Challenges surround garment enterprises
Textile and garment firms have been through a roller coaster ride, with profits going up in the first half
Amazon's "punch" on two Vietnamese textile companies caused a serious decline in the production business of enterprises, leading to a wave of forced staff reductions.
According to the domestic press, after the controversy Gilimex sued Amazon, this business reported a loss of nearly 39 billion dongs, the highest in the company's listing history.
Meanwhile, partner Garmex Saigon - a large textile and garment export enterprise in Ho Chi Minh City - also reported a more than 33 billion dongs loss in the second quarter and laid off more than 2,000 employees.
Garmex lays off more than 2,000 workers.
Garmex Saigon Joint Stock Company (code GMC) announced its consolidated financial statements for the second quarter of 2023 with very poor results.
According to the report, revenue in the first 6 months of GMC was just over 8 billion dong, down 97% compared to last year.
In addition, the financial income also decreased from nearly 12 billion dongs last year to 2.1 billion dongs this year.
In the first 6 months of 2023, Garmex Saigon reported a loss of 33 billion dongs, while in the same period last year, this famous textile and garment enterprise in Ho Chi Minh City also made a profit of more than 4 billion dongs. As of June 30, Garmex accumulated more than 54 billion dongs in losses.
All kinds of selling, corporate management, and finance costs have been reduced and reduced sharply by Garmex Saigon.
According to Garmex Saigon General Director Nguyen Minh Hang, the negative post-pandemic impact and political fluctuations in the world will cause global economic growth to continue to decline in 2023.
The textile and garment industry - accordingly - is also affected by declining orders, especially in key markets such as the United States and Europe.
On the other hand, one of the important reasons for Garmex's serious decline in production business comes from the need for more revenue from its partner, Binh Thanh Import-Export Production and Trading Joint Stock Company (Gilimex).
Accordingly, in the first 6 months of 2022, Garmex had a revenue of nearly 224 billion dong from supplying orders to Gilimex, but this year, this amount is no longer available.
According to Market Life, this could be a "follow-up" after Gilimex filed a lawsuit against the world's largest e-commerce giant, Amazon.
This bold but risky decision not only "deals" heavy blows to Gilimex itself but also negatively affects other partners in the industry, such as Garmex Saigon itself.
According to Ms. Hang, Garmex Saigon has rebalanced its personnel to suit the new situation to reduce the cost burden.
In particular, this business has reduced 98% of its employees. According to the report, as of June 30, 2023, the total number of Garmex employees was 41, a decrease of 2,060 compared to the beginning of the year. From the beginning of 2021, Garmex has cut 3,769 jobs.
Additionally, in the first half of this year, Garmex's personnel costs decreased by 77% over the same period, from more than 31 billion dong to 7 billion dong.
How is Gilimex doing?
For Binh Thanh Import-Export Production Trading Joint Stock Company (Gilimex - Code: GIL), in the first quarter of this year, the company announced a loss of nearly 39 billion dong, the highest in the listing history of GIL.
For 2023, Gilimex sets a revenue target of VND 1,500 billion, profit before tax at about VND 103.5 billion, down 77% compared to 2022.
The reason for the decline in the business plan was none other than Amazon's sudden cut in orders from the Vietnamese company.
As Sputnik mentioned, at the end of 2022, Gilimex attracted public attention when conducting proceedings to sue Amazon for compensation of $ 280 million for suddenly "turning the car" and narrowing orders, causing Gilimex to suffer the excess production capacity situation as well as imported raw materials.
Gilimex was Amazon's main partner from 2014 to 2022. And to carry out orders for Amazon, Gilimex had to turn down IKEA and Columbia Sportswear.
After signing a contract with Amazon, Gilimex also had to spend tens of millions to invest in manufacturing facilities, building steel and fabric storage tanks to organize inventory in Amazon's warehouse. The company even employs more than 7,000 employees at multiple factories to produce more than 1 million storage units annually for Amazon.
In addition, to meet Amazon's needs during the pandemic, Gilimex had to relocate production and packaging facilities to continue production amid the Covid-19 outbreak and epidemic prevention measures. Government diseases are constantly changing.
Gilimex had hoped for a long-term agreement with Amazon and a guarantee of transparency, but in April 2022, after the demand for online shopping weakened, Amazon's side immediately changed and cut orders down to just a fraction.
Vietnamese company still pursuing Amazon lawsuit.
At the shareholders meeting at the end of April, Gilimex informed that the lawsuit will continue with the next steps.
Business leaders also stated that the goal of Gilimex's Board of Directors and Board of Directors this year is to resolve the inventory and the lawsuit against Amazon completely.
The sudden blow when "Amazon turned the car" caused Gilimex's business index to plummet. Last year, in 2022, Gilimex only recorded a pre-tax profit of VND 458.9 billion. This year, the company expects many large potential customers worldwide to replace Amazon, replenish orders for existing customers and grow to full capacity.
Gilimex focuses on expanding to find large customers, M7A opportunities in the industry to increase capacity, actively investing in raw materials, and combining time optimization and reasonable investment value.
In 2022, the company invested 126 billion VND to contribute capital to My Khang Investment JSC and Hung Khang Real Estate JSC. Therefore, this year, this unit is trying to promote the industrial real estate segment and will start to record revenue in 2023-2025.
Closing today's trading session on July 27, GIL stock dropped to VND 30,700/share, while GMC of Garmex Saigon JSC was anchored at only VND 10,000/share.
