Spinners doing well but denim is not
The demand for denim products decreased although the demand for knit garments rose globally during the pandemic
Spinning mill owners are doing business well as they hiked the prices of yarn because of the cotton price hike in the international markets. But businesses involved in the denim sector are on a losing streak due to the decreased demand for their produce.
Investment bankers say the country's apparel sector has recorded growth in profit in the 2020-21 financial year, compared to the 2019-20 financial year amid the Covid-19 pandemic.
Even many big companies declared huge investments as the demand for apparel products have increased over the previous period. With this, the shares of textile companies listed on the capital market saw a huge price hike.
On the other hand, the demand for denim products has decreased although the demand for knit garments had risen in the global market during the pandemic. The market of Denim products has not turned around. Hence, denim makers are on a losing streak.
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Spinning mill owners said yarn making entities usually stock cotton for at least six months. As the production of yarn had dropped significantly due to the pandemic, the stock of cotton was high. In the meantime, the price of yarn has increased as the prices of cotton hiked in the global market. They racked in huge profits utilising the advantage of the price hike of yarn made from the cotton they stocked at lower rates during the pandemic.
Yarn manufacturers have posted a maximum 1000 % growth in profit in the 2020-21 financial year. The profit of Metro Spinning Limited of Maksons Group and Square Textile Limited of Square Group has increased by 1,100 %.
Regarding the price hike of cotton, Mohammad Ali Khokon, president of the Bangladesh Textile Mills Association (BTMA), earlier told The Business Standard that the price of cotton was 58-60 cents per pound before the pandemic last year, and it is now $1.2. That means the price of cotton has almost doubled. Besides, the price of yarn was $2.60 to $2.70 per pound during the pandemic last year and now it has increased to $4.10.
However, Envoy Textile limited, also one of the largest denim manufacturers in the country, has lost 66% of its revenue in the last fiscal year. Besides, Evince Textile, another leader in denim manufacturing, has lost 100% of its revenue.
Regarding the loss of denim makers, Tanvir Ahmed, director of Envoy Textile, told The Business Standard, after the Covid-induced shutdowns, spinners are doing business well. But denim makers' business did not turn around. However, the demand for denim products is gradually increasing in European countries.
He said, "We gave 10% cash dividend to the shareholders despite the decrease in business as it was our commitment. Because we failed to give any dividend to our shareholders in the 2019-20 financial year due to loss incurred due to the pandemic."
After reviewing the 2020-21 financial year's financial statements of 58 apparel sector companies enlisted in the capital market, it was found that spinners have given more dividends than the preceding fiscal year as they are doing well in business.
About 38.75 billion were earned from goods exports recording a 15.10 % growth in the 2020-21 Financial Year compared to $33.67 billion in the 2019-20 Financial Year.
The export growth momentum is still going on in this fiscal year. In the July-October period of fiscal 2021-22, the readymade garments export recorded a 21% growth to $12.62 billion.
To keep pace with growing export demand, Envoy Group, Square Group, DBL Group and Maksons Group have declared huge investments for the current fiscal year.
