Second quarter to be tougher for spinning industry

While spinning companies posted healthy bottomline as compared to their peers in the textile value chain for Q1 of current fiscal due to rising yarn prices, demand for cotton yarn has begun to dwindle.

The industry fears tough demand and pricing condition in coming months.

"There is a recovery in the cotton yarn vertical. Spinning companies and integrated textile companies with good yarn businesses have done well in the first quarter of the current fiscal. While cotton yarn prices rose, cotton prices declined leaving spinning companies in a better position than last year. However, the coming months are uncertain," said DK Nair, secretary general of Confederation of Indian Textile Industry (CITI).

Spinning companies like Vardhman Textiles, Nahar Spinning and Nitin Spinners posted profits for Q1 of fiscal 2012-13 as against losses in the corresponding quarter last year.

Vardhman Textiles, for instance, saw its Rs 43.08 crore loss in Q1 of fiscal 2011-12 turn into a profit of Rs 54.89 crore in June quarter of this fiscal. However, according to Nair, it is the subduing demand of garments and apparel that is a cause of worry.

"Second quarter may not be as good as first quarter this year. There are uncertainties regarding demand for garments which might impact the spinning industry in the coming months," Nair added.

In recent times, cotton prices have risen Rs 32,000 per candy to Rs 38,000 per candy which could impact yarn makers in terms of input costs. "Many spinners who suffered last year did well in the first quarter of the current year. It is only those who carried extensive cotton were in problem. For quite sometime, cotton prices have been low except recently. But in last one month, spinners have lost prices which may show in the second quarter results soon," said PR Roy senior textile consultant.

Worse still, the garment industry doesn't seem to expecting any turnaround for now.

"As it is the markets have been low in the entire value chain barring a few. We fear if the spinning industry is doing well, it may raise prices further. If the raw materials keep going up, slowdown in apparel will get worse," said Rahul Mehta, president of Clothing Manufacturers Association of India (CMAI).

The apparel industry is not only facing slowdown in demand on the domestic front but also in exports. Due to poor demand in the US and European markets, India's garment exports declined from $ 1.2 billion in June last year to $ 1.1 billion in June this year.