Textile enterprises overcome difficulties sustainably

Enterprises are interested in learning about new machinery, equipment and technologies at the Saigontex exhibition that has just taken place in Ho Chi Minh City. Photo: N.H

Profits plummeted

According to the General Statistics Department, Vietnam's export of textiles, garments and raw materials was estimated at US$ 8.213 billion in the first quarter of 2023, down 24.6% compared to the first quarter of 2022. In which, the export value of textiles and garments reached US$ 7.1 billion in the first quarter of 2023, down 17% compared to the same period in 2022, due to the influence of global inflation.

In the first quarter of 2023, Vietnam's textile and garment export to the US market was estimated at US$ 2.805 billion, down 35.8% over the same period in 2022, this is the strongest decline in the first quarter of the year in 5 years. Vietnam's textile and garment export to the EU market was estimated at US$ 747.2 million, down 16.7% over the same period in 2022.

The drop in export data is similar to the gloomy picture of business results of textile and garment enterprises. According to the consolidated financial statements of the first quarter of 2023 of Century Yarn Joint Stock Company, net revenue in the period reached VND 287.9 billion, down 55% compared to the same period in 2022; profit after tax was only VND1.63 billion, down sharply by 98%.

According to Mr. Dang Trieu Hoa, General Director of Century Yarn Joint Stock Company, in the first quarter of 2023, both sales and average selling prices were lower than in the same period last year. Because indirect and direct customers reduced order size. Although the company has reduced financial expenses, selling expenses and administrative expenses, it still failed to improve the profit target.

According to the company’s management board, the economic downturn in major export markets continues to have a negative impact on orders. Orders have been showing signs of slowing throughout the first quarter of 2023 and are likely not to pick up until the end of the third quarter of 2023. Currently, Century Yarn’s factories are only operating at 60% of their total capacity (compared to over 90% capacity when there are enough orders). In the second quarter of 2023, a small amount of orders for spring-summer 2024 were placed, but the number was insignificant.

Thanh Cong Textile Garment Investment Trading Joint Stock Company (TCM) also announced that its revenue in the first quarter of 2023 decreased by 22% and profit after tax decreased by 27% compared to the same period last year, reaching US$ 36.7 million and US$ 2.24 million respectively.

According to TCM's management board, due to the impact of the Covid pandemic and high inflation, consumers in the US and EU had tightened spending and reduced consumption for non-essential goods, including textiles. It made the export situation of Vietnamese textile and garment enterprises to the markets decrease compared to the same period last year. However, thanks to the strategy of diversifying export markets, including Asian markets such as Japan, Korea, and China, TCM partly reduces risks and was less affected than other similar companies mainly exporting to USA and EU.

At TNG Investment and Trading Joint Stock Company, although revenue in March 2023 recorded significant growth compared to the previous month and the same period in 2022, it still could not save the negative performance of the whole first quarter of 2023. Specifically, the revenue in March 2023 reached VND 561 billion, an increase of nearly 36% over the same period last year and an increase of 50% compared to February 2023, but for the first quarter of 2023, revenue still decreased by 12% compared to the fourth quarter of 2022.

Investing for the long term

In fact, the decline does not only happen to Vietnamese textile and garment enterprises. Mr. Vuong Duc Anh, Chief of Office of the Vietnam Textile and Garment Group (Vinatex), said China's textile and garment industry recorded a decrease of 18.6% in the first two months of 2023. Although Bangladesh still maintained its upward momentum, it could not maintain the export figure of over US$ 4 billion /month as in 2022. Indian textiles, after going flat in January, continued to decline in February 2023. Similarly, Pakistan and Cambodia also fell 28% and 23% respectively in February 2023.

As noted by Mr. Vuong Duc Anh, the inventory situation at big brands was still high.

In many enterprises, although revenue had increased, profits had decreased deeply. Typically, the Adidas brand, at the end of 2022, inventory was at US$ 5.97 billion, up 49% compared to 2021. In 2022, although Adidas' net revenue reached EUR 22.5 billion, which increased by 6% compared to 2021, but net profit decreased by 83% to only EUR 254 million. Even the Hanes brand lost US$ 127 million in 2022 while the previous year had a profit of $77 million. Inventories of this enterprise also increased by nearly 25%, to US$ 1.98 billion. Similarly, at the end of February 2023, Nike's inventory was at US$ 8.9 billion, up 16% over the same period in 2022; H&M's inventories stood at US$ 3.93 billion, up 4%.

In that context, according to the Vietnam Textile and Apparel Association, the whole industry's orders decreased by 18-22% in the first quarter of 2023 and did not show any positive signs in the second quarter of 2023.

Although the short-term situation has not improved much, textile enterprises still believe in long-term prospects. Accordingly, investment and product development plans for meeting new market trends are still promoted by enterprises.

TCM has been researching and developing environmentally friendly product lines based on the “greening’ trend of world fashion and the essential demand of life by using recycled and sustainable materials. TCM has built a closed production process from yarn – knitting/weaving – dyeing – sewing. As a result, the rate of closure from yarn onwards of this enterprise reached 35% and from fabric onwards reached 85%.

Autonomy has helped TCM be stronger than other enterprises in the industry and met most of the garment orders with the autonomy of raw materials, bringing a high gross profit margin.

Similarly, the management board of Century Yarn Joint Stock Company also believed in the demand for recycled yarn in the long term, so this company would still focus on recycled yarn and recycled yarn products. Currently, the first phase of Unitex factory of Century Yarn was constructed and is expected to start operation in early 2024. At this factory, 60% would be used for recycled yarn and the rest was high-quality virgin yarn.

TNG company is also setting a goal of sustainable development associated with 2 trends of green and automation. Earlier this year, TNG invested in automation equipment to improve labor productivity and reduce input costs.

The enterprise also commits to not using coal-fired boilers and replacing them with electric ones to reduce CO2 emissions each year, develops a roadmap to use 100% renewable energy, and use recycled materials for production and business activities.

Besides, TNG researches and develops new products used for the garment industry by reusing redundant raw materials after production; contributing to adding value to it, minimizing resource exploitation and environmental pollution.