KARACHI, Oct 30: Local producers of fabrics and clothes again appear worried this Eid over persistent rising market share of imported, smuggled, under-invoiced and misdeclared goods. According to leading textile producers, the share of these types of goods now stands over 50 per cent.

Foreign goods have gained additional prominence in the shops as compared to locally produced fabrics and clothes from last year. People get enchanted due to the price factor otherwise consumers are aware that the cheaper foreign goods lack durability and quality.

One of the significant aspects of this Eid is the presence of Chinese ready-made shalwar kamiz at Rs250-300 per suit. A leading producer of value-added fabric had already forecasted in last Eid-ul-fitr about the arrival of such suits.

Former vice chairman of All Pakistan Textile Mills Association (Aptma) and chairman taxation and fiscal matters, Mushtaq Vohra said that Chinese ready made shalwar kamiz can be purchased at 250-300 in the vicinity of Light House Area. The low price factor attracts the customers but these items are being dumped through illegal channels or being cleared through under invoicing and misdeclaration.

Some market elements are happy in bringing clothes from China and Far East at the rate of Rs10-12 per yards and selling them at exorbitant rates, he said.

Local producers of fabrics are trying every experience to maintain their market share. Some existing textile mills producers are rolling out new varieties of gents shalwar kamiz fabric with different names in order to change the habit of customers who have become accustomed to buying old brand names.

Vohra said that existing mills are bringing out new varieties under different names by changing brand names in order to lure customers. This trend of producing a parallel brand with a new name by existing mills has developed in the last one or two years.

He did not agree that fabrics are specifically coming from Far East, China and other countries.

The fabric is coming purely from China and retailers and shopkeepers are playing with innocent customers' curiosity by claiming the fabrics with different countries' name. By doing this, retailers succeed in selling their goods, he said.

Two years back there was an impression in the market that prices of fabrics, ready-made garments, clothes, etc., were not affordable. Today, every thing is available that suits your pocket. The entry of cheap smuggled and foreign fabrics has led to the opening of new textile mills whose two piece lawn suit is priced between Rs170-220 while the cotton suit is available at Rs250-350. High quality suits of known mills range between Rs450 and above. The demand of fabrics has increased this Eid on the back of flourishing economic activities, rising demand and improving liquidity position of the customers.

"In textile industries, where a lot of expansion is being done, shortage of skilled labour looms large these days," he said.

Director Sales of Al-Karam Textile Mills, Rafiq Ibrahim was also quick enough to reveal that Chinese ready-made shalwar kamiz has finally made the entry at price Rs250-300. He said that some market players have gone to China and ordered three patterns of small, medium and large sizes. These shalwar kamiz are available in the markets.

This is perhaps the notable thing of this Eid. Otherwise one should easily guage the presence of imported and smuggled goods, which are in abundance and selling side by side with local products, he said.

"I think the overall sales of goods will improve this Eid too as of last years as the markets have enough liquidity and purchasing power of consumers have improved," Rafiq, also chairman of Pakistan Yarn Merchants Association (PYMA), said.

However, sales of locally produced fabrics may not remain up to the mark in presence of cheap imported and smuggled items, which now enjoy over 50 per cent market share.

The influx of imported items has threatened the financial viability of local producers. He added that cheap Indian fabrics are being dumped at throw away prices and retailers are fleecing the consumers by charging the prices on their own as customers are now more interested in foreign goods' name instead of quality.

He claimed that the rates of locally produced fabrics have not increased despite rise in raw material and polyester fibre rates. In this situation, the local industry is trying hard to survive and is competing in a market which has become over-heated with the arrival of foreign goods. He said an Indian georget three piece suit does not worth more than Rs400-500 but it is being sold at Rs1,500-2,000.

President of MHG Group and leading producer of value added fabric, Majyd Aziz thinks that this year prices of fabrics and clothes are higher as compared to last Eid due to price hike in yarn.

This year local industry will again battle with smuggled and misdeclared fabrics arriving from China, Far East etc, thus posing a real threat to local industry.

He said there are reports about arrival of Chinese made shalwar kamiz and even shopkeepers and retailers of fabrics have become khepias and distributor of foreign fabrics.

Chinese fabric for trousers has captured 40 per cent market share while Chinese, Thailand and Indonesian made children garments virtually dominate 70 per cent market. In footwear, the market share of China is well over 90 per cent while foreign sweaters enjoy over 50 per cent share. Majyd said that local producers (known brands) can now be counted on fingers.

Analyst at Invest Cap, Khalid Iqbal Siddiqui tracks the results of around 30 textile companies, which include 15 spinning sector companies, 10 composite sector companies, and 5 weaving sector companies.

For the textile sector, overall, sales revenue grew by 26 per cent in third quarter 2004 against same period of last year. Gross profit, however, was down by 4 per cent as gross margin shrank from 13.1 per cent to 10 per cent.

Operating profit declined by 13 per cent, and even though financial charges were down by 15 per cent, net profit declined by 16 per cent, he said.

Spinning profits down on shrinking margins. The textile spinning sector suffered a hit on its profitability due to receding margins. Cotton prices were at record high levels during the cotton buying season for FY04, which seem to have hurt the textile spinners during third quarter 2004. Total revenue for the spinning sector during third quarter 04 grew by 25 per cent, however, gross profit fell by 28 per cent, which took gross margin from 12.8 per cent in third quarter 2003 to 7.4 per cent in third quarter 2004, he added.

At the operating level, profit dipped by 43 per cent, and the bottom-line for the sector receded by 56 per cent, as reduction in financial charges was a meagre 11 per cent this time around. The hit on spinning profits is expected to be a one-time item, as cotton prices have fallen by around one-third from the recent record highs and reduced raw material prices are expected to result in a better FY05 for spinning sector companies.

The textile weaving sector saw a handsome growth of 45 per cent in its sales revenue, and the sector even saw an increase of 14 per cent in its gross profit for third quarter 2004 despite margin having declined from 9.6 per cent in third quarter 2003 to 7.6 per cent in third quarter 2004.

The textile composite sector saw a jump of 23 per cent in its sales revenue in third quarter 2004 as compared to third quarter 2003. The sector's gross profit rose by 6 per cent, despite a dip in gross margin from 14.1 per cent to 12.3 per cent. At the operating level, the sector saw a 9 per cent growth in its profitability.