FW
The chairman of Pakistan Cotton Ginners Association (PCGA) Jeso Mal has asked the government to patronise cotton growers and to ensure purchase of their produce on fair price to boost cotton production to 20 million bales and save foreign exchange worth Rs 60 billion per annum. Mal said his Association has decided not to be blackmailed at the hands of cartel of textile millers and would prefer to export the country’s products at the rates they wish to. He also revealed that said that the country would have to spend at least Rs 40 billion to purchase at least 4 million bales of cotton from different countries this year to run its textile as well as value-added industry.
Mal also informed this year, Punjab clocked in 40.76 per cent less cotton production. However, Sindh province increased its production by 6.61 per cent. As of September 30, seed cotton (Phutti) equivalent to over 26,45,349 bales of cotton have reached ginneries across Pakistan showing a decrease of 13.93 per cent compared to corresponding period last year when ginneries received 30,73,325 bales.
Briefing media men about cotton production, Mal said that out of the total arrivals, 2,645 million bales of cotton have been converted into bales so far. Ginneries in Punjab recorded arrival of 7,88,699 bales showing a decrease of 40.78 per cent. On the other hand, ginneries in Sindh recorded arrival of 18,56,650 bales while last year the province received 17,41,486 bales showing an increase of merely 6.61 percent. Ginneries in Sindh recorded an increase of 6.61 as compared to corresponding period last year.
Jeanologia has been promoting the Mexican textile sector with sustainable technologies that increase productivity and competitiveness. The leading Spanish company, in the development of sustainable solutions for the finishing of jeans, presents innovations that will transform the Mexican industry towards automation and efficiency at the Exintex 2016 at Centro Expositor Puebla, Puebla, Mexico that is being held from October 18 to 21.
The company has reduced 90 per cent of water and chemical consumption and 50 per cent of power, thanks to the combination of its three sustainable technologies: laser, ozone and e-Flow nanobubbles. Also its integration of these technologies power new creative possibilities scalable to large productions.
At Exintex, Jeanologia will display its latest developments which have been applied to laser, ozone G2 and e-flow nano bubbles technologies. Visitors can see vintage clothing, novel designs and trends with a common denominator: authentic eco efficient products.
Using Light PP Spray and Light Scraper solutions, it is possible to produce pollution-free jeans as the use of the dangerous potassium permanganate has been removed and it’s possible to clone the authentic look of the antique denim in an efficient and ethical manner. At Exintex 2016, Jeanologia will also give live demonstrations of the Flexi HS 3D laser machine that adapts to the needs of each manufacturer or designer and offers maximum versatility. It allows multiple combinations of dial-up thanks to its Swivel Head and optical system that allows you to work both in horizontal and vertical mode on jeans, shorts, shirts, t-shirts, jackets and accessories.
Since it started supplying machines in the dying years of the ’60s, Karl Mayer Rotal has been known as a global producer of high-tech warp preparation machines. Now, the company is all set for further expansion. The beginning of this year saw the production facilities of Karl Mayer Rotal, headquartered in Mezzolombardo, being extended by 3,100 m2. Now, the company’s site covers 9,000 m².
The turnover has grown four times over the past five years and the turnover in terms of finance has since increased to €40 million. It is estimated that the company is likely to cross the 45 million-euro-level this year, thanks to the company’s exports. In the regular routine, Karl Mayer Rotal ropes in roughly around 80 per cent of its profits overseas mainly from India, Pakistan, Bangladesh and Turkey. But business has also started to pick up on the domestic market again. The revenue is generated by selling sizing and dyeing machines for the denim sector and with sales activities for the whole Karl Mayer Group.
In recent expansion, completed in June of this year, around €2.7 million was invested. The project was the reason why the company decided to invite its customers to an open house event at its modern site. The event, held on June 24 and 25 was the perfect opportunity for visitors to view the production facilities, to look at the latest technology in sectional warping, indigo dyeing and sizing, and to exchange information. Nearly 146 representatives from 50 companies attended the open house for the warp preparation customers in Mezzolombardo and their interest in the company and machines on show generated positive feedback.
Investing in expanding the plant has strengthened the company’s position on the standing in its international markets and has also increased awareness of Italy as a production location. Over the years, denim dyeing was one of the areas that Karl Mayer Rotal had tapped into and has now become a global pioneer with high growth ambitions in the lucrative textile sector. The extension of the site in Mezzolombardo has also gone hand in hand with expansion of the activities of the company in the denim sector.
