Vinatex faces damage of $43 million due to COVID-19
Vinatex faces damage of $43 million due to COVID-19
In case the COVID-19 pandemic is brought under control in May and the economy recovers from June onwards, the textile and garments sector is estimated to sustain a damage of VND11 trillion ($478.26 million), VND1 trillion ($43.48 million) of which will come from Vietnam National Garment and Textile Group (Vinatex).
Vinatex establishes damage of $43 million due to COVID-19
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The damage Vinatex takes will be more serious if the epidemic is prolonged over May, despite the company's revenue from manufacturing face masks.
According to the company, since mid-March, more and more orders have been either cancelled or delayed, putting workers into unemployment in April and May. The larger the brands, the larger the order volumes cancelled – and there are no reliable forecasts for the timeline of the pandemic.
Furthermore, the difficulties will increase as the Chinese market is already recovering, increasing supply while demand in the local market is dropping. This could easily lead to an oversupply, pushing down prices. It will put financial pressure on the textile and garments sector and endanger stable employment.
A representative of Vinatex forecast that if no policy adjustments are made, firms will lose their market liquidity by the end of April. Between 30-50 per cent of employees would be out of their job within the next two months.
Furthermore, the industry required about $1.5 billion of material imports a month ($120 million for Vinatex), thus if 20 per cent of orders are cancelled, $300 million worth of materials will not be used for production, which will cause difficulties in warehousing. As the result, by the end of this year, entire unsold goods in April and May will be lost at least 50 per cent of worth, equaling $300 million ($24 million of which comes from Vinatex).
In order to deal with these difficulties, Vinatex assigned its 22 member companies to continue taking on orders for products used in the battle against the epidemic, including face masks. Besides, the group applied cost-cutting policies and requested either a deferment or an exemption from social and unemployment insurance fees.
According to Vinatex, in the first two months of 2020, the group and its member companies supplied over 38 million face masks to the market. The corporation targets maintaining a production capacity of 28-30 million face masks per month. In case demand surges, Vinatex could increase production capacity to nearly 50 million cloth face masks per month.
