Online seminar

Dr. Truong Van Phuoc presented the Financial – Monetary trends in the last 6 months of 2024

Providing some information on financial-monetary trends in the last six months of 2024, Dr. Truong Van Phuoc stated that the FED focuses on three main indicators: inflation, unemployment rate, and GDP growth to make decisions about interest rates. In the context of the second estimate of US GDP growth in Q1, 2024 increased by only 1.3% annually, a decrease of 0.3% compared to the first estimate (1.6%) and significantly lower than that in Q4 2023 growth (3.4%), leading a decline in personal consumption, and inflation remaining around 3 �3.7%, etc. This could lead to the FED’s decision to cut interest rates earlier than planned in September 2024.

In Vietnam, the USD/VND exchange rate has increased by nearly 3.97% compared to the beginning of the year. However, if the FED cuts interest rates earlier than expected, the pressure on the USD/VND exchange rate will likely be eased. Dr. Truong Van Phuoc forecasts that by the end of 2024, the USD/VND exchange rate will increase by about 1%, fluctuating between VND25,700 and VND25,800.

According to Dr. Phuoc, although the national currencies of textile and garment exporting competitors have stabilized and are no longer being devalued as much as in 2022, some countries such as Mexico, Bangladesh, Turkey, and Indonesia may continue to devalue their currencies to increase competitiveness against Vietnamese textiles in the rest of 2024. Additionally, Dr. Phuoc predicts that the deposit interest rate of the VND, which is on an upward trend, will likely maintain at 6.5 �6.8%.

Concluding the seminar, Mr. Le Tien Truong, Chairman of the Board of Directors of Vinatex, stated that based on Dr. Truong Van Phuoc’s insights and the forecast information from the Group’s research department on financial and monetary market trends in the near future, member units need to calculate financial plans, capital sources, and bank loans for the business plan in the second half of 2024. Specifically, with the current USD/VND exchange rate, businesses need to consider appropriate conversion plans suitable for their business conditions.

Regarding the Japanese Yen, the JPY/USD exchange rate is likely to increase by about 10% by the end of the year, so orders from this market should be signed within a sufficient timeframe, not too far in advance, to respond to market fluctuations. For the US market, if long-term orders can be signed, businesses should take advantage of opportunities to secure orders.

However, to compete with other countries that might continue to devalue their local currencies, the “narrow path” for Vietnam’s textile and garment industry is high-end, technically sophisticated, and high-value products. At the same time, businesses need to tighten the quality and origin of products instead of chasing the output.

The residual value after the effort to “overcome the market storm”

We have discussed the difficulties of 2023 extensively. The challenges were identified quite early on, but these impacts still took the enterprises by surprise, leaving them unprepared for unprecedented situations. 

Continuous instability from global geopolitical conflicts, the unresolved Russia-Ukraine tension followed by the war between Israel and Hamas, conflict in the Red Sea, etc, has plunged the global economy into a prolonged crisis. This resulted in a more than 10% decrease in global demand for textiles and garments compared to 2022, with significant drops in purchasing power in major markets of Vietnam textile and garment industry. Low demand combined with extremely fierce price competition, as Vietnam’s interest rates are 2-3% higher than those of competing countries; the currencies of competitors depreciated significantly against the USD to boost exports, while the VND only depreciated by 5%. In addition, competition from China became increasingly intense as the Chinese government implemented numerous measures to support the textile-garment industry to recover after the pandemic.

In such a market situation, the global yarn industry has had a dismal year of losses. Vietnamese yarn enterprises’ selling prices were not enough to cover variable costs, and some companies have had to reduce production. The garment industry has seen a decrease in orders and prices of 30-50% compared to the previous year. Therefore, Vietnam’s textile and garment export turnover in 2023 reached only $39.6 billion, reduced by 11.3% compared to 2022 – this was the highest decline in 30 years of exporting, even during the Covid-19 pandemic or periods of regional or global economic crisis, textile and garment exports have never declined.