The growth of the readymade garment (RMG) sector in Bangladesh has been spiraling with time. The country’s apparel export earnings from Russia, China and Chile registered an immense growth in the first quarter of the current financial year while earnings from most non-traditional markets including India, Turkey, Brazil and Australia suffered a negative growth in the period.
Readymade garment export to Russia in the July-September period of FY17 registered a whopping 61.67 per cent growth to touch $49.10 million from $30.37 million in the same period of FY16, according to an Export Promotion Bureau data. Apparel export to China in Q1 of FY17 grew by 42.35 per cent to $82.71 million from $58.10 million in the same period of FY16. Exporters say RMG export to Russia registered an encouraging growth as the country reduced its import from Turkey due to political reasons. China’s shift from production of basic garments to high-end products was the reason for the strong growth in Bangladeshi RMG export to China while export to Chile witnessed robust growth due to duty-free market access.
On the down side, RMG export to Brazil fell 56.11 per cent to $17.67 million in the July-September period of FY17 while export to South Africa went down by 24.46 per cent to $15.80 million while exports earnings from Australia declined by 12.30 per cent to $142.81 million.
Cotton prices in India increased by 30 per cent year-on-year in the second quarter of FY ’17 and it is likely to have a negative impact on margins of apparel companies. EBDITA margins of Arvind, Page Industries, Kewal Kiran and Rupa are likely to decline 70 basis points, 108 basis points, 84 basis points and 100 basis points year on year respectively. However, Vardhman Textiles is an exception. Vardhman buys its yearly cotton requirement in March-April every year. Thus the company will report a margin expansion of 16 basis points year on year.
Revenue growth of apparel companies is likely to be moderate due to subdued consumer behavior at the retail level. Except for Page Industries and Kewal Kiran, all other companies in the coverage universe are likely to register single digit growth. Page’s revenue growth is expected to be driven by 17.2 per cent year on year volume growth and 5.4 per cent year on year realisation growth. Kewal Kiran, Arvind and Rupa are likely to register year on year revenue growth of 10 per cent, 9 per cent and 7 per cent respectively.
Cotton output in the country is expected to decrease by close to 10 per cent due to the white-fly attack on the crop in the northern states.
"In the wake of e-commerce boom and fast fashion retail, traditional brands are finding it challenging to survive and sustain their market. The premium-denim category is probably the highest hit market where private-equity firms and investment groups in recent years bought out the founders of well-regarded labels as True Religion, J Brand, 7 For All Mankind, Joe’s Jeans and Hudson Jeans."
In the wake of e-commerce boom and fast fashion retail, traditional brands are finding it challenging to survive and sustain their market. The premium-denim category is probably the highest hit market where private-equity firms and investment groups in recent years bought out the founders of well-regarded labels as True Religion, J Brand, 7 For All Mankind, Joe’s Jeans and Hudson Jeans.
If reports are to be believed, True Religion, acquired in 2013 by Tower Brook Capital Partners for $824 million, is in a state of bankruptcy as revenues are down to $408 million after coming in at $420 million five years ago having institutional term loans of $485 million. In such a scenario, founders are scouting for a turnaround expert after having appointed John Ermatinger last year as the company’s chief executive.
Andreas Kurz, former chief executive of 7 For All Mankind and now president of Akari Enterprises, an international business consultant, points out the premium-denim market has contracted. People are working with an old recipe where they import Italian or Japanese fabric to Los Angeles, make it in Los Angeles and try to sell a jean for $200 to $250. That doesn’t work anymore. Consumers are more price-conscious. The consumer is being trained to be more frugal and to expect more for less, and that is tough on brands, believes Lloyd Greif, President and Chief Executive, Greif and Co, a downtown Los Angeles investment banking firm.
layoffs, a cause for concern
Some of the big names such as 7 For All Mankind, Splendid and Ella Moss, were sold to Israeli company Delta Galil earlier this year for $120 million by VF Corp, which bought the contemporary labels for more than $1 billion several years ago and saw revenues from the three drop several years in a row. With the market going down, Delta Galil has laid off more than 100 people at the three labels and has centralised the headquarters of all three stores in Los Angeles.
