According to data from the Vietnam Textile and Apparel Association (Vitas), as of the end of September, Vietnam's textile and garment exports reached 29.7 billion USD, down 14% over the same period due to weak purchasing power and increasingly fierce among competitors in the market.
According to statistics, 6 out of 9 textile and garment enterprises listed on the stock exchange reported a decline in revenue and profit in the third quarter of 2023. Two companies even reported losses.
The third quarter financial report of Vietnam Textile and Garment Group (Vinatex) recorded net revenue decreasing by 11% to 4,089 billion VND, profit after tax reached 80 billion VND, down 55% over the same period.
Similarly, TNG Investment and Trading Joint Stock Company, Song Hong Garment Joint Stock Company, Thanh Cong Textile - Investment - Trading Joint Stock Company, Phong Phu Joint Stock Corporation, Century Fiber Joint Stock Company all recorded declining profits in the last quarter when the number of orders decreased sharply.
In the third quarter, Binh Thanh Import-Export Production Trading Joint Stock Company (Gilimex) had an after-tax loss of more than 19 billion VND, while in the same period last year, its profit was more than 128 billion VND.
Revenue of Garmex Saigon Joint Stock Company (GMC) only reached 73 million VND in the third quarter, down more than 99% compared to 11 billion VND in the same period. The company said there were no orders in the quarter, so revenue mainly came from the service segment. Garmex Saigon continued to have a net loss of nearly 11 billion VND, equivalent to the same period.
Garmex Saigon had to rebalance personnel, narrow operations to suit the new situation, and implement cost reductions to reduce losses.
As of September 30, the number of employees at Garmex Saigon was 37 people, down 4 people compared to the end of the second quarter but down 1,945 people compared to the beginning of the year.
The main reason for Gilimex's business results to decline stems from the fact that the commercial giant Amazon narrowed its orders. Amazon has been Gilimex's main partner since 2014.
Explaining this adjustment, Vinatex said that previously the Group's 2023 Annual General Meeting of Shareholders had approved production and business targets for 2023 according to a good scenario, however, in recent times, there have been continuous difficulties and disadvantages for production and business activities.
Based on the production and business results of the first 9 months of the year and the market forecast for the last months of the year which were not as expected, Vinatex adjusted down its production and business plan.
In the first 9 months of the year, Vinatex recorded 12,187 billion VND in net revenue, pre-tax profit reached 288 billion VND, which decreased by 16% and 76% respectively over the same period.
Compared with the new plan, Vinatex has achieved 74% of the revenue target and 78% of the year's profit target.
According to Vinatex, from the end of 2022, the textile market has faced many difficulties such as a shortage of orders in both quantity and unit price due to low demand. The shortage of orders causes workers to lose jobs.
Faced with the above situation, Vinatex was forced to accept low-priced orders to ensure an average salary for workers of over 8 million VND/person/month (while with the price of the orders received, the average salary only reached less than 6 million VND/person/month).
At a conference to discuss production and business directions for 2024 held in October, Mr. Cao Huu Hieu, General Director of Vietnam Textile and Garment Group (Vinatex) said that difficulties with Vietnam's textile and garment industry could last until 2024 when there are still unfavorable factors such as world economic recession, widespread geopolitical crisis, changing consumer behavior, price competition from rival countries.
Therefore, businesses must be cautious when building production and business plans for 2024, and at the same time seek opportunities from the US market, improve productivity, develop new products.
Mr. Le Tien Truong, Chairman of Vinatex, said that total demand for textiles and garments in 2024 is expected to improve compared to 2023, but still 5-7% lower than in 2022.
Thanh Cong Textile - Investment - Trading Joint Stock Company said that the fourth quarter is usually the preparation period for festivals and Tet, but this year, shopping demand and orders are still slow compared to previous years due to the difficult economic situation and slow recovery.
As of the end of October, TCM had not yet received enough orders for the end of the year. Currently, the company has only received about 75% of the order revenue plan for the fourth quarter. TCM expects that the order situation in the first quarter of 2024 will be better. Currently, the company has been receiving many orders to meet the revenue plan for the first quarter of 2024.
During the period as Amazon's partner from 2014 to 2021, Gilimex continuously recorded high growth in both revenue and profit. In 2021, the company recorded peak revenue of more than 4,000 billion VND and net profit of more than 300 billion VND.
However, by the end of 2022, Gilimex announced that it had sued Amazon for compensation of 280 million USD. At the 2023 Annual General Meeting of Shareholders, Mr. Nguyen Viet Cuong, Member of the Board of Directors, shared that the lawsuit file had passed the most important step in the lawsuit process, which is acceptance.
Enterprises adjust and reduce their business plans
Immediately after announcing unsatisfactory business results in the third quarter, Vinatex, asked to adjust the 2023 business plan.
Specifically, the planned consolidated revenue was adjusted down from 17,500 billion VND to 16,500 billion VND, a decrease of 6%. Consolidated pre-tax profit decreased by 39% compared to the original target, from 610 billion VND to 370 billion VND.
In a recent analysis report, Mirae Asset Securities Joint Stock Company (Vietnam) expects that textile and garment exports in the last months of 2023 and 2024 will gradually improve thanks to some motivation from economic growth in key markets and decreasing inventory.
The World Bank forecasts that GDP growth in 2023 of Vietnam's key markets will continue to grow: the US about 1.1%; EU with 0.4%; Japan about 0.8% and China with 5.6%.
These signals point to a recovery in consumer income and demand. Fears of an economic recession are likely to decrease, supporting spending on textile products. Along with the GDP growth rate, the consumer confidence index in key markets remained stable in the first 10 months of 2023.
In addition, the inventory-to-sales ratio of major brands such as Nike, Inditex, GAP, H&M and Puma at the end of the third quarter remained low, while sales showed signs of increasing in the context of upcoming holiday. “Positive signals about sales may help the number of orders increase in 2024,” Mirae Asset forecasts.
However, the business environment in 2024 still faces challenges, mainly coming from macroeconomic instability. Mirae Asset believes that in the short term, geopolitics and high interest rates are the main risks to textile demand in 2024.
In the long term, as FDI capital flows into Vietnam are increasing, textile and garment enterprises will be under pressure from rising labor costs. In addition, it is now easy for Vietnamese workers to find jobs abroad, causing competitive pressure on domestic labor costs.
Source: Mirae Asset, vietnambiz
Compiled by VietnamCredit
