Textile and garment exports: Turnover increases, profits do not increase

Vietnam's textile and garment export turnover still increased in 2015, however, businesses' profits were affected because they had to reduce prices to compete with other countries in the context of the world economy still being difficult and many countries devaluing their domestic currencies.

At the press meeting on December 21 of the Vietnam Textile and Garment Group (Vinatex), Mr. Tran Viet, Head of Vinatex's General and Legal Department, said that Vietnam's textile and garment export turnover in 2015 is estimated to reach more than 27.1 billion USD, an increase of more than 10% compared to the previous year.

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The highlight is that although textile and garment import turnover of some major markets only increased slightly, or decreased, Vietnam's textile and garment exports to these markets still increased strongly.

Specifically, in 2015, textile and garment imports from the US market increased by 4.8% compared to last year, estimated at over 112 billion USD. According to Vinatex representatives, while textile and garment exports from China, India, and Bangladesh to the US market increased slightly, or even decreased (China), Vietnam's textile and garment exports to this market increased by nearly 13%, reaching over 11.3 billion USD.

Textile and garment imports from the EU, Japan and South Korea also decreased this year. Meanwhile, Vietnam's exports to the EU increased by nearly 6% (estimated at 3.36 billion USD), to Japan by nearly 8% (estimated at over 2.95 billion USD) and to South Korea by 8.77% (estimated at over 2.58 billion USD).

However, according to Vinatex representative, in 2015 there were many developments that were unfavorable to Vietnam's textile and garment industry. Specifically, the devaluation of domestic currencies by many countries, such as the Chinese Yuan in August 2015 (at times the devaluation rate was up to 4.8%), the currencies of India and Indonesia, etc. (with a higher devaluation rate than Vietnam) caused the price level of textile and garment products to go down in countries that directly compete with Vietnam. Therefore, to keep orders as well as customers, Vietnamese textile and garment enterprises had to reduce product prices to compete, causing profits to decrease.

In addition, in 2015, cotton prices fell to below 60 cents/pound, and polyester filament prices also fell, hitting rock bottom in October 2015. According to a Vinatex representative, this development directly affected yarn manufacturing enterprises; in which, there were contracts that enterprises were delivering but customers requested price reductions, or had to stop.

According to Vinatex, the total industrial production value of the group (calculating the total number of member units in which Vinatex holds more than 51% of shares, and associated units in which Vinatex holds less than 51% of shares, including companies such as Viet Tien, May 10, May Nha Be,...) is estimated at 40,500 billion VND, an increase of 15.7% compared to 2014.

The group's revenue is estimated at VND52,570 billion, up 11% over last year; export turnover also increased by 10%, estimated at over US$3.4 billion, accounting for nearly 13% of Vietnam's total textile and garment export turnover. However, pre-tax profit is estimated at VND1,350 billion, equivalent to last year.

According to Mr. Viet, in 2016, the textile industry will continue to face the same difficulties as this year. In particular, exchange rates will continue to fluctuate, affecting prices, revenue and profits of businesses in the industry.

The production plan of the entire Vinatex group in 2016 is expected to increase by 11%, but revenue is expected to increase by only 8%, according to Mr. Viet, because the fluctuation of exchange rates next year may continue to affect product prices.

In addition, rising electricity, water, and minimum wage costs will continue to affect the business situation of enterprises. However, in general, customers will still be interested in textile and garment enterprises in Vietnam thanks to Vietnam's participation in many bilateral and multilateral free trade agreements.

According to TBKTSG