And as Greif says, there was a perception that these brands were on fire and now they are smoldering, noting that Delta Galil is known for selling down-market goods. This is a clear sign that these brands are in their maturity and are on a downhill slope. Whether Delta Galil turns them around or milks them until there is nothing left is still to be seen. BCBGMaxAzria has fired 123 people in an attempt to reduce some debt burden. J Brand is also witnessing downfall Japanese giant Fast Retailing, parent company of Uniqlo, acquired 80 per cent share of the denim label in late 2012 for $290 million.
Survival strategies
Experts say in the apparel industry, these issues are not unique to California companies but to the apparel industry across the country. The last two years have witnessed major downfall in US speciality stores. This has put pressure on clothing manufacturers to get financing.
The brands that are growing quickly are the hot brands that go direct to the Internet and reach the consumer through social media and online. There have been instances of new brands launching and going from zero to $30 million in sales in two or three years, all online. At the same time, fabric innovation and novelty in design needs to be taken care of in order to win over competitors, say experts. They have to fit with what is happening in the world at the time and maintain a core position.
Companies need to keep reinventing demand, patterns and styles in order to stay ahead of the curve. In line with this, denim companies are offering denim pants with spandex to make them more comfortable—even making jog jeans that have the feel of a knit but the look of denim. The athleisure movement is not about to stop as people want more-functional and -technical garments.
While apparel companies can manage products and price mix, it’s their ability to market and sell clothes online, which will help them reach maximum audience. During the first eight months of this year, department-store sales tanked 5 per cent compared to the same period last year, while online sales jumped a staggering 15.8 per cent, says the US Census Bureau.
The Chinese are investing in Vietnam’s textile and garment industry before TPP comes into play. The garment industry is the strongest magnet for Chinese investors, while textile and dyeing also lure Chinese investment but at a lower level. Vietnamese apparel products would enjoy a zero tariff in the US after Vietnam signs the Trans-Pacific Partnership (TPP) agreement. Vietnam is working on a plan to help local manufacturers improve competitiveness when the TPP takes effect.
Vietnam now achieves an annual growth of seven per cent in exports to the US, and the growth might reach 12 to 13 per cent if TPP is favorable to the local textile and garment sector. Among TPP members, the US is the largest market for Vietnamese textile and garment producers.
A number of Chinese and Hong Kong textile and dyeing projects have got off the ground in Vietnam. A Chinese company, Pacific Textiles, is planning $180 million dollar venture in Vietnam with the Crystal Group of Hong Kong. Crystal will spend an additional 49 million dollars raising the size of the project to 70,000 spindles. By 2025, Vietnamese textile and garment exports to the US may hit $30 billion. The greatest benefit TPP may bring to Vietnamese textile and garment products is a zero tariff.
About 55 per cent of high-priority repairs and 63 per cent of all required repairs of Bangladesh’s garment factories affiliated with the Alliance for Bangladesh Worker Safety have been completed so far. Alliance is a platform of North American apparel buyers and companies.
All Alliance factories are expected to complete their high-priority repairs by July 2018. Alliance has warned of cutting relationships with those factories which fail to make progress on repairs that address safety concerns. Those unwilling or unable to comply will be suspended and removed from the compliant factory list.
Meanwhile Alliance has suspended 104 factories for failure to make progress on repairs that address safety concerns till October 12, 2016. Critical repairs include lightning protection systems on buildings, exit enclosures provided with rated, fire-resistant barriers, easy means of egress, strong structural columns that can support the weight of the factory structure, machinery, and workers, and structural systems free of distress, settlement, shifting, or cracking in columns or walls.
Alliance is working with factories to prioritize the most critical repairs. Some issues including the import and installation of fire doors, the reinforcement of structural beams and columns, and the installation of sprinkler systems are often costly and time-consuming for factories to achieve.
Charisma and confidence are some of the qualities Abercrombie & Fitch (A&F) is widely known for. As an effort to show a new version of itself while staying true to its 125-year history as an American sportswear brand, the company has unveiled a new look. The campaign includes a completely re-designed website and all-new digital advertising across platforms including social media.