This Annual General Meeting Season is an opportunity for us to look back on the most challenging year in the Group’s history. Besides the damages to efficiency, alongside our efforts to fulfill the business plan, Vinatex and its member units – as a leading group in Vietnam’s textile-garment industry with over 60,000 employees – have always operated with a principle of balancing the interests between “employees, shareholders, and society.” The most significant achievements of 2023 include:

• Maintaining and stabilizing the workforce of nearly 62,000 people in Group 1 companies, reaching 97% compared to 2022, despite the difficult situation. To ensure employment for workers, and prioritize stabilizing the production force until the market recovers, businesses have to accept small orders with demanding technical requirements and tight delivery schedules at very low prices, reduce productivity, and not focus on efficiency. This demonstrates that Vinatex always prioritizes responsibility to society, and it is also an important strategy that enables the entire system to be ready to recover whenever favorable market signals emerge.
• The interests of workers are also taken care of. The average income across the Group reached VND 9.45 million/person/month, equivalent to 97.6% compared to 2022 and 94.9% compared to the 2023 plan.
• Although the business results did not meet the plan, enterprises in the system always prioritize the interests of the shareholders. Most units paid dividends equal to or higher than expected, only a few companies have lower dividend rates than planned business, mainly yarn companies with loss-making business results.
• The difficult decisions of 2023 were all “brave” decisions of the managers with the highest positions the Chairmen/CEOs of the businesses. We cannot maintain the production force and the management team if there is no “bravery” from the business leaders.

Leveraging the opportunity of 2024 – To regain what was lost

Although it is predicted that the difficult phase is not yet over, 2024 has shown positive signs from the market, stemming from more optimistic forecasts for global economic growth, with some central banks of major countries planning to cut interest rates by 0.75 to 1% from mid-2024. The domestic economic situation is also more favorable than in 2023, with Q1 GDP growing by 5.66% compared to the same period and higher than the growth rate of Q1 from 2020-2023; the total estimated export revenue reached $178 billion, increased by 15.5% compared to the same period.

The textile and garment industry also sees some support factors as the textile and garment demand in 2024 is forecasted to reach $717 billion, an increase of 5.6% compared to 2023; inventory levels of major brands have decreased compared to the same period; the implementation of some regulations related to green and sustainable production has slowed down due to the global economy not yet fully recovered. In addition, the Vietnamese textile and garment industry also has the potential to access better market opportunities, with less competitive pressure as competing countries have almost exhausted to continue depreciating their currencies to support exports and are unable to maintain their exchange rate advantage as they did in 2022-2023. At the same time, Vietnam also has the opportunity to capture orders diverted from other countries due to political-social instability, tightening of forced labor regulations, etc.

These signs are also evident in the first four months of the year, with profuse garment orders, although the processing price is still at a low level; in the yarn industry, although the selling price is still unprofitable due to weak demand and large fluctuations in raw material prices, these have shown a clear improvement in efficiency. The export revenue of Vietnam’s textile industry in Q1/2024 reached 9.4 billion USD, grew 9.2% compared to the same period in 2023.

Thus, it can be predicted that market opportunities are approaching, as well as the usual pattern of forming growth waves after a prolonged downturn. We should not be overly optimistic but need thorough preparations to receive and take full advantage of the opportunities if these forecasts become reality.

In the spirit of seeking truth at the shareholders’ meetings of member units, we should take a frank look at shortcomings and potential weaknesses to determine appropriate direction. These include:

• Management practices are not flexible enough, not fully utilizing all resources to optimize efficiency as well as cope with the continuous fluctuations of the market.
• Low ability to diversify products, mainly focusing on basic and traditional products.
• Lack of proactive market activities, limiting the ability to expand the customer data.
• Productivity and quality are not optimized and unstable.
• Connection in the production chain within the Group’s system is low. 

