FW
China's strong economic growth showed visible signs of fading in July as lending costs rose and the gravity-defying property market cooled, though activity levels generally remained solid, propped up by a year-long construction spree. Industrial output, investment, retail sales and trade grew less than expected last month, after the world's second-largest economy put in a surprisingly strong showing in the first half. But economists do not expect any hard landing, with the government keen to ensure stability ahead of a once-in-five-years Communist Party leadership reshuffle in the autumn.
The upshot is both foreign and domestic demand appear to have softened at the start of the third quarter, say economist. The statistic bureau says the overheated property market has cooled "somewhat", but it still expected China's economic performance to be steady in the second half. The performance in July was stable.
Growth of private investment also ebbed to 6.9 per cent in the first seven months of the year, suggesting small and medium-sized firms still face challenges in accessing financing. Private investment accounts for about 60 per cent of overall investment in China. Retail sales pulled back, too, but growth remained in the double-digits for the fifth month in a row, suggesting consumption will continue to overtake factory output and investment as the biggest growth driver of the economy, a key policy goal for Beijing.
Retail sales expanded 10.4 per cent in July on-year, down from June's 11 per cent and forecasts for a 10.8 per cent rise. But while car sales remained solid, automakers cut back production. Beijing is targeting growth of around 9 per cent in fixed asset investment for 2017, and expects retail sales to increase about 10 per cent.
Chinese textile firms using North Korean factories for production. Once ready, the factories then send the clothes that are labeled as Chinese all over the world. Making clothes in North Korea helps Chinese manufacturers make huge cost savings. Textiles were North Korea’s second biggest export in 2016.
Chinese suppliers send fabrics and other raw materials for manufacturing RMG to North Korean factories across the border where the garments are assembled and exported. Dozens of clothing agents operate in North Korea, acting as go-betweens for Chinese clothing suppliers and buyers from the United States, Europe, Japan, South Korea, Canada and Russia. North Korea has about 15 large garment exporting enterprises, each operating several factories spread around the country, and dozens of medium sized companies. All factories in North Korea are state-owned. And the textile factories appear to be doing great business. They take orders from not only China but all over the world.
It is believed North Korean workers can produce 30 per cent more clothes each day than a Chinese worker. Total exports from North Korea in 2016 rose 4.6 per cent. In addition Chinese companies are relocating their factories to Bangladesh, Vietnam and Cambodia to take advantage of cheaper labor.
Nandan Denim’s net profit for Q2, June quarter has risen 2.06 per cent as compared to the corresponding period of the previous year. Net sales for the quarter were up by 41 per cent. Ebitda and pat margins were at 14.44 per cent and 3.84 per cent respectively.
The company successfully completed capacity expansion plans and expect to get the full realisation and synergies of the expansion in the current fiscal. Post expansion, the company has become India’s largest denim fabric manufacturer with an installed capacity of 110 million meters per annum. Spinning capacity is increased to 141 tons per day and in addition the company has created a yarn dyed shirting capacity of ten million metric tons a year.
Going forward, emphasis will be laid on fashion denim fabrics to target better realizations compared to regular denim material. A combination of higher sales volumes and value added products is likely to fuel top-line growth in the coming fiscals.
Denim fabric contributes 80 to 90 per cent to Nandan’s annual turnover. Spinning capacity has more than doubled. This will ensure adequate availability of yarn for the company’s fabric manufacturing unit besides reducing the degree of dependence on outside suppliers of raw materials and facilitating margin accretion.
Daiichi Orimono produces synthetic polyester fabric with an ultra high-density weave, which makes the material extremely water-repellent and durable. One of the company’s most popular fabrics is 100 per cent polyester but looks and feels like linen. Another hot seller is a polyester fabric that mimics the properties of cotton.
A loom is used to weave fabrics. The process is different for each type of thread used and requires fine adjustments by hand to get the weaving force just right. It is this craftsmanship which makes such fine textures possible.
Even when it produces a textile that does not sell well initially, the company keeps it in stock. What also sets Daiichi Orimono apart is that it sells its products directly to overseas customers, which account for about 70 per cent of its business. Business grew when upscale apparel brands began embracing synthetic fabrics that had traditionally been used in outdoor and sporting goods. Demand in the fashion world for soft, lightweight synthetic fabrics continues to swell. Since 2014, the company has taken the lead in jointly developing fabrics and opening new markets in cooperation with other fabric manufacturers from Japan.
For the quarter ended June 30, 2017, Indo Rama Synthetics’ net revenues stood at Rs 652.54 crores as against Rs 727.45 crores in the corresponding quarter of the previous year. Operational ebidta for the quarter stood at Rs 22.16 crores as compared to Rs 21.68 crores for the corresponding quarter in the previous year. Net loss for the quarter ended June 30, 2017, is reported at Rs 15.57 crores as compared to a net loss of Rs 16.56 crores in the corresponding quarter of the previous year.
Indo Rama Synthetics is India's largest dedicated polyester manufacturer. The main business activities are textiles, polyesters, and industrial chemicals. However in the last few years there has been an oversupply of polyester in the industry. This has resulted in lower profit margins for the company.
Meanwhile, Indo Rama has taken several initiatives to improve its operational performance in terms of specialty products, higher capacity utilisation, cost control initiatives and addition of new customers. Production capacity is 6,10,050 tons per annum of polyester staple fiber, filament yarn, draw texturized yarn, fully drawn yarn and textile grade chips.
Indo Rama Synthetics’ sales volume rose 16.13 per cent for the quarter that ended on September 30, 2016.
