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VN apparel industry lacks ‘supplier punch’

Update: June, 30/2017 - 10:49
Vinatex targets higher profit in 2017 despite the difficulties forecast for both domestic and global markets. — Photo vinatex.com.vn
Viet Nam News

HÀ NỘI — Vinatex, the nation’s premier garment and textiles group, is targeting an increase in profits this year despite the difficulties forecast for both domestic and global markets.

At its annual general meeting on Thursday, the Việt Nam National Garment and Textile Group (Vinatex), said it expects combined pre-tax profits of VNĐ749 billion (US$33 million) this year, up 9.6 per cent year-on-year. It estimates total revenues at VNĐ16 trillion, down 3.1 per cent from last year.

Revenues of the parent company alone are set at VNĐ1.8 trillion and pre-tax profits at VNĐ345.9 billion this year, respectively up 37.9 per cent and 22 per cent year-on-year.

The group expects to pay a dividend of 6 per cent this year.

Last year was a difficult one for Việt Nam’s apparel industry with its main markets like the United States, European Union and Japan all experiencing lower import growth.

The Brexit vote and the US Presidential election also had negative impacts on the country’s apparel exports, said Vinatex general director Lê Tiến Trường.

He said annual apparel imports of the United States decreased 4.8 per cent last year, and that of Japan and South Korea dropped by 1.7 per cent and 4 per cent, respectively.

In addition, major textile exporting countries devalued their currencies at a high rate (about 10 per cent), while the Vietnamese đồng depreciated by just 1 per cent, which made the country’s garment products more expensive than those of its rivals.

Many foreign investors who invested in production in Việt Nam with the hope of reaping Trans-Pacific Partnership (TPP) benefits began to cut orders and move back to their factories.

The pressure to find new customers and alternative orders at Vietnamese enterprises was huge last year, Trường said.

Despite these troubles, Việt Nam’s textile exports saw an annual expansion of 5.42 per cent in 2016, the highest among the apparel exporting countries. Growth rates in major markets remained positive, including the Unites States (5.03 per cent), EU (5.78 per cent) and Japan (4.9 per cent).

Vinatex reported total 2016 revenues of more than VNĐ16.5 trillion, up 1.1 per cent year-on-year, while the group’s pre-tax profit was VNĐ683.5 billion, up 0.9 per cent over the previous year.

Not proactive

Trường also pointed out shortcomings and weaknesses among the Vietnamese garment companies, saying they were not proactive in searching of new customers and markets.

Local businesses were mainly signing contracts with intermediary agents without directly contacting big customers, he said.

More importantly, Vietnamese companies are unable to exercise any ‘supplier power’ to influence the decision of buyers, and are easily be replaced by other suppliers, he added.

Weak corporate governance and business links among local manufacturers have also reduced the country’s strength in international markets.

Trường said Vinatex’s first-half business was “similar to 2016” but did not give specific numbers.

Vinatex has registered with the Ministry of Industry and Trade an export growth rate of 10 per cent, equivalent to a turnover of $30 billion, this year

He said the Government has agreed to continue reducing State holdings in the group and will eventually transfer Vinatex to the State Capital Investment Corporation (SCIC) or to a newly-established committee. — VNS



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