In recent seasons, A&F has been in retail limbo. Last year, the company named a new brand president and managed to get its new creative director from J Crew. Their influence was reflected in a sophisticated Fall ’16 collection. Still, the move to connect with the masses in particular the younger consumers has fallen short as the company continues to experience a lukewarm comeback after having shuttered 60 of its stores last month.
With teaser campaigns, the company plans to promote its new look leading up to the holidays. The campaigns hold two messages. The first, ‘People have a lot to say about us. They think they’ve got us figured out.’ It urges consumers to view A&F in a new, more inclusive light. The second message says, ‘This is Abercrombie & Fitch.’
"It seems to be a complex web of global and internal pressures that is plaguing Indian exports growth plans. In 20 out of the last 21 months, India’s merchandise exports registered negative growth. Services exports, which were earlier doing well have also started declining – falling by 4.56 per cent (year on year) in July. With a decline of just 0.3 per cent in August, Indian officials claim that the export decline has bottomed out and hence it should soon pick up."
It seems to be a complex web of global and internal pressures that is plaguing Indian exports growth plans. In 20 out of the last 21 months, India’s merchandise exports registered negative growth. Services exports, which were earlier doing well have also started declining – falling by 4.56 per cent (year on year) in July. With a decline of just 0.3 per cent in August, Indian officials claim that the export decline has bottomed out and hence it should soon pick up. However, that doesn’t seem a possibility because of the complex interplay of global as well as internal factors that will continue to constrain India’s exports, going forward.
External forces and their impact
With a slowdown in China, Japan and EU, along with the great commodity crash, there’s seems to be a long way for the revival of global trade, indicating lower demand for imported goods and services in most parts of the world. Global trade liberalisation is progressing slowly as trade policy now has to deal with contentious non-tariff issues such as labour and environment, tighter WTO-plus rules on protection of intellectual property rights, public procurement and investment.
Going ahead, Brexit seems to be a visible threat to global trade with the EU accounting for nearly a third of global trade even though its share in global GDP is 25 per cent. Trade elasticity (that measures change in world trade as a result of change in global GDP) has reduced from 2 (1980-2011) to 1 (2012-15/16) and the situation is going to remain the same for some time now. According to WTO, world trade is likely to grow at 1.7 per cent in compared to world GDP at 3 per cent this year.
The share of services in global GDP is increasing sharply but the increase in services GDP is not adding much to the global trade. And former RBI governor Raghuram Rajan rightly points out aptly as countries become richer, non-traded services constitute a greater share of output causing GDP to grow faster than trade. Thus, a significant portion of global GDP growth is simply bypassing global trade.
Implications for India
The above pressures would significantly impact exports of India in the near future. Slowdown in China would dramatically reduce export growth for India. China, by limiting the growth of commodity exporting nations as well as Asean, Japan and Korea, will limit the overall demand for Indian exports. OPEC, along with Brazil and Russia together, accounts for roughly one-fourth of India’s merchandised exports.
Moreover, it remains to be seen how India will fight global giant ‘China’ in the wake of ‘Make in India’ movement and its low cost labour advantages. Labour reforms is a major challenge because India will be under tremendous pressure to increase minimum wages despite having lower labour productivity compared to countries such as Bangladesh and Vietnam in key manufacturing industries. Further, the EU accounted for 17 per cent ($45 billion) of India’s merchandise exports in FY 2016 and 20 per cent of that shipped to UK. Similarly, UK accounted for half of $24 billion IT exports to the EU. These exports are likely to hit by Brexit and its after-effects.
India’s exports are still a significant contributor in the global trade. The top 20 product categories account for 80 per cent of India’s total goods exports. The export of services is even more skewed than goods. Services sector accounts for roughly 60 per cent of its GDP. Over 62 per cent of India’s IT export goes to the US alone, and one vertical, BFSI accounts for 40 per cent of total IT export. It’s the reliance on one particular sub-set that may signal problem for Indian exports. India has to truly work on its tourism potential to up its capabilities.
Economist say reforms like keeping rupee undervalued won’t help India’s exports. Rupee depreciation usually leads to demand for steeper discounts from buyers in a sluggish global demand scenario. Thus, we end up supplying more goods for the same amount of dollars. It’s important to realise that faster global GDP growth rather than discounts lifts India’s exports as India’s export basket is now more income elastic than price elastic. Trade ties with the countries need to be carefully designed and materialised to their fullest to reap maximum benefits.