Grasim’s net profit for the quarter rose 8.2 per cent year-on-year. Revenue increased 12.8 per cent. Earnings before interest, tax, depreciation and amortisation increased 5.2 per cent. The ebitda margin contracted 150 basis points to 20.3 per cent.
Grasim is a Aditya Birla Group company has a near-monopoly in viscose staple fiber, a biodegradable cotton-like fiber. The company entered the branded consumer segment with Liva, an apparel brand that uses viscose fiber. Liva clothes are now available in over 3000 stores.
Viscose staple fiber prices have gone up globally as inventory in China nearly halved in the last couple of months, helping in better price realization. Liva has helped the viscose staple fiber segment grow at 12 to 13 per cent.
Grasim merged with Aditya Birla effective July 1 as part of the group restructuring. This business will add close to Rs 5000 crores in revenue and Rs 600 crores in ebitda on an annualised basis. Grasim had a cash surplus of Rs 2900 crores at the end of June. The merger with Aditya Birla Nuvo will add a gross debt of Rs 2000 crores. UltraTech is expected to add another Rs 11,000 crores on a consolidated basis, being a subsidiary of the company.
The EU Ecolabel for textiles has been fine tuned to include accessories and intermediate products used in textiles. The amendment also clarifies the exceptions applying when recycled fibers or organic cotton fibers are used and revises the calculation required with regards to percentage of these fibers used in EU-Ecolabelled textiles.
Other criteria for chemical management, such as water repellent finishes, are mentioned alongside new rules for wool and pesticide residues on cotton. Any fiber may be used without having to meet the textile fiber criteria if it contributes to less than five per cent of the total weight of the product or if it constitutes a padding or lining.
For calculating the percentage of cotton in a product that shall be required to comply with certain criterion, the recycled cotton fiber content shall be deducted from the required minimum percentages except in the case of clothing for babies under three years old. There are also changes to criteria on the substitution of hazardous substances used in dyeing, printing and finishing where it states that for water repellent chemistry the repellent and its degradation products shall be either readily and/or inherently biodegradable, or non-bioaccumulative in the aquatic environment, including aquatic sediment.
Finch, a Chinese swimwear brand, uses Repreve recycled fiber in its products. Finch has a commitment to transparency and building a sustainable supply chain. The brand identifies with the slow-fashion movement and repeats 85 per cent of its prints and styles year after year to encourage timeless, responsible purchasing. It designs all its signature prints in-house and works only with manufacturing partners that share its core values of social and environmentally responsible production.
Since launching swimwear made from Repreve fiber in 2013, Finch has rapidly established partnerships with some of the most luxurious names in travel, including Six Senses, W Hotels, Mandarin Oriental, Ritz-Carlton, Park Hyatt and Naked eco-resorts.
Finch offers timeless, sustainable, luxury swimwear, resort apparel and accessories in signature prints. Finch’s swimwear for women, men and children is made exclusively from Repreve yarn. In addition to being environmentally responsible and stylish, Finch swimwear is also high-performing, as each item offers protection from the sun with a UPF rating of at least 50 and UVB sun protection, with no added chemicals.
Finch, launched in 2010, creates swimwear for the whole family that is fashionable, functional and earth-friendly. It was launched with the eco-conscious global traveler in mind.
Cambodia needs to diversify its export basket to make it more resilient to shocks. As of now, garment and textile production and a few other low value-added manufacturing dominate Cambodia’s exports. These are largely destined for the US and the European Union, exposing the economy to sector- and market-specific shocks.
The economy is constrained due to its dependence on garment exports. The way forward is to invest in educational reforms and specifically in people – that is ensuring that the skills are there in the first place so Cambodia can more quickly move up the value chain. There is an opportunity for Cambodia to first step into electronics exports and food processing sectors.
It’s also necessary to address gaps in hard infrastructure, such as high costs of electricity, if Cambodia wants to be in a good position to capture export manufacturing operations that are moving out of China due to rising costs of labor there.
A bold vision can leapfrog typical paths of development and quicken its industrial development. Should political tensions lower the impetus for reform to address institutional weaknesses, that would be credit negative. Cambodian exports to the US from January through June rose by 4.5 per cent compared to the same period in 2016.
Due to higher duty, longer lead-time, and lower price Bangladesh garment shipment to the US, the country’s single largest export destination, declined 7.47 per cent year-on-year to $5.2 billion in 2016-17 . Exporters also blame the appreciation of local currency against the American dollar, loser imports by US retailers and inefficient port operations in Bangladesh as other reasons behind the decline in garment exports.
Bangladeshi apparel exports face 15.62 per cent duty to the US markets, whereas Vietnam, Turkey, China and India are subjected to 8.38 per cent, 3.57 per cent, 3 per cent and 2.29 per cent duty respectively. Longer lead-time is another major problem for Bangladesh whereas competitors are sending their products to the US in shorter time.
Bangladesh imports raw materials such as cotton and then spins them locally before making the finished products. Till now Bangladesh needs to import some key raw materials like woven fabric, some accessories and other related things. Bureaucratic red tape causes many delays in government and customs related activities. Imports and exports operations are taking longer time now-a-days than before. Less management and worker efficiency at small and medium-sized factories make things very difficult for them to take orders to cater to retailers within such a short time.
As per Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the country’s garment sector was hit by 15 per cent price cut in the last two years. Reduction of price of the US buyers is making things further difficult for Bangladeshi manufacturer. As European buyers give better price many manufacturers prefer EU buyer over US buyers.
