Shifting consumer preferences cheer polyester makers
The marked improvement in the profitability of polyestermakers has come at the cost of thousands of spinning mills, many of which fear closure due to the sustained decline in cotton yarn and a significant change in consumer preferences.
The Cotton Textile Export Promotion Council (Texprocil), the apex industrial body of the sector, showed a 38.8 per cent decline in the value of India’s cotton yarn exports, at $1.28 billion for the period between July and September 2019, from $2.09 billion in the corresponding period last year. Cotton yarn exports have been steadily declining month after month this year, even by volume, from 90 million kg (mkg) in April to 67 mkg in September.
Problems for spinning mills were aggravated with lukewarm domestic demand. The ongoing economic slowdown and rural distress have worsened demand of textile and other products in the value chain. “Exports of cotton yarn have registered a negative growth since April this year, which is a matter of deep concern. Many of the spinning mills are on the verge of closure, which may cause unemployment,” said K V Srinivasan, chairman, Texprocil.
By contrast, the demand of polyester yarn and fabric has increased as these products are much cheaper than cotton. Industry sources estimate polyester to be 40-50 per cent cheaper than cotton across all variants. With crude oil prices moving in a narrow range, polyester makers plan their business for long term and invest in plant and machinery in anticipation on a rapidlychanging consumer preference for polyester blended fabric.
“The profitability of Indian polyester yarn manufacturers has been growing steadily. This is primarily on account of the rise in consumption of synthetic yarns across the world, as compared to natural fibres. Moreover, cost competitiveness of Indian manufacturers has been better than that of northeast Asia manufacturers, which has resulted in better operating margins and profitability,” said Madhusudan Bhagaria, chairman and managing director, Filatex India (FIL), one of India’s largest makers of polyester yarn. FIL has seen improvement in its financial performance over the past three years, led by better volume growth and operational efficiency measures. FIL reported a CAGR of 48.42 in its net profit to ~85 crore in 2018-19, from ~26 crore in 2015-16. Bhilosa Industries, second largest polyester yarn manufacturing firm, saw its Ebitda and profit after tax rise by 13 per cent and 21 per cent, respectively, during the period.