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Garment exports up, but profits dwindle
Apr '11
In spite of remarkable rise in export turnover during the initial three months of the current year, the garment firms failed to register good profits, while some of them even suffered losses. The problem is likely to intensify in the second quarter.

As stated by the Vietnam Textile and Apparel Association (VITAS), garment export turnover registered a rise of 28 percent during first quarter of the current year to grow to $2.075 billion, as over corresponding period last year. However, this rise in turnover did not result in rise in profits.

Deputy Chairman of VITAS, Pham Xuan Hong, here said that, the garment firms are facing an impasse situation.

He revealed that, though the garment firms have sufficient number of orders and the export turnover is also rising steadily, still profits of these firms are likely to decrease and some of the firms are even anticipating negative profits, owing to soaring prices of raw material.

Like for example, Kateford fabric which was available at a price of 32,000 dong per metre at close of 2010 is now being traded at 75,000 dong that is a rise of 134 percent. Meanwhile, the cotton fabric prices have also gone up by 150 percent from 16,000 dong to 40,000 dong.

Hong termed this as an “unexpected tsunami”.

Hong clarified that, whereas clients consent to a maximum 15 percent rise in the prices, the raw material prices, coupled with water, electricity and transport costs and bank interest loan rates, have gone up by 22 percent. In addition to this, the enterprises have even hiked the average pay of workers by almost 14 percent from 3.5 million dong per month to 4 million dong per month. Thus, in view of all these factors, profits are likely to further decline in coming times.

Fibre2fashion News Desk - India

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Courtesy: H&M

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