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Leather industry thrives on tight profit margins

15
Jul '10
As per the Council of Leather Exports (CLE), despite recording a positive growth of 30 percent in the initial two months of this financial year, as against the same period last year, the Indian leather industry is as yet, managing to continue to exist on tight profit margins.

April and May months of 2010, witnessed merely 30 percent growth as compared to the same months in 2009. But still, the industry has been moving edge-to-edge with its profit margins, owing to the slow-moving export destinations.

As per the latest data, leather exports during April-May 2010, registered US $535 million as compared to the exports of April-May 2009, which was recorded at US $414.01 million, thus witnessing an upwards movement of 29.22 percent.

As compared to leather exports of $195.91 million recorded in April 2009, exports recorded in the month of April 2010 touched $262 million, thereby, witnessing a positive trend of 33.73 percent. Similarly, in May 2010, exports were registered at $273 million as compared to $218.10 million, which was recorded in May 2009, hence, registering a positive growth of 25.17 percent.

Further more, leather and leather goods are witnessing a fall owing to appreciation of the European currency, which has appreciated from Rs 65 per Euro to about Rs 56-57 a Euro.

Despite having plentiful of orders and the leather factories getting busier in the sector, about 80 percent of the goods are exported to the Eurozone, and currently, their currency is taking a beating. Therefore, as of now, although the industry has potential orders in the pipeline, they are facing trouble due to Euro's appreciation.

The market is in a fix with scarce profit margins, escalating raw material cost and till a certain extent, the European debt crisis are also making Indian leather exporters doubtful about their potential growth.

In fact, during the last fiscal, leather industry registered a fall of 9 percent, standing at $3.6 billion in March 2008-09, in March 2009-10, the industry fell to $3.3 billion.

Further more, as per CLE data, the net exports of leather and leather goods for the period April-March 2009-10 stood at $3400.97 million, which was down by 5.51 percent, as compared to the same period last year, which recorded, $3599.46 million.

Fibre2Fashion News Desk - India


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