Textile exports pick up pace

Denim segment is yet to escape Covid-19 triggered stress

Salman Siddiqui July 25, 2020

Pakistan’s leading textile exporter has reported the revival and receipt of new orders, mainly for hosiery products such as socks, following the lifting of lockdowns in the European Union and the US but its denim segment is yet to escape the Covid-19-induced stress.

“ILP’s (Interloop Limited) hosiery division is now operating at over 100% utilisation level whereas the denim section is operating at just 50% utilisation level,” Group CFO Maqsood Muhammad said while addressing a webinar organised by BMA Capital.

Interloop is a listed company at the Pakistan Stock Exchange (PSX). It manufactures products for renowned brands such as Adidas and Nike.

The company’s denim division had been significantly impacted by the Covid-19 pandemic as it lost over half of orders at one point. On the other hand, the hosiery division remained the least affected as it lost 15% of the orders, he said, according to the brokerage house.

On account of lower international demand due to Covid-19, Pakistan’s exports have faced a contraction. However, after the gradual economic recovery in the EU and US, exports have started picking up again.

A major part of Interloop’s export revenue comes from the EU (60%) while the rest comes mainly from the US.

The textile sector is the largest export earner in Pakistan. Its share stood at around 60% ($12.53 billion) in total exports ($21.39 billion) in fiscal year 2019-20, according to the Pakistan Bureau of Statistics (PBS).

However, textile exports fell 6% during the year mainly due to the Covid-19 outbreak from $13.33 billion in the prior year (FY19). Almost all the textile segments reported a fall in exports except for two.

The month of June showed a silver lining as exports of almost half a dozen textile segments recovered compared to the same month of previous year, according to the PBS.

ILP Group CFO said, “Importers are diversifying their textile orders from China to South Asian markets, which presents a good opportunity to exporters in our country.”

He said export product prices had not been affected and the company had not so far passed the benefit of rupee depreciation on to importers.

However, the buyers are asking for the same. “Increased sales and lower yarn prices, in addition to the rupee devaluation, are likely to keep profits elevated,” he said.

“The company has been able to get orders for its hosiery division from three new clients whereas work has also been done to bring new clients on board for its denim segment and one good brand is placing orders at very attractive prices,” the CFO was quoted as saying.

Currently, the ILP’s denim segment is operating at a loss, however, it is expected to start contributing to profits from next year, according to the brokerage house.

Interloop is one of the world’s largest hosiery manufacturers and Pakistan’s sixth largest exporting firm. The company has two manufacturing units in Pakistan and Bangladesh, and one associated company in Sri Lanka, along with services available in the US, the Netherlands, China and Japan.

It has hosiery production capacity of 700 million pairs of socks annually, which accounts for over 90% of the total revenue. Other notable segments include yarn, denim and knitwear, according to the brokerage house.

Interloop is currently using a cotton mix of 50:50 (imported and local), which was previously 30:70.

Published in The Express Tribune, July 25th, 2020.

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