Though seacooking and garment companies had an impressive growth rate in export turnover in the first quarter of the year, they did not have good profits.  Some companies even incurred losses. The problem may become even more serious in the second quarter.

Export growth rate positive, profit negative

The Vietnam Textile and Apparel Association (Vinatas) has reported that the garment export turnover in the first quarter of 2011 reached 2.795 billion dollars, an increase of 28 percent over the same period of the last year. However, the turnover increase did not mean an increase in profit.

Pham Xuan Hong, Deputy Chair of Vitas, said garment companies have been put into a dilemma. Companies have many orders and the turnover from exports has been increasing steadily. However, the profits tend to decrease and some companies have anticipated losses due to the increasing prices of input materials. Hong called this an “unexpected tsunami”.

Kateford fabric, for example, which was priced at 32,000 dong per meter at the end of 2010, is now trading at 75,000 dong, an increase of 134 percent, while the price of cotton fabric has jumped from 16,000 dong to 40,000 dong, an increase of 150 percent.

According to Hong, clients only accept the 15 percent price increase at maximum, while the input costs, including bank loan interest rates, water and electricity, and transport costs, have increased by 22 percent in total. Besides, enterprises have to raise the average wage from 3.5 million dong to 4 million dong a month (+ 14 percent). Therefore, the profit decreases are foreseeable.

According to the Ministry of Industry and Trade, the turnover from seafood exports reached 1.1 billion dollars in the first quarter of the year. However, Nguyen Van Ky, General Director of Agifish said that some seafood companies will break even, but most of them will incur heavy losses.

In fact, Vietnamese exporters could not imagine such sharp increases in input material prices when they signed export contracts with partners last year. In September 2010, the tra fish price was 15,600-16,000 dong per kilo.

At that time, exporters believed that the sale prices at $2.8-2.9 per kilo would be high enough to bring profit, if the tra fish price increased by 30 cent (6300 dong per kilo) by early 2011. However, the tra fish has increased more sharply than expected to 27,000-28,000 dong per kilo, which means that enterprises need to export at 3.35-4 dollar per kilo to make a profit.

Situation will be more serious in Q2

Though they encountered big difficulties in the first quarter of 2011, enterprises still said that they were lucky because they still could prepare materials at the time when the prices were low. Meanwhile, fortune will not appear in the second quarter, and they anticipate that the situation will be even worse in the time to come.

Tran Van Linh, General Director of Thuan Phuoc Seafood and Trade Company in Da Nang City, said that the white leg shrimp markets are now open, especially in Japan, Europe and the US. However, it is very difficult to find materials to process at this moment. In late 2010, white leg shrimp was traded at 47,000-48,000 dong per kilo (100 shrimp per kilo), while the price has soared to 80,000 dong.

“We exported 14 million dollars worth of products in the first quarter of the year, but we did not make any profit,” Linh complained. “I have to allow 1/3 of workers to take a long leave, because we do not have materials to run factories”.

According to Linh, the biggest problem now is that his enterprise has to bear the pressure from the 14-15 percent production cost increase, and to move heaven and earth to seek materials, while importers will not accept higher product prices.

Hong said that his company still can make a profit of five percent. However, if he raises wages to ensure stable income for workers and the material prices increase by another five percent, the company would break even or incur a loss of 1-2 percent.

Tuyet Ngan