RMG backward linkage industry slumps again

After bouncing back slightly from last year's Covid-19 blows, the garment accessories manufacturing industry, also known as the backward linkage industry, is facing a downturn again as demand has fallen both in domestic and export markets.

The surge in infections during the second wave of the pandemic also led to a decline in business.

The industry grows by around 5-10% in normal times but companies now fear losses again after the minimal recovery from the first wave of the pandemic.

Md Abdul Kader Khan, president of Bangladesh Garments Accessories and Packaging Manufacturers and Exporters Association, told The Business Standard the overall business situation is not good as apparel exports have declined.

He said export-oriented local factories are the domestic buyers of accessories and their business fell after the novel coronavirus outbreak.

Raw material prices have gone up and competition among companies have increased, he said.

This is causing product prices to decrease but production cost is rising, he added.

Garment accessories include all kinds of cartons, polybags, hangers, elastic, drawstrings, backboards, neck boards, bar codes, swing tags, etc.

In the fiscal year 2019-20, Olympic Accessories, the manufacturer of all kinds of garment accessories, saw a 63.45% fall in revenue. The situation did not improve until the first nine months of the current fiscal year.

During this period, the company incurred losses of Tk5.66 crore, which was Tk7.23 crore during the same period of the previous fiscal year.

Moreover, it posted a 9% decline in revenue to Tk32.22 crore in this period from Tk35.35 crore during the same period of the previous financial year.

An official of the company said, "Due to the pandemic, orders declined as demand decreased. This was because buyers were also impacted by Covid-19. We usually manufacture products based on purchase orders."

Olympic Accessories supplies products to local garment factories as deemed exports.

The revenues and profits of its two other listed peer companies – KDS Accessories and SK Trims and Industries – also fell due to the pandemic.

KDS Accessories manufactures all types of cartons, buttons, and hangers and supplies products to Walmart, Tesco, and Decathlon. In the first nine months of this financial year, its net revenue and profit decreased by 3.6% and 3.49% respectively.

During this period, its net revenue stood at Tk155.18 crore, down from Tk160.98 crore in the same period last year, while net profit declined to Tk12.14 crore from Tk12.58 crore.

SK Trims and Industries, a 100% deemed export-oriented company which was listed on the stock exchanges in 2018, saw its net revenue and profit fall by 31% and 50% respectively in the first nine months of FY21 compared to the same period of the previous financial year.

During this period, its net revenue stood at Tk68.15 crore and profit Tk8.31 crore, which was Tk99.19 crore and Tk16.64 crore respectively in the same period of the previous fiscal year.