|
|
| Issue date:01/10/2007 |
| ATA Journal for Asia on Textile & Apparel - Oct 2007 Issue |
| Source:Journal for Asia on Textile & Apparel |
| by Michelle Phong |
|
| Established in 1997, the Hong Kong-based Pacific Textiles was recently listed on the Hong Kong Stock Exchange. Chief Executive Officer Bill Lam attributed the achievement to the management team's effort in adopting a scientific dyeing approach, which successfully positioned the company in a niche market of value-added warp knitted fabrics. |
 |
| Pacific Textiles is the first enterprise in China to adopt full-scale blind dyeing production, Bill Lam said |
|
|
|
Pacific Textiles provides an integrated range of services from knitting, dyeing, printing to finishing, with an annual production capacity of approximately 170 million pounds of garments, including men's, women's and children' clothing, sportswear, swimwear and intimate wear.
It mainly sells its fabrics to garment makers in China, Hong Kong, Sri Lanka and Southeastern Asia, which in turn trade their finished garments to brands across the United States, Japan and Europe, including Calvin Klein, Triumph, Uniqlo and VF Intimate.
With reference to the latest annual report of the company, it earned an annual sales revenue of HK$4,200 million for the financial year ended March 31, 2007, up 25% over the previous year, while the sales volume reached 154 million pounds during the FY2007, representing a 22% increase from a year ago.
Staying ahead of changes
In the 1980s, many textile manufacturers moved their plants from Hong Kong to Southern China in the mainland to take advantage of the low production costs and worker's wage there.
This has helped nurtured a group of top managers, who are Hong Kong people well-informed of the world market and experienced in running production plants in the mainland.
Pacific Textiles has its major production facility in Panyu, China |
Pacific Textiles, based in Panyu, Guangdong province in South China, is a relatively young company managed by four forward-looking textile professionals, namely Wan Wai-loi, Paul Tsang, Bill Lam and Dr Lam King-man.
Founders of Pacific Textiles |
They realized that the cost advantage of producing in China continued to diminish as the country's economy grew rapidly, especially in the 1990s. To stand out from competitors and win over customers, the company must rely on its uniqueness in products and services.
For Pacific Textiles, the unique products it offers to customers are fabrics dyed with the scientific approach of "blind dyeing". This is a nickname of right-first-time dyeing in the absence of a human dye master. "The approach was more common in the West back in the 1990s, and to my understanding, we pioneered in introducing it to China," explained Mr Lam.
The dyeing industry in China traditionally depends on workers who are called "dye masters" to judge the selection and portions of dyes based on their own experiences and their "art sense". Through years of trial and error, dye masters are able to monitor and manipulate the many variables in a dyeing process.
A dye master often tailors a color recipe of dyes and agents due to different lots or substrates using a "trial and error" approach — which Mr Lam called a "fire-fighting exercise". Other pre-treatments and post-treatments might also result in a slight change of color shades on the ending fabrics of garments, leading to re-dyeing.
The experienced management team of Pacific Textiles saw this on-going inconsistency in the dyeing process undermining the cost-effectiveness in production, as subjective impressions of dye masters were drawn upon and re-dyeing was quite common.
"In order to improve the production efficiency, we sought for a more scientific approach, namely 'blind dyeing'. We established a set of procedures to control and monitor varying parameters systemically, with the help of professional equipments including a digital eye to evaluate colors," said Mr Lam.
These parameters include all factors that can affect a dyeing process of a piece of fabrics and produce successfully the required color shades of clients.
This starts with a prescription of the color shade required in the laboratory to the reproduction of a required color shade 100% from laboratory to the full-scale production. However, variables such as different substrates and different lot(s) of dyes used in lab dip and in production may lead to color or effect problems. Other potential variables come from the plant environment, such as water quality to house-keeping skills of labor.
Ideal as it may seem, Mr Lam admitted there emerged difficulties during the initial stage of applying the new technique when the learning curve was steep.
"There was a miserable two-year initial phase before we started to benefit from the new approach. At one stage, one of our current top three customers had to say goodbye to us," he said.
With the academic background and empirical experience of Dr Lam King-man, Pacific Textiles was able to overcome the steep learning curve. Mr Bill Lam continued: "Thus, this is a breakthrough compared to the conventional approach with a dye master, which is still common among most dyeing houses in South China nowadays."
He said that Pacific Textiles was now able to control parameters effectively and that the use of scientific approach saved them from "fighting fires" in subsequent stages.
Even today, according to Mr Lam, this scientific approach is not popular among enterprises since it is mutually exclusive with the presence of a dye master.
He gladly claimed that their dyeing techniques had resulted in a high rate of color consistency in the dyed fabrics with a small percentage of reprocessing, leading to an improved efficiency.
Becoming a major supplier
Pacific Textiles has also become the third largest knitted fabrics manufacturer in China (in volume) among its peers listed in Hong Kong, supplying more than 3,000 designs and specifications of knitted fabrics to garment makers annually.
It sells the fabrics mainly to intermediate markets (garment makers) in China, Hong Kong (location of headquarters), Sri Lanka and Southeastern Asia. The prime market is the United States (70% in volume), followed by Japan (over 10%) and Europe (10%).
It also fosters relationships with owners of such brands as Calvin Klein, Triumph, Uniqlo, VF Intimate and Victoria's Secret.
