Achieving positive results in 2021, textiles and garments maintain a strong outlook in 2022

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Textile enterprises implement "three-on-the-spot" to maintain production during the pandemic. Photo: Nguyen Thanh

Positive business results

After a nearly two-year hiatus, the global textile and apparel industry has begun to regain its footing, fuelled by the dramatic rise of e-commerce. Despite continued difficulties, demand has been increasing from the second half of 2021.

Vietnam's textile and garment export turnover in 2021 rose 11.2% year-on-year to US$39 billion. This is a significant result despite the prolonged disruption due to the social distancing policy in the third quarter of 2021.

Vietnam's textile and garment industry in 2021 faced a lot of difficulties and pressures of raw material costs, inflation, rising freight rates and labor shortage after the social distancing periods. However, many businesses still achieved very impressive results.

The 2021 financial statements of Century Synthetic Fiber Corporation recorded a net revenue of VND2,042 billion, up 16% year-on-year and an after-tax profit of more than VND278 billion, up 93%.

Meanwhile, textile and garment enterprises have witnessed a difference between the North and the South due to the impact of the Covid-19 pandemic. Specifically, TNG Investment and Trading Joint Stock Company earned VND5,444 billion in sales in 2021, a year-on-year rise of 22% and VND233 billion in revenue up 52%. This is also the highest profit of TNG since its inception.

According to Chairman of the Board of Directors of TNG Investment and Trading Joint Stock Company Tran Van Thoi, in 2021, the company oriented to focus on exploiting and increasing the proportion of free on board (FOB) customers (customer takes delivery of goods being shipped by a supplier once the goods leave the supplier's shipping dock). Besides, customers in pandemic-hit countries shifted their orders to Vietnam, it helped the company increase revenue. In addition, the company clearly identified the target product line and focused on technical and high-class products along with the application of management solutions to improve production and business efficiency.

TNG also applied solutions to improve labor productivity by applying programming machines, specializing and automating production stages.

Duc Giang Garment Corporation also estimates that total revenue in 2021 will reach VND2,441 billion, up 17% from 2020. In which, export revenue rose by 11% to more than US$81 million and domestic revenue rose by 38% to VND542 billion.

Meanwhile, Thanh Cong Textile - Investment - Trade Joint Stock Company (TCM) estimates that its profit in 2021 will be halved. The company has received orders until the third quarter of 2022. The company is building Thanh Cong Vinh Long 2 garment factory with advanced technical investments and starting to install a solar power system, meeting quality and environmental standards of fastidious markets such as the US, Japan, and the EU.

The factory is expected to be put into operation at the beginning of March 2022. In December 2021, TCM also received the first orders from US customers after passing the inspection and evaluation of Thanh Cong factory in Vinh Long.

The fiber industry continues to see positive outlook

Commenting on the situation in 2022, the report of SSI Research said that the global textile and garment market is expected to face new challenges in the context of logistics congestion and production disruptions, high transportation costs and raw material shortages.

These factors further increase input costs and create an imbalance between supply and demand. Accordingly, consumers can bear higher prices while the profit margins of manufacturing companies shrink.

The Vietnam Textile and Apparel Association forecasts that the export turnover in 2022 will reach US$42.5 - 43.5 billion (up 10% compared to 2021) under the scenario that the pandemic is under control in the first quarter of 2022 and reach US$40-41 billion if the pandemic is under control by mid-2022.

According to SSI Research, the cotton yarn industry, after rapid growth in 2021, will gradually find a balance point in 2022. Input cotton prices will continue to soar in the next two quarters, but it is highly likely to revise down in the second half of 2022. Cotton yarn prices and output will grow in the first half of 2022, but the gross profit margin of cotton companies may fall in the second half of the year. Therefore, SSI Research estimates that most garment manufacturing companies will have lower gross profit margin than 2021 due to high input costs in the first six months of 2022.

In addition, the Ministry of Industry and Trade recently imposed a five-year import tax on imported polyester fibers (types POY, DTY and FDY), effective from October 16, 2021, specifically to China 17.5%; India 54.9%; Indonesia 21.9%; and Malaysia 21.5%. This will benefit most of the domestic yarn companies, especially Century Fiber, which can expand domestic consumption in line with the current capacity expansion plan.

VCBS Securities also said that the EVFTA and CPTPP agreements will actively support Vietnam’s textile and garment export activities in 2022. The market share of Vietnam’s textile and garment in the US and EU is still expanding. Besides, Vietnam will also have opportunities from the trend of shifting the world’s textile and garment supply out of China and Vietnam is one of the destinations for importers and retailers.

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Regarding the sustainable production trend of the world textile and garment industry, VCBS believes that businesses will focus on "green" production processes in factories and production of cotton and recycled yarns such as Damsan, Century Synthetic Fiber Corporation or using input materials mainly cotton, recycled fibers such as TNG, TCM, etc.

This is expected to attract more orders from major partners who are interested in this issue such as H&M, Uniqlo, Nike and Adidas.