Denim makers slash output as demand fades

Denim makers led by Century Textiles are cutting production as demand for the product globally and in the local market dwindled.

Century Textiles today announced a reduction in half of its denim production at its Madhya Pradesh facility. The company has not stated for how long the unit will run on half its capacity, except saying that it is for the time being.

The cut in production is effective from February 1. The factory — Century Denim — which is located in Khargone district in the south western part of Madhya Pradesh, has a capacity of 20 million metres per annum.

“Our denim exports were hit more than the domestic market and it was not economical to run the unit at its full capacity,” R K Dalmia, president, Century Textiles and Industries, told Business Standard. “Input costs were rising and our realisation was down. As soon as the market bounces back, we will try to restore the production.”

Century Textiles, part of the B K Birla group, has been continuously coming up with dismal quarterly numbers with its textiles business denting the profitability. The quarter ended December saw the company’s net profit plunge by 68 per cent. The textiles segment alone posted a net loss of Rs 24 crore in the quarter.

When asked how long the “temporary” cutting down production will continue, Dalmia said, “it is hard to say.” He added that worldwide the demand for denim has slowed down and several denim manufacturers have cut their production. “We hope that with cuts, prices would improve,” Dalmia said.

Ahmedabad-based Aarvee Denims has reduced its capacity by 25 per cent as well. “Century is not an exclusive case. Almost everybody in the textile industry, especially denim players, have been cutting down their production in varied measures. We, for instance, have cut down production by around 25 per cent,” said Ashish Shah, managing director of Aarvee.

Instead of operating for seven days, the denim major has now shut down its unit by two days per week. “We now run our unit for five days, instead of the previous seven days. We have also cut down on our cotton consumption by 100 bales per day,” added Shah.

Not just the capacity, the company has also reduced prices of denim fabric by Rs 5-10 per metre. Currently, the fabric on an average is priced around Rs 88 per metre, said Shah. Echoing Shah’s opinion, Deepak Chiripal, chief executive officer of Nandan Exim, the denim arm of the Chiripal Group, had earlier told Business Standard, “No denim player would even think of expanding capacity by way of buying out others’ business. May be, a multinational company, interested in entering into the denim industry, might think of going for the offer.”

After much speculation, denim players have finally resigned to a continued oversupply in the market. While a bumper crop of cotton is likely to bring down prices of the commodities, the demand doesn’t seem to be lifting up, feel denim manufacturers.

Experts also opine that the reduced international cotton prices have not been much of respite since the supply has been quite low.