FW
Indorama Ventures registered year-on-year revenue growth of 11 per cent in the second quarter of 2017. Core net profit was up 31 per cent year-on-year. Core ebitda grew nine per cent. Cash flow from operating activities grew by 87 per cent year-on-year.
This, despite planned turnarounds that led to a four per cent fall in production. The company has made prudent investments in higher margin businesses and in key regions and integrated into key feed stocks in balanced markets. The last 12 months saw steady to strong integrated industry margins compared to the declining trend in the previous five years.
The company is on track to complete its US Gas Cracker project and expects refurbishment to be complete by the end of 2017. Indorama Ventures is a chemical producer. The company is well-positioned for another year of solid growth. Innovative products, the positive tailwinds in volume and margin and the impact from operational excellence actions taken during the year are expected to continue contributing to earnings growth. It is confident that the continued business transformation efforts it has made, combined with scale and best-in-class assets in its portfolio, will support its journey of profitable growth, while providing shareholders the opportunity to participate in the unparalleled value creation potential of the company.
Apparel forms 74 per cent of total textile and apparel imports by the US, this is followed by cotton textiles, manmade textiles, carpets and others with a share of 11 per cent, nine per cent, three per cent and three per cent respectively.
Over the last five years, US’ total textile and apparel imports increased at a CAGR of 0.4 per cent while its exports decreased at a CAGR of two per cent. China is the largest supplier of textiles and apparel accounting for a 44 per cent share. Vietnam is second place. India is the third largest supplier of textile and apparel products to the US. India’s textile and apparel exports to the US have grown at a CAGR of 1.1 per cent over the last five years and its share has increased from 4.9 per cent in 2011 to 7.3 per cent in 2016.
Apparel has a 51 per cent share in India’s textile and apparel exports to the US. This is followed by cotton textiles, carpets and manmade textiles having a share of 32 per cent and 11 per cent and four per cent respectively.
New data compiled by fashion search engine Lyst and the Business of Fashion reveals the official global rankings for the highest performing fashion brands and individual products in the second financial quarter, with Alessandro Michele's Gucci topping both lists. Tracking 4.5 million data points per hour from over 65 million annual consumers, 4 million products and 12,000 brands, the formula allowed fashion houses to be analysed through search data, engagement statistics, conversion rates and sales.
Rising three places since the Q1 results in April, Gucci has overtaken Kanye West's brand Yeezy and streetwear stalwart Vetements to move from 3rd in the list to 1st. Gucci also snapped up 4 spots in the top 10 best-selling products category, with the brand's GG Bloom slides topping the list.
A significant factor in this success was Gucci's ability to connect with millennial and Gen-Z consumers, with sales to millennial and Gen-Z consumers reportedly growing at double-digits in the first half of the 2017 fiscal year. Following Gucci on the list was Yeezy, which was praised for its 'clever pricing and distribution strategy' that allowed it to maintain buzz. Next was Balenciaga, followed by Vetements and then Givenchy.
Foreign direct investment in Myanmar’s garment industry has been significant. As of mid-2015, about 55 per cent of registered garment firms in the country were fully or partly foreign-owned. Among them, a quarter came from China, 17 per cent from Hong Kong, 29 per cent from South Korea and 12 per cent from Japan. Foreign-linked firms supply almost all garment exports and these have surged in recent years. The lifting of EU and American sanctions has helped further boost export growth.
However, these foreign-linked garment firms have produced few benefits, linkages or spillovers in Myanmar beyond export and job creation. These firms have few local managers, reflecting the country’s shortage of high-level skills. The country’s garment sector lacks entrepreneurial, management and technical skills. The short-to-medium term measure is labor circulation – the movement of foreign and domestic skilled employees from international businesses to existing and new local ones. Entrepreneur support policies should also be made available to foreigners as well as the Myanmar diasporas.
In the long term, the country should develop tertiary educational institutes dedicated to the garment industry to increase supply of managers and technicians in the sector. Other possible reforms are: making access to trade credit possible for garment exports and providing tariff-free fabric imports to both free-on-board and cut-make-package producers.