Direction and essential solutions

To control and improve the above shortcomings, the Group’s Executive Board has identified several key solutions that the entire system needs to focus on implementing in 2024:

• Effectively implementing the approved restructuring plan, reviewing inefficient investments, enhancing risk management, and thoroughly handling “hot spots”.
• Applying digital management across the whole system. Initially use the yarn management app for all yarn companies within the Group. Digital management will provide more flexibility in organizing production, meeting the continuous change requirements of customers, optimizing when producing small, fast-delivery orders
• Strengthening product R&D work, collaborating with research units, and technology partners, focusing on specialized products requiring high techniques to build the core products of the Group. For the units, improving the diversified product’s ability through research and application of technology, in-depth investment, and ensuring supervise to market requirements.
• Enhancing the role of the Business Production Departments in market development, obtaining orders that bring high efficiency, and focusing on reasonable coordination according to the advantages of each unit.
• Investing in key projects according to the approved strategy, in parallel with strengthening deep investment, prioritizing new technologies to increase productivity, reduce labor dependence, and reduce costs (electricity, energy…).
• Having a policy of using each other’s products among units in the Group, especially forming a closed production chain for some new specialty products like fire retardant fabrics, towelsâ€? as a foundation for system-wide chain linkage in the future.
• Practically competing in good production- high productivity, saving, improving the working environment for workers, enhancing the efficiency of production and business, and meeting the increasingly high and diverse needs of customers. Ensuring employment, actively caring for the material and spiritual life of the workers… 

Harmonized interests �Shared risks

2024 is the sprint year – the pivotal year of the 2020-2025 plan period and also the foundation for the new 2025-2030 period. More than ever, Vinatex needs the understanding and cooperation of the units in the Group, all the employees and the shareholders.

It is necessary to share with employees about the difficulties that the enterprise is facing to have mutual agreement with the medium- and long-term development strategy with visible harmonious benefits. Only then will the employees be ready to shoulder the heavy tasks ahead, willing to reduce benefits in the short term to aim for long-term stability and sustainable development, ready to fully exploit the capabilities of individuals and the collective to get through this extremely important period.

For shareholders, we hope for trust in strategic decisions, support for short-term investment decisions, and sharing of the difficulties that Vinatex and its member units are striving to overcome, with the sole desire to ensure benefits for all parties: sustainable development of the enterprise – workers have a stable and increasingly improved living conditions – shareholders achieve optimal investment efficiency.

Vietnam Nation Textile and Garment Group believes that 2024 will create the momentum for enterprises to gradually overcome the prolonged difficult period, stabilize at a new level, ready for the development pace of the next stage. ” Calamity is man’s true touchstone “, the recent market wave can somehow be considered “positive” when it helped us detect and improve existing shortcomings, creating conditions for enterprises to mature and continue steadfastly on the challenging road ahead to achieve the strategic goals set out.

 2024 Annual General Meeting of Vinatex

Overcoming difficulties, Vinatex completed the 2023 business plan

Mr. Cao Huu Hieu, General Director of Vinatex stated that 2023 was an unprecedentedly difficult year, with textile-garment export turnover decreasing by over 10% for the first time, and business efficiency on revenue being the lowest in the past 10 years. Unit prices of various products dropped by over 20% while input costs surged. In the face of these challenges, implementing the Board of Directors’ strategy, the Group’s Executive Committee has vigorously implemented a number of synchronous solutions: (1) Market research focused on evaluating, selecting customers and developing new customers: member units actively searched for and developed new markets to balance and reduce dependence on mainstream markets; Organizing monthly market workshops and regular seminars of the Yarn and Garment Manufacturing Teams to timely update information on the macroeconomy, textile and garment market, discuss appropriate business plans based on the actual context; (2) Innovating management platforms and digital transformation: Continued development and application of new management solutions to maximize the utilization of human resources across the Group to address issues beyond the capacity of a single enterprise, based on a centralized data platform and operating software systems being built and continuously improved for various fields, e.g. yarn production, finance and accounting, human resources management, etc. (3) Investment and development: Based on the recommendations of the Production and Business Departments and proposals from enterprises, the Group has continuously carried out in-depth investment and upgrading to ensure the automation, optimization to effectively exploit the existing production capacity system, at the same time forming new investment directions to ensure balance and connection of the production system in each unit and between units within the Group; (4) HR development: Focusing on tranning specialized HR to ensure the requirement of management in the context of science and technology development and the market fluctuations; developing succession staff; attracting and recruiting young and capable staff; (5) Research and development: Implemented research on technology, machinery, and trial production of new items such as filament core yarn and new blended yarns to flexibly meet the changing market demands; developing new markets for products with special features such as fire retardant, puncture resistance, and waterproofing.

