In contrast to a sector-wide pickup in the first quarter of 2022, Vietnamese textile and apparel companies saw mixed performance in the second quarter.
According to the Vietnam Textile and Apparel Association (VITAS), textile and garment exports hit around $22.3 billion in the first six months of the year, up 17.7% year-on-year.
Vietnam National Textile and Garment Group (Vinatex) made an after-tax profit of VND573 billion ($25 million) in Q2, up 49% compared to Q2/2021.
The firm attributed the rise in profit to its high volume of cotton in storage, which resulted in low production costs amid mounting cotton prices.
TNG Investment and Trading JSC followed suit with an after-tax profit of VND87 billion ($3.72 million), up 42.3%.
Phong Phu Corporation raked in over VND160 billion ($6.84 million) in profit, surpassing the figure in Q2/2021 by 11%.
Although many firms were riding high in Q2, some saw their profits eroded by rising costs.
Thanh Cong Textile Garment Investment Trading JSC earned just VND55 billion ($2.35 million) in Q2, down 6%. The company said higher overheads and exchange rate fluctuations cost it over VND75 billion, eating into its profits.
The situation was no better for Century Synthetic Fiber Corporation that saw a fall of 2% in profit due to soaring financial costs. The costs ballooned from VND320 million to over VND15 billion, driving its profits down to VND69.4 billion ($2.97 million).
Hanoi Textile Garment JSC ran unprofitably as it incurred higher financial costs and elevated costs of sales. It made a loss of VND5.4 billion ($231,000) in Q2, a stark contrast to the profit of VND6.2 billion in the same period last year.
VITAS said the outlook of Vietnamese textile and garment is not very optimistic in H2 as the risk of Covid-19 resurgence is still high.
Besides, many of Vietnam’s commercial partners have been tightening up preventive measures against Covid-19, fuelling the situation.
Rising inflation in textile-importing countries, coupled with the prolonged Ukraine-Russia conflict, would continue to push up materials and fuel prices, adding around 25% to textile and garment firm bills and eroding their profits.
Securities firm SSI forecast that textile and apparel companies would fare worse financially in H2 and early 2023.
It is the case because rising costs, including labour, material and logistic costs, and the possible downturn of the U.S. economy, a major textile importer, are expected to wear away their earnings.
Another broker Viet Dragon Securities believed that textile demand would fall during the rest of year as consumers tighten their belts and cut back on non-essential products.
It forecast that domestic textile firms would have to compete more vigorously for input materials and sale contracts during the period. Big firms are more likely to fare better profit-wise since they have a solid customer base.