China, Indonesia, Thailand, South Korea, Bangladesh and Japan.
Millennials in the US insist on sustainable products. So, retailers, manufacturers and brands alike in the US are being forced to become environmentally aware. There’s a focus on less-disposable products across all consumer categories, including apparel. Brands are taking a closer look at their supply chains, manufacturing processes, overall and business practices in the context of environmental concerns. As the circular economy grows in importance, companies are researching and developing less environmentally damaging production methods and materials and communicating their commitment to sustainability to consumers.
When it comes to apparel manufacturing, sustainability initiatives can be particularly beneficial for the environment, too. Businesses are pushing their suppliers and partners to improve sustainability because sustainability helps buyers achieve cost efficiencies, improve revenues and boost profitability. Companies that make sustainability a priority stand to benefit immensely, as sustainability initiatives also force them to identify efficiencies in their operations, maximize their supply chains and minimize waste. The result is often an increase in yearly revenue and a renewed sense of loyalty among consumers who see the company as a champion for sustainability. Outdoor clothing retailer Patagonia produces new clothes in a smart, sustainable way. Fashion brand Reformation uses sustainable fabrics and upcycled materials in its clothing and ensures that it partners only with socially responsible suppliers.
Global denim fabric imports increased 9.4 per cent last year. Bangladesh, with a 25.5 per cent share of total imports, is the leading the pack. Vietnam follows with 7.6 per cent share; Hong Kong has a share of 7.4 per cent, Turkey 7.1 per cent and China’s share is 5.4 per cent.
China has a 42 per cent share of world denim exports. Pakistan has a 11.7 per cent share, India 8.2 per cent, followed by Hong Kong with 7.4 per cent and Turkey 6.8 per cent.
From January to July 2019, Turkey’s denim fabric imports decreased 23.6 percent. Pakistan has the biggest share of denim fabric imports into Turkey. Other countries from where Turkey imports are: Egypt, Italy and Ethiopia. In 2018 Turkey’s denim imports from Ethiopia increased by 58.2 per cent. Turkey exports denim to Germany, Spain, England, the Netherlands and Denmark. But looking at the most important denim market shares in Turkey’s exports in 2018, Tunisia comes first with a 16.2 per cent share, Egypt has a 13.9 per cent share and Italy has a share of 10.3 per cent.
India’s merchandise exports fell by 1.1 per cent in October. However, some large export items, such as gems and jewelry, chemicals, engineering goods and pharmaceuticals, grew. Readymade garment exports, for instance, fell by 2.1 per cent and petroleum products by 14.6 per cent. Gems and jewelry exports, however, grew by 6.02 per cent, chemicals 0.86 per cent, engineering goods 1.2 per cent and pharmaceuticals by 12.6 per cent.
Imports fell for the fifth month in a row. These include imports of coal, petroleum, chemicals, plastic materials, precious stones, iron and steel and electronic goods. However, gold imports picked up. The only silver lining signaling a probable revival in domestic investment activity was the fall in imports of electrical and non-electrical machinery and of transport equipment.
During the first seven months of the fiscal, exports contracted 2.2 per cent. A weakening external sector will put additional pressure on India’s growth, as GDP slowed to a six-year low of five per cent in the first quarter while consumption fell to a 18-quarter low.
Because of escalating trade tensions and a slowing global economy world merchandise trade volumes are now expected to rise just 1.2 per cent in 2019. Downside risks remain high. China’s October exports fell for the third straight month, down 0.9 per cent, while imports shrank for the sixth consecutive month.
