Harmonizing the interests of shareholders, employees, and society

Vinatex and its member units are currently in the 2024 Annual General Meeting season. As of now, most of the companies have concluded their Meetings. Although the majority did not achieve their expected business results in 2023, they have all agreed to set ambitious plans for 2024, demonstrating their determination to seize the opportunities of 2024 – the pivotal year of the 2020-2025 term, to recover and regain losses in 2023.

The residual value after the effort to “overcome the market storm”

We have discussed the difficulties of 2023 extensively. The challenges were identified quite early on, but these impacts still took the enterprises by surprise, leaving them unprepared for unprecedented situations. 

Continuous instability from global geopolitical conflicts, the unresolved Russia-Ukraine tension followed by the war between Israel and Hamas, conflict in the Red Sea, etc, has plunged the global economy into a prolonged crisis. This resulted in a more than 10% decrease in global demand for textiles and garments compared to 2022, with significant drops in purchasing power in major markets of Vietnam textile and garment industry. Low demand combined with extremely fierce price competition, as Vietnam’s interest rates are 2-3% higher than those of competing countries; the currencies of competitors depreciated significantly against the USD to boost exports, while the VND only depreciated by 5%. In addition, competition from China became increasingly intense as the Chinese government implemented numerous measures to support the textile-garment industry to recover after the pandemic.

In such a market situation, the global yarn industry has had a dismal year of losses. Vietnamese yarn enterprises’ selling prices were not enough to cover variable costs, and some companies have had to reduce production. The garment industry has seen a decrease in orders and prices of 30-50% compared to the previous year. Therefore, Vietnam’s textile and garment export turnover in 2023 reached only $39.6 billion, reduced by 11.3% compared to 2022 – this was the highest decline in 30 years of exporting, even during the Covid-19 pandemic or periods of regional or global economic crisis, textile and garment exports have never declined.

This Annual General Meeting Season is an opportunity for us to look back on the most challenging year in the Group’s history. Besides the damages to efficiency, alongside our efforts to fulfill the business plan, Vinatex and its member units – as a leading group in Vietnam’s textile-garment industry with over 60,000 employees – have always operated with a principle of balancing the interests between “employees, shareholders, and society.” The most significant achievements of 2023 include:

• Maintaining and stabilizing the workforce of nearly 62,000 people in Group 1 companies, reaching 97% compared to 2022, despite the difficult situation. To ensure employment for workers, and prioritize stabilizing the production force until the market recovers, businesses have to accept small orders with demanding technical requirements and tight delivery schedules at very low prices, reduce productivity, and not focus on efficiency. This demonstrates that Vinatex always prioritizes responsibility to society, and it is also an important strategy that enables the entire system to be ready to recover whenever favorable market signals emerge.
• The interests of workers are also taken care of. The average income across the Group reached VND 9.45 million/person/month, equivalent to 97.6% compared to 2022 and 94.9% compared to the 2023 plan.
• Although the business results did not meet the plan, enterprises in the system always prioritize the interests of the shareholders. Most units paid dividends equal to or higher than expected, only a few companies have lower dividend rates than planned business, mainly yarn companies with loss-making business results.
• The difficult decisions of 2023 were all “brave” decisions of the managers with the highest positions the Chairmen/CEOs of the businesses. We cannot maintain the production force and the management team if there is no “bravery” from the business leaders.

Leveraging the opportunity of 2024 – To regain what was lost

Although it is predicted that the difficult phase is not yet over, 2024 has shown positive signs from the market, stemming from more optimistic forecasts for global economic growth, with some central banks of major countries planning to cut interest rates by 0.75 to 1% from mid-2024. The domestic economic situation is also more favorable than in 2023, with Q1 GDP growing by 5.66% compared to the same period and higher than the growth rate of Q1 from 2020-2023; the total estimated export revenue reached $178 billion, increased by 15.5% compared to the same period.

The textile and garment industry also sees some support factors as the textile and garment demand in 2024 is forecasted to reach $717 billion, an increase of 5.6% compared to 2023; inventory levels of major brands have decreased compared to the same period; the implementation of some regulations related to green and sustainable production has slowed down due to the global economy not yet fully recovered. In addition, the Vietnamese textile and garment industry also has the potential to access better market opportunities, with less competitive pressure as competing countries have almost exhausted to continue depreciating their currencies to support exports and are unable to maintain their exchange rate advantage as they did in 2022-2023. At the same time, Vietnam also has the opportunity to capture orders diverted from other countries due to political-social instability, tightening of forced labor regulations, etc.

