The fall in orders in the textile and clothing industry is already visible in the results of exports, which fell by 3% in value and 12% in quantity in February. But not alone. Import data also shows a decline of 8% in value and 17% in quantity, with a special emphasis on textiles. The industry speaks of a “worrying” situation, according to data from the most recent activity survey, with 57% of companies expecting production interruptions of up to 30% in the first quarter, and the prospect that the reality will remain the same until June. Mário Jorge Machado, president of the Textile and Clothing Association of Portugal (ATP), says the sector needs “public policies” such as moratoria and the return of fire simplified, to “cross the desert”.
The survey, conducted in early April, found that more than half of companies recorded a drop in sales in the first quarter, to 10% for 26% of respondents and 10 to 30% for 21% of companies. Yet there is still 7.6% who say they have registered a drop in turnover of more than 30%. For 20% of the respondents, business remained stable and there are 17% of companies with a turnover increase of up to 10% compared to the same period last year.
The drop in production affected 66% of companies, i.e. almost seven in ten respondents, with 27% having production cuts of up to 10%. With 10 to 30% less production, there are 30% companies and 9% even indicates a decrease of more than 30%. The proportion of those who recorded an increase in production of up to 10% is also 9%, and 21% of respondents had no increase or loss of orders between January and March.
Pessimism reigns
The outlook for the second quarter of the year is generally not much better. The expected production reduction of up to 30% covers 53% of companies and 20% say they expect the same as a year ago. On the other hand, those with breaks of more than 30% rise to 10.6% of the responses, and those who expect to increase their production by 10 to 30% are 12% of the respondents, three percentage points more than in the first quarter.
When asked about the main difficulties, 70% point to a lack of or reduction in orders and 51.5% to shrinking profit margins. Still, problems in hiring employees are in the top 3, with 29% of the answers, and finance problems and high energy prices occupy fourth place, both indicated by 24% of the respondents.
For Mário Jorge Machado, this is a purely cyclical situation, caused by the invasion of Ukraine and all the ensuing consequences, namely in terms of inflation, rising interest rates and loss of purchasing power of consumers, but throwing away those immediate measures, under penalty of everything.
sustainability helps
The person responsible ensures that the valences that caused the textile and clothing industry (ITV) to grow above 20% in the first half of 2022, thanks to a major commitment to sustainability issues, remain more than current. Especially because with the so-called digital passport, in the context of the amendment of the law that the European Commission is preparing, and with the change of mentality of consumers, who want to know where, how and with what resources the products they buy were produced, in terms of environmental and social aspects, “producing in Europe will increasingly be a competitive advantage for brands”, he believes.
But 2023 will be “a difficult year” and action must be taken now, he argues. “Companies that have ongoing investments and that are facing a sharp decline in activity will need help with a medium and long term gamble. You cannot throw the baby out with the bathwater, as this situation is only cyclical,” argues he. .
prevent bankruptcies
Convinced that, given the rise in interest rates, there will be industrialists who cannot continue to meet their obligations, the ATP requests moratoria or “a form of support from the Banco de Fomento, which can act as a guarantee in traditional banking so that it maintains support for businesses”. If that happens, he warns, bankruptcies and redundancies could follow, “which would be tragic” when the situation of the industry is structurally “very positive”, since the Portuguese factories, thanks to the investments they have made, are “one of the best prepared, globally, to capitalize on the growing demand for items produced in a sustainable and responsible manner.”
ATP, which will request an emergency meeting with the Ministry of Economic Affairs to disclose the situation, warns that the traditional layoff has “approval mechanisms that can take many weeks”, which is a problem for an industry that can go weeks without orders. “It’s an industry with a completely different flexibility than the others, which should also have different rules, because the last thing companies want is to lose their employees,” he guarantees.
The textile company has about six thousand companies, which employ more than 125 thousand employees.
Ilídia Pinto is a journalist for Dinheiro Vivo
Source: DN
