‘We are expanding denim capacity by 140%’ – CEO, Denim Intl

The denim fabric sector in Pakistan has recently seen a developmental stage and over the last few years, there has been a rapid growth and expansion in production capacity in the country. There has been a phenomenal increase in denim output in the last few years, with exports accounting for a major portion of the production.

However the rising prices of raw cotton which has more than doubled in the last one year, is creating major stumbling blocks and giving sleepless nights to denim producers as finished goods prices have not raised proportionately. These have taken a toll on their operating margins and in turn profit margins, too.

Denim International is a specialized producer of denim fabric, with a capacity of 10 million meters per annum. Its plant is located in Karachi and the plant occupies over 100,000 sq ft of covered space. It manufactures all types of 100% cotton as well as polyester and stretch denim fabrics.

The company has installed state-of-the–art technologies and the plant is equipped with high speed warping with electronic yarn sensors and tensioners to ensure superior quality. It has also chosen the latest technology in dyeing and sizing to achieve the best results and a weaving section with 70 Tsudakoma air-jet looms.

The company exports 60% of its produce, with the rest accounted for by the domestic market. Again out of which, a major portion is exported as clothing.

Fibre2fashion spoke exclusively to the young and energetic CEO of Denim International; Mr Reza Agha, who agreed to spare time from his busy schedule and spoke at length on his expansion plans, the current trends and the challenges faced by the denim fabric producing sector in Pakistan.

We began this very informative chat by asking him about his expansion plans, to which he replied by saying, “We are expanding our denim fabric output by 140% (14 million meters) which will help us reach a production of 24 million meters from 10 million meters per annum in July 2011.

“Currently we have 70 air-jet looms and we are adding 150 more rapier looms, along with which we are installing an Italian make rope dyeing machine with 24 ropes at an entirely new location. We are also contemplating setting up of a spinning plant to have an assured supply chain in place and also an apparel manufacturing plant in the near future”.

Next we asked him to comment on the current market for denim fabrics in Pakistan and abroad, to which he said, “The market was moving towards recovery in the beginning of 2010, but since the last quarter of 2010, we are facing very harsh times, due to rising prices coupled with shortage of raw cotton in the domestic market.

“The shortage has mainly happened as the Indian cotton exporters who had booked our orders in advance, later they did not supply the same, mainly as the Indian government had put a cap on cotton exports as well as the fact that, exporters could not ship the cotton bales in time before the deadline date set by India.

“The government of India had put a cap on exports of cotton and yarn to help its textile industry in accessing raw material requirements and we hope that the Pakistani government also promulgates the same type of policy to help our textile sector, as Pakistani cotton and yarn exports have surged in the last two years.

“This in turn is affecting the competitiveness of our textile sector as yarn prices too have shot through the roof and has helped countries like Bangladesh and India to grab our share of the global business of denim fabrics and clothing”.

When quizzed about as to what extent the rising cost of cotton has affected his company, he replied by saying, “Our export order position has fallen quite much, so we are now supplying a major quantity of our production in the local markets, which manufacture denim products for the domestic and export markets.

“In the preceding years, we had a competitive edge in the global denim markets, however, as of date; it is cheaper for an overseas buyer to import from India than from Pakistan”.

Speaking about reduced margins, he said, “Till the middle of 2010, we were operating at comfortable margins, but now our margins have gone down drastically and I am myself not sure for how long this trend is going to last. Salaries, gas and electricity charges too have risen in tandem and we have had to sacrifice our margins to keep our plants running, as denim fabric prices have not increased proportionately”.

Informing about the product range produced by his company, Mr Reza said, “We produce most of the varieties of denim as ordered by our buyers, but most of our output compromises of a blend of 98% cotton and 2% lycra. Other than that, we also produce cotton/polyester blends and stretch denim fabrics as per the requirements of our buyers”.

Visualizing the future trends of denim fabrics in the global markets, he enlightened us by saying, “The future trends are very bright and I expect the production of denim to shift to the sub-continent. However, I am pessimistic of the fact that Pakistan could get left behind if nobody helps us with the challenges posed by the cotton crisis.

“The biggest setback has come from the European Union which had permitted exports of textile products duty-free in to the EU. The same was supposed to begin from January, but now it has got delayed till March 2011. The most to be affected will be the weaving sector as it will bear the brunt if the EU concessions do not come through even in March.

“Like in India or China, which has a huge population and also has a culture where everybody wears denim jeans, Pakistan on the other hand is a small country and people prefer to wear traditional dresses. So, we have no alternative, but to depend on export markets. To make matters worse, Turkey, one of our major markets, has now imposed anti-dumping duty on our textile products”.

To conclude, he was optimistic that the Indian government would help the Pakistani textile sector in sourcing cotton from India, which in turn would give some breathing space to value-added producers like Denim International, till the next cotton crop arrives in the market.