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Diverse opinions emerge on dipping textile profit margins
Feb '13
Two diverse opinions have emerged from textile companies in Pakistan, Bangladesh and India as to whether profits margins of the textile industry have been hit in the last few months.
While on one hand two major textile producers in India and Bangladesh opine that profits margins have declined in the last few months, the opinion from Pakistan is in variance and contrary to the one from India and Bangladesh.
Mr Utsav Pandwar – CFO of India based Aarvee Denims Ltd tells fibre2fashion, “As there is a mismatch between demand and supply, there is a pressure on selling price. Supply has increased drastically since last few months, while demand is increasing as per normal trends of around 15%”.
Mr Abid Farooq, MD of Pakistan based Ali Akbar Spinning Mills however is of the opinion that margins have not gone down.  He says, “The margins have improved in the last few months in the Pakistani textile industry.
Giving reasons, he adds, “Our yarn exports have gone up tremendously in the last few months. Alongside, cotton prices have also maintained stability in the same period. Secondly, due to energy crisis, there have been no expansions in recent years, due to which there is no mismatch between demand and supply”.
Bangladesh based MD of Malek Spinning Mills Ltd - Mr Matin Chowdury is also of the opinion that margins have declined. 
He informs, “The market price of yarn in Bangladesh is dictated by duty-free low-cost cotton yarn imported from India.  While Indian yarn producers get subsidies, we do not get any such incentives, which leaves us at an disadvantage”. 
“The global recessionary trends have also led to a pressure on prices of garments, which in turn have put pressure on yarn prices. The third and also a big reason is the very high rates of interest we pay for working capital or on fixed investments. All these factors put together has led to an erosion of margins”, he concludes by saying.
Mr Pandwar says the margins have dipped between 7-10 percent, but is optimistic that the trends will reverse within the next six months. In the meantime, they are focusing on export markets to improve profit margins.  

Fibre2fashion News Desk - India

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