The Group’s Board of Directors determines that in the short and medium term, the market will still contain many risks when Vietnam’s competitive advantages are weaker than other textile-garment manufacturing countries worldwide. In that context, in 2023, the Board of Directors of Vinatex organized 13 meetings, issued 22 Resolutions, and 4 Decisions with the following contents: (1) Strategy and investment: Developing Vinatex Restructuring Project for the period 2021-2025, with a vision to 2030; Approving investment projects at member units; Directing the divestment at units according to the approved restructuring project; Organizing the development of regulation system in the Group to ensure the operation of legal corridor. (2) Human Resources: Participating in the development and implementation of internal training activities within the Group; Coordinating with the Executive Board to organize the Human Resources Conference, and human resource management program at the units. (3) Market, risk management: Updating, analyzing, evaluating, and forecasting the global textile and garment market; regulations on new trends affecting the industry and macroeconomic factors; Identifying, warning risks, monitoring business results and quarterly inventories of major fashion brands that are customers of enterprises within Group; Closely coordinate with the Group’s Board of Supervisors to evaluate manufacturing activities and the capital representatives activities at the units.

The Board of Directors’s activities focus on several highlights: (1) Focusing on R&D, production of special and high-tech products, signing a cooperation agreement on manufacturing of fire-retardant fabrics with the Coats Group (UK) and will have the first export shipment to the US market in July 2024; Trial production of filament core yarn. (2) Market promotion and focusing on high-value-added products and shifting to meet new demands, compensating for the decline of traditional products: Introducing Phong Phu towels into the US market, preparing to build a towel production chain in the North (Ha Dong Textile and Nam Dinh Textile); Shifting to the blended fibers production with a high recycled component to meet market demand: average of over 25% in the Vinatex system (over 50% at Phu Bai Yarn). (3) Extending the supply chain towards a closed-loop supply chain: Yarn to the weaving & dyeing – Viet Thang reached 70% of yarn through weaving, 35% in Nam Dinh; connecting the yarn sector with domestic manufacturers (especially FDI); consolidating the weaving – dyeing industry to increase the use of grey fabric. (4) Digital transformation to enhance management efficiency: Complete basic digitalization at the Group’s Office and yarn sector; Cost management through digitalization data. (5) Taking human resources as the foundation for development: Phase 2 of the Young Talent program training; On-demand training for management staff at key units: Viet Thang, Phong Phu, Phu Bai, Natexco.

With synchronous and effective solutions, Vinatex has completed and surpassed the targets set by AGM 2023. Specifically, consolidated revenue reached VND 17,612 billion, equivalent to 106.7% of the plan, with the separate financial result reaching VND 2,008 billion, equivalent to 105.7% of the plan; Consolidated profit reached VND 538 billion, equivalent to 145.5% of the plan, with the separate financial result reaching VND 133 billion, equivalent to 102.9% of the plan.

Chairman of the Board of Directors of Vinatex, Mr. Le Tien Truong, shared that the common spirit of textile workers is always steadfast, united, brave, and creative in all situations. The efforts of the Group’s Executive Committee and member units during recent times are highly commendable because the decisions of the leaders are all crucial ones. The Board of Directors understands that the decisions of 2023 were all difficult. Most yarn and weaving enterprises had to sell below production cost. Without the bravery, passion for the job, and ultimate responsibility towards the enterprise they manage, just stopping production for 1-2 months would have made it impossible to achieve the business results of 2023. We need to maintain this spirit to overcome difficult periods and if any element is missing from the slogan “RESILIENT – BRAVE – UNITED – CREATIVE” it will also be an obstacle to achieve success.