Modern slavery risks have risen in nearly three quarters of the 28 member states of the European Union over the last year. The migrant crisis has increased the risk of slavery incidents appearing in company supply chains across Europe. Greece is host to significant number of migrants and remains a key destination for human trafficking. It is no longer just the traditional sourcing hotspots in emerging economies that businesses should pay attention to when risk assessing their suppliers and the commodities they source.
Turkish textile factories have been associated with high profile incidents of child labor and slavery. Asian manufacturing hubs, Bangladesh, China, Indonesia, Malaysia, Myanmar, the Philippines and Thailand, all feature in the extreme or high risk categories. China, the top exporter of garments, is categorised ‘extreme risk’ in the index and is ranked 21st worst in the world. It has registered a slight increase in risk, driven by inadequate enforcement and reports of severe forms of modern slavery.
Bangladesh and China have recorded incidents of forced labor, servitude, trafficking, prison labor and generational debt bondage. Trying to eradicate slavery in garment exporting countries is a big challenge, given the prevalence of exploitation, but there are signs of improvement.
China’s textile industry has turned to water conservation measures. There is a cap on water use and tough new controls on polluting industries. The textile dyeing and finishing industry is taking action in key areas, including adoption of upgraded technologies and a requirement for advanced water efficiency and wastewater reuse.
Progressive, innovative textile mills are embracing regulatory changes – using it as a means to separate their business from less reputable operators. As a first step, they are halving water and energy use by adopting dye innovations and process improvements. Promising innovations and developments are helping mills make dramatic savings without requiring investment in new plant or equipment. They are using eco-friendly dyes which compared to commodity dyes help mills reduce water consumption by up to 50 per cent.
Other simple changes like fixing leaks, installing sensors and water meters, and collecting the monsoon rains, can also pay big dividends. Stricter regulatory enforcement and growing consumer concerns mean that pollution will no longer pay in China and factories that are unable or unwilling to invest to meet the stringent new standards will no longer be viable. Environmental issues are now global, and few brands can afford to compromise their standards in the face of calls for greater supply chain transparency.
In the first half of 2017 Cambodia’s garment exports grew four per cent compared to last year’s nine per cent. One reason for dip was stiff competition from Myanmar and Vietnam. Another reason was a rise in minimum wages for textile and allied sectors. This resulted in higher production costs, thereby cutting into manufacturers’ margins.
Some other factors are affecting Cambodia’s trade balance. For one, it has lost its preferential trade access to EU countries owing to an upgrade of its economy by the World Bank. The Bank accorded Cambodia lower middle income country status. The non-availability of preferential rates will last for next three years. Also FDI inflow into the garment sector took a sharp 30 per cent dip in initial quarter of this year. This compares unfavorably with a five per cent dip that took place in 2016.
Despite the slowdown, the garment industry has proved to be a robust force in expanding Cambodian economy. The dent in Cambodia’s poverty rate in recent years has been largely due to the contribution from the textile and footwear industries. These industries together engender revenue to the tune of $6 billion annually and employ nearly 6,00,000 people, many of whom are from an impoverished rural background.
Cambodian exports to the US from January through June rose by 4.5 per cent compared to the same period in 2016. The vast majority of Cambodia’s exports to the US are garment and footwear products. Cambodian travel goods can enter the US duty-free. The US is one of the world’s largest markets for travel goods. In July 2016 the US removed customs tariffs on Cambodian-made travel products such as luggage, backpacks, handbags and wallets. The items, which previously faced tariffs of between 4.5 and 20 per cent, now enter the US duty-free.
This provision has effectively doubled the size of Cambodia’s travel goods exports in just over a year. Right now, the value of Cambodia’s exports of travel goods is over a $100 million, with the majority exported to the US. However, it could take years before the country sees full benefits of the duty-free privilege. New investors have to be attracted to establish production in Cambodia. Once that happen the country’s exports of travel goods to the US may see a significant increase and contribute a larger export value.
Cambodia plans to submit a GSP duty-free exemption application for its footwear industry. If it’s accepted, it would reduce trade-weighted average for footwear export duties that sits at 10.8 per cent globally.