Mr Lam underscored that the company was one of the most profitable enterprises in China. The profitability was measured in terms of earnings before interest, taxes, depreciation and amortization (EBITDA) and net profit margin. The EBITDA of Pacific Textiles reached 18%-21% with net profit margin between 12%-13.6% during the financial years of 2004 and 2006. This compared to the EBITDA of other similar enterprises listed in Hong Kong (with China facilities) from 7%-10% and their net profit margin range stood between 2.5% and 6.6% during 2004-2006.
With the above profit records, Pacific Textiles was popular among investors when it went public. Its Hong Kong public offer was 46 times over-subscribed. The company was officially listed on the Hong Kong Stock Exchange in May this year to raise a total capital of HK$18 million (note: US$1 equals around HK$7.8).
With reference to the latest annual report of the company, it earned a sales revenue of HK$4,200 million for the year ended March 31, 2007, up one quarter compared to the last financial year. Profit attributable to equity holders amounted to HK$555 million, representing an increase of 21% year-on-year.
Targeting higher-margin warp-knit fabrics
Mr Lam explained that the company positioned itself as a premium niche player manufacturing customized knitted fabrics for functional garments, womenswear with fancy design and/or added features.
In particular, it is the only sizable warp knit fabrics producer with printing capacity in the South China region.
"We have also extended our customer base by producing medium to highly sophisticated range of fabrics," he added.
With heavy investments in machinery, Pacific Textiles is able to produce premium fabrics for better margins (Pictured: a warp-knitting machine on the left and a flat screen printing machine) |
With its heavy investment in the German-made warp knitting systems at the Panyu facility in Guangdong province in 2005, Pacific Textiles became the only fabric producer among its Hong Kong peers to possess such capital-intensive equipments, which required a purpose-built facility.
The systems were used to manufacture synthetic-based fabrics for the end uses of sports wear, intimate wear and beachwear.
He revealed that the warp knitted fabrics represented promising growth opportunities and generated attractive margins. The integrated knitting, dyeing and printing facility had an existing floor space of over 294,000 square meters.
In the financial year of 2007 ended March, the production volume of the Panyu facility was 154 million pounds, up 27% from the previous financial year.
In order to accommodate the growing capacities, Pacific Textiles also expanded its energy capacity by building a cogeneration power plant. The water treatment capacity was doubled from 20,000 to 40,000 cubic meters per day in December 2006.
The use of water resources was further optimized by June 2007 after the completion of a new water recycling plant, which increased water recycling from 10% to 60%.
Extra capacity in Sri Lanka
In addition to the major facility in Panyu, Pacific Textiles has installed part of its capacity in Sri Lanka, considering the south Asian country a crucial location for garment manufacturing under the favorable trade arrangements with the European Union and United States.
Enjoying duty-free exports to the European Union under the EU's Generalised System of Tariff Preferences (GSP), Sri Lanka was the third largest market for Pacific Textiles, as a number of its major brand-owner customers employed garment manufacturers based in the country.
As a result, it acquired 52% interest in Textured Jersey Lanka (Private) Limited ("PT Sri Lanka") in late 2004 to improve its competitive position through geographic diversification.
Its production volume for the financial year of 2007 increased to 11 million pounds.
The company would double the production capacity of PT Sri Lanka after completion of the water treatment facility by December this year.
Strategic partners
To facilitate further developments, Pacific Textiles branched out to establish a number of strategic partnerships.
It joined hands with Fillattice, an Italian elastic and spandex warp knit fabric producer, to establish a 50/50 joint venture in 2006.
The Italian producer thus relocated part of its machines and transferred the technologies to Fillattice-Pacific entity in Panyu to produce special warp knit fabrics, using specific spandex supplied by Fillattice Group.
The fabrics are currently marketed under the Lineltex label, a trademark owned by Fillattice Group. The strategic alliance provides it with access to new markets and processing know-how while enabling Fillattice to maintain its cost competitiveness.
By cooperating with an Italian design house, Pacific Textiles is building up its design service |
Pacific Textiles has also recently partnered with an Italian design company, Pubblicentro to develop print designs.
"We are seeking to build up the design service capability to complement our manufacturing prowess, offering a one-stop shop service. This will help deepen our customer relationships and increase its sales of high value-added fabrics," he explained.
Aside from the manufacture of apparel textiles, the company sought to penetrate into the automotive textile sector.
The opportunity came in late 2005 when it acquired 33% interest in SPM Automotive Textile, a Japanese producer with operations in South China. It mainly supplied polyester warp knit fabrics for seats, upholstery, and carpets in a motor vehicle.
"Above all, the plant was close to downstream suppliers. It is one-hour drive away from Honda's production facility and half-an-hour drive from Toyota's," added Mr Lam, who expected to witness more profits from the strategic partnerships mentioned above by 2008.
|
| We are collecting readers' comment for improving our website. If you are willing to help, please CLICK HERE to complete a survey. Your comments matter. |
|
|
|
|
| Copyright © Adsale Publishing Limited. Any party needs to reprint any part of the content should get the written approval from Adsale Publishing Ltd and quote the source "ATA Journal for Asia on Textile & Apparel", Adsale Textile English Website - www.AdsaleATA.com. We reserve the right to take legal action against any party who reprints any part of this article without acknowledgement. For enquiry, please contact Editorial Department. |
|
| Copyright © Adsale Publishing Limited. Any party needs to reprint any part of the content should get the written approval from Adsale Publishing Ltd and quote the source "ATA Journal for Asia on Textile & Apparel", Adsale Textile English Website - www.AdsaleATA.com. We reserve the right to take legal action against any party who reprints any part of this article without acknowledgement. For enquiry, please contact Editorial Department. |
|
|
|
Close
|
|
|
Write a mail to the editor : 
