US-China trade relations affecting business performance of garment, textile companies

VCN – A survey on business performance of garment and textile companies in 2019, recently released by SSI Securities Corporation shows remarkable impacts of US – China relations on the business performance of these companies.
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The US-China trade war affects garment and textile orders. Photo: Nguyen Hue

In the fourth quarter of 2019, net revenue saw a slight increase of 1.55% while after-tax profit reduced 1.29% compared to the same period last year, said SSI.Total revenue of the garment and textile industry in 2019 reached VND68.9 billion, equivalent to 2018 but after-tax profit reduced 9.15%.

The US-China trade tensions greatly affected orders of companies. Because of passive status about that Chinese garment and textile products are likely to be subject to safeguard tax upon exporting to the US market, many customers tend to make monthly orders to explore advantages of China’s production capacity while easily shifting to other market if this tax is valid.

Consequently, when the US stopped its plan on imposing taxes in the fourth period phase 2, as well as reduced 50% of tax rates for goods subject to taxes in the first period, customers of many companies still took priority to choose Chinese producers because of their advantages on production technique, infrastructure and complete value chain. This is a cause leading to shortage of orders in the short term forVietnamese companies.

In addition, competing processing orders with countries which have lower costs such as Bangladesh, Cambodia and Pakistan also put pressure on business performance of the garment and textile industry.

Some companies topped the industry saw low business performance such as Viet Tien Garment Corporation had net sales and after-tax profit in 2019 reduced 7% and 12% respectively compared to 2018. Thanh Cong Garment Textile and Garment Investment Trading Joint Stock Company also recorded a decline of 16.4% in after-tax profit compared to 2018 due to profit margin of many orders reducing.

2019 was a hard year for the natural fiber industry. The US-China trade war made the demand for textile dyeing in China fall, thereby affecting the import demand for natural fiber from Vietnam. China is the largest market of Vietnam’s fiber industry with total imports of 65% (2019). According to Vinatex,Vietnam’s natural fiber industry suffered a loss of 3.500 billion in 2019.

For some listed companies, Dam San Joint Stock Company recorded a strong decline of as much as 83% of after-tax profit in 2019 compared to 2018 and Duc Quan Investment and Development Joint Stock Company suffered a loss of 95% compared to 2018.

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Similarly, for the man-made fiber industry, the net sales of Century Synthetic Fiber Corporation reduced 7.4% compared to 2018 due to cautious psychology of customers before the trade war together with the competitive pressure from Chinese polyester yarn.

By Nguyen Hue/ Huyen Trang

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