These signs are also evident in the first four months of the year, with profuse garment orders, although the processing price is still at a low level; in the yarn industry, although the selling price is still unprofitable due to weak demand and large fluctuations in raw material prices, these have shown a clear improvement in efficiency. The export revenue of Vietnam’s textile industry in Q1/2024 reached 9.4 billion USD, grew 9.2% compared to the same period in 2023.

Thus, it can be predicted that market opportunities are approaching, as well as the usual pattern of forming growth waves after a prolonged downturn. We should not be overly optimistic but need thorough preparations to receive and take full advantage of the opportunities if these forecasts become reality.

In the spirit of seeking truth at the shareholders’ meetings of member units, we should take a frank look at shortcomings and potential weaknesses to determine appropriate direction. These include:

• Management practices are not flexible enough, not fully utilizing all resources to optimize efficiency as well as cope with the continuous fluctuations of the market.
• Low ability to diversify products, mainly focusing on basic and traditional products.
• Lack of proactive market activities, limiting the ability to expand the customer data.
• Productivity and quality are not optimized and unstable.
• Connection in the production chain within the Group’s system is low. 

Direction and essential solutions

To control and improve the above shortcomings, the Group’s Executive Board has identified several key solutions that the entire system needs to focus on implementing in 2024:

• Effectively implementing the approved restructuring plan, reviewing inefficient investments, enhancing risk management, and thoroughly handling “hot spots”.
• Applying digital management across the whole system. Initially use the yarn management app for all yarn companies within the Group. Digital management will provide more flexibility in organizing production, meeting the continuous change requirements of customers, optimizing when producing small, fast-delivery orders
• Strengthening product R&D work, collaborating with research units, and technology partners, focusing on specialized products requiring high techniques to build the core products of the Group. For the units, improving the diversified product’s ability through research and application of technology, in-depth investment, and ensuring supervise to market requirements.
• Enhancing the role of the Business Production Departments in market development, obtaining orders that bring high efficiency, and focusing on reasonable coordination according to the advantages of each unit.
• Investing in key projects according to the approved strategy, in parallel with strengthening deep investment, prioritizing new technologies to increase productivity, reduce labor dependence, and reduce costs (electricity, energy…).
• Having a policy of using each other’s products among units in the Group, especially forming a closed production chain for some new specialty products like fire retardant fabrics, towels…, as a foundation for system-wide chain linkage in the future.
• Practically competing in good production- high productivity, saving, improving the working environment for workers, enhancing the efficiency of production and business, and meeting the increasingly high and diverse needs of customers. Ensuring employment, actively caring for the material and spiritual life of the workers… 

Harmonized interests – Shared risks

2024 is the sprint year – the pivotal year of the 2020-2025 plan period and also the foundation for the new 2025-2030 period. More than ever, Vinatex needs the understanding and cooperation of the units in the Group, all the employees and the shareholders.

It is necessary to share with employees about the difficulties that the enterprise is facing to have mutual agreement with the medium- and long-term development strategy with visible harmonious benefits. Only then will the employees be ready to shoulder the heavy tasks ahead, willing to reduce benefits in the short term to aim for long-term stability and sustainable development, ready to fully exploit the capabilities of individuals and the collective to get through this extremely important period.

For shareholders, we hope for trust in strategic decisions, support for short-term investment decisions, and sharing of the difficulties that Vinatex and its member units are striving to overcome, with the sole desire to ensure benefits for all parties: sustainable development of the enterprise – workers have a stable and increasingly improved living conditions – shareholders achieve optimal investment efficiency.

Vietnam Nation Textile and Garment Group believes that 2024 will create the momentum for enterprises to gradually overcome the prolonged difficult period, stabilize at a new level, ready for the development pace of the next stage. ” Calamity is man’s true touchstone “, the recent market wave can somehow be considered “positive” when it helped us detect and improve existing shortcomings, creating conditions for enterprises to mature and continue steadfastly on the challenging road ahead to achieve the strategic goals set out.