Determined to achieve 5 key goals and tasks

The Vinatex leadership assessed that the market in 2024 is still full of uncertainties and unpredictable while signs of recovery from the market are not sustainable and risky. Therefore, Vinatex has set a target of consolidated revenue for 2024 of VND 17,900 billion, accounting for 101.63% of the same period, of which the revenue of the Holding Company is VND 2,070 billion, equivalent to 103.06% of the same period; Consolidated profit reached VND 550 billion, equivalent to 102.13% of the same period, profit of the Holding Company reached VND 150 billion, equivalent to 112.17% of the same period in 2023.

Setting out the missions throughout 2024, Mr Chairman clearly stated 5 key tasks including:

1. Closely following the Group’s development orientations in the medium and long term;
2. Frankly recognizing the position in the supply chain;
3. Transparency of difficulties and development opportunities;
4. Thoroughly analyzing market information and competitors to direct and manage;
5. Innovation, creativity, and flexibility in production to seize opportunities and adapt to the market.

At the same time, continue to implement 5 commitments including:

1. Implementing commitments and initiatives on environment, society, and corporate governance (ESG);
2. Participating in the supply chain with a firm position, being a preferred partner of major manufacturers and distributors in the world;
3. Continuously forecasting the market and providing adaptation solutions;
4. Building the strategic goal within the Group of ” One-stop destination for comprehensive textiles and fashion solution”;
5. Training staff to meet new market and technology requirements.

2024 Annual General Meeting of Vinatex

General Director Cao Huu Hieu stated that in 2024, the Vinatex Board of Directors’ Office will also focus on implementing a number of key tasks and solutions to improve productivity and product quality;  in-depth investment, technical innovation, and enhance production capacity based on existing infrastructure; strengthening the capacity of the garment industry in design and marketing to increase the proportion of high-value export goods such as OEM/FOB in total revenue; continuing research and development programs for new products like fire-retardant fabric, filament core yarn, and yarn and fabric with special features; accelerating the operation and implementation of digital transformation; completing and updating the risk management handbook to prevent and provide timely operational solutions, limiting risks for the Group and its member units; continuously updating regulations and mandatory requirements on sustainable development and green production to proactively apply into the manufacturing; monitoring the compliance of units regarding environmental protection, occupational safety and health, and carbon emission management.

Regarding the challenges of Vinatex as a labor-intensive enterprise, Mr. Pham Van Son �General Director of the Department of General Affairs, Commission for the Management of State Capital at Enterprises, highly appreciated the management results of the Board of Directors and the Executive Board of Vinatex in 2023. The state capital at Vinatex, managed by SCIC, was preserved, and a dividend of 3% was distributed, which was a success when many businesses struggled with an unfavorable market. As a labor-intensive Group, with social security responsibility for more than 62,000 direct employees of level 1 and over 150,000 employees of level 2, ensuring the living and income of employees with an average of nearly VND 9.5 million/person/month was one of the highlights of Vinatex in 2023.

“Many economic experts predict that 2024 and 2025 will still face many risks and unpredictable developments. Therefore, Vinatex needs to consolidate resources and build quick, efficient, and decisive policies to effectively implement the restructuring plan for the 2021-2025 period, orientation to 2030, and stabilize the living conditions and employment for employees through salary and income solutions. Most importantly, given the characteristic of the textile-garment industry where profits depend on labor productivity, this will be the guiding principle for Vinatex to propose to the Government regarding the salary mechanisms for management staff and employees,” Mr. Pham Van Son emphasized

Reporters

Translated from the article published in the May 2024 issue of Textile-Garment and Fashion Vietnam Magazine.