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Wide gap in profits margins of apparel producers
May '11
Guangdong is called the "powerhouse" of China's clothing production. But the current state of local garment enterprises makes experts worry about the sustainability of their performance.

As per the annual reports for 2010, released by listed apparel producers by the end of April 2011, there was a great gap in the gross margins of these companies.

Among 35 garment enterprises listed in the A group, Lucky Bird achieved the highest gross margin of 54.19 percent, net profit margin was 19.29 percent, while gross margin of Wearing Apparel was only 5.9 percent and net profit margin was only 1.16 percent.

Most enterprises in the annual report, referred to cost pressures. In fact, cotton price continued to rise from last September to early November, soaring from 18,000 Yuan per ton to 30,000 Yuan per ton, representing an increase of about 70 percent. At the same time, labor wages too shot up further by over 20 percent.

However, recently domestic cotton price has plummeted. The pressure on these apparel manufacturers has come down. But looking at the wide chasm in margins, experts are apprehensive of the sustainability of enterprises working on low margins.

Fibre2fashion News Desk - China

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