"At a recent discussion on cotton, majority of WTO members affirmed their support for a meaningful and specific outcome on cotton domestic support, the chair of the agricultural negotiations, Ambassador Stephen Ndung’u Karau of Kenya, highlighted. Ambassador Eloi Laourou of Benin, speaking on behalf of the four West African cotton-producing countries, Benin, Burkina Faso, Mali and Chad (Cotton-4), stressed domestic support remains the cornerstone of cotton trade problem."
At a recent discussion on cotton, majority of WTO members affirmed their support for a meaningful and specific outcome on cotton domestic support, the chair of the agricultural negotiations, Ambassador Stephen Ndung’u Karau of Kenya, highlighted. Ambassador Eloi Laourou of Benin, speaking on behalf of the four West African cotton-producing countries, Benin, Burkina Faso, Mali and Chad (Cotton-4), stressed domestic support remains the cornerstone of cotton trade problem. Laourou said the Cotton-4 countries reflected on their priorities for cotton negotiations when they gathered at the 5th ministerial meeting of the Cotton-4 that took place in April 2017 in Cotonou, Benin. He reminded members that these priorities are to follow-up on the effective implementation of all WTO ministerial decisions on cotton and the progressive phase-out of all forms of trade-distorting domestic support for cotton and its by-products. The Cotton-4 countries have been attempting to derive an outcome on domestic support for cotton at the WTO’s 11th Ministerial Conference to take place in Buenos Aires in December 2017.
Cotton trade policies
Karau informed members these negotiations must be based on recent and up-to-date data on members’ policies and support levels, especially in terms of domestic support. A background paper prepared by the WTO Secretariat was also discussed. The paper provides updated information on cotton based on new notifications, and includes new tables showing export volumes and share of world exports for major cotton exporters.
The WTO Secretariat and International Trade Centre (ITC) deliberated on the market analysis tools that can help members better understand trade trends and policies in the cotton sector and presented a project, ‘cotton portal’ that would provide a single-entry point containing all the information available in the various WTO and ITC databases on market access, trade statistics, notified requirements, country-specific business contacts, etc.
Global cotton market
An International Cotton Advisory Committee (ICAC) presentation highlighted global cotton market is still characterised by a high level of cotton stocks while production has remained stagnant in recent years. India is now the largest cotton producer in the world, followed by China and the US, and the yields for many African cotton producers are still low with some potential to catch up in the coming years. The US is the main cotton exporting country, followed by West Africa and India. Bangladesh is now the largest importer, followed by Viet Nam and China.
Cotton-4 also highlighted the importance of diversifying cotton products for export. Ambassador Sékou Cissé of Mali highlighted African leaders’ commitment to develop cotton value chains in Africa, upgrade skills and create more jobs in the sector. He noted that African cotton value chains are rich in knowhow and traditional craft, and are especially beneficial for women. To achieve tangible results, donors, governments and the private sector must work together to ensure the inclusive and sustainable development of cotton value chains.
US apparel imports dropped 3.4 per cent in June. On a 12-month smoothed basis, apparel imports fell by 2.9 per cent, their smallest drop in 13 months. Stagnant consumer demand for apparel and persistent price deflation at troubled brick-and-mortar retailers weighed heavily on demand. Continued declines in store traffic and seemingly weekly new store closure announcements are causing many stores to rein in inventory. US buyers are placing smaller, more frequent orders with shorter lead times requested.
Total apparel imports declined by 1.9 per cent in the first six months of 2017 compared to the same period in 2016. China lost the most share in US apparel imports in the period, down 0.6 percentage points to 30.9 per cent. Bangladesh lost share, with apparel shipments to the US down by 5.5 per cent in the first six months of 2017.
Among the top ten US apparel trading partners, only Vietnam, Nicaragua and Mexico registered an increase in apparel shipments. Continuing to make headway despite failure of TPP, Vietnam’s apparel shipments to the US grew by 5.5 per cent in the period. On a square meter equivalent basis, imports edged up 1.7 per cent this year, continuing the overall tendency towards cheaper goods, despite upward pressure on labor and raw material costs.
