Textile stocks (TCM) slump despite profit rises

Textile stocks (TCM) slump despite profit rises

Even though positive earnings and good export results were recorded, major stocks in the textile and garment industry lost ground.

Shares of Thanh Cong Textile Garment Investment Trading Joint Stock Company (TCM) dropped 12 per cent compared to the beginning of April, trading at around VND117,000 (US$5.11) per unit.

Shares of TNG Investment and Trading Joint Stock Company have also slumped 13 per cent compared to the beginning of April, trading at VND20,600 per share. Vietnam National Textile & Garment Group (VGT) are being traded at VND14,800 per unit, down 17 per cent compared to the beginning of April.

The recovery of textile and garment enterprises had been forecasted by many experts and analysts due to positive growth factors such as the recovery of production chains, and traditional orders returning after the pandemic.

Some enterprises with available raw materials have partly converted their production capacity into making masks and protective clothing, diversifying their output products.

Post-pandemic, Viet Nam’s textile and garment industry is expected to benefit from the strong demand from main export markets such as the EU, US, Japan and South Korea.

Export value also benefitted from free trade agreements such as the Viet Nam-EU Free Trade Agreement (EVFTA), Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Investment from China is also predicted.

According the Ministry of Industry and Trade, export turnover in the first quarter of 2021 increased slightly by 1.1 per cent over the same period last year, estimated at $7.2 billion. Items such as knitwear and popular goods with large consumption recorded new orders.

Many businesses reported profits in the first quarter. VGT reported after-tax profit of VND200.4 billion, an increase of 28.5 per cent compared to the first quarter of 2020.

TCM post-tax profit was VND154.5 billion, up by 36 per cent year-on-year. Song Hong Garment Joint Stock Company (MSH) announced after-tax profits of VND92.1 billion, an increase of 44 per cent compared to the first quarter of 2020.

However, textile enterprises are still facing difficulties and challenges over material prices including rising costs in cotton and yarn.

According to the Viet Nam Cotton and Spinning Association (VCOSA), in the first two months of 2021, the price of raw cotton imported to Viet Nam increased by 0.87 per cent over the same period last year, at an average of $1,625 per ton. The highest import price was recorded from Australia at $1,917 per tonne.

“From December 2020 to February 2021, the sharp increase in yarn prices caused many difficulties for textile enterprises,” said Le Tien Truong, Chairman of the Board of Directors of Viet Nam National Textile and Garment Group (Vinatex).

“At present, fabric prices have not increased significantly while the yarn price has increased by 25 per cent.

“The reason for the high increase in yarn prices is that the last cotton crop in the world produced low yields, and worldwide cotton inventories have also decreased. It is expected that the amount of cotton consumed this year globally will exceed the amount of cotton that can be harvested.”

TNG recorded net revenue of nearly VND911 billion, an increase of 18 per cent over the same period.

During the period, selling expenses were reduced by nearly half, and administrative costs were also lower than the same period last year, but due to a large decrease in gross profit, TNG only saw a post-tax profit of VND22 billion, down 34 per cent compared to the first quarter of 2020.

As for new orders in the first quarter, although the quantity of products is higher, the price is between five and 10 per cent lower due to COVID-19. Meanwhile, input costs and payables to employees did not decrease, leading to an increase in the cost of a product, TNG said.

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