Tanners turn around on global price hikes

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The tannery industry in Bangladesh has overcome a pandemic-induced slowdown riding on price hike of leather and leather goods in the international market.

The industry insiders said most leather and leather goods exporting countries had to raise the prices of their products due to an increase in the costs of raw material and shipping.

But Bangladeshi exporters enjoyed a cost advantage because they had a big stock of raw materials and offered a competitive price to foreign brands.

In fiscal 2020-2021, the country's leather and leather goods exports rose 19% to $569.88 million; of which, leather export increased 21%, leather products 14%, and leather footwear 19%.

The positive trend of export still keeps going in the current fiscal year. In the July-September quarter, the total export by the tannery industry rose 21% to $271.34 million and it reached the pre-pandemic level.

But in fiscal 2019-20, the leather industry saw a 22% fall in exports due to the worldwide pandemic.

Md Saiful Islam, president of Leather Goods and Footwear Manufacturers and Exporters Association of Bangladesh, said, "Raw material prices and freight costs shoot up across the globe. But Bangladesh's export market was more competitive because we had raw material stock purchased at the previous prices."

"If this trend continues, we will be able to sustain 20% growth in the days ahead."

"However, we are far behind in the compliant issue. If we cannot ensure environmental compliant, it will affect our exports," he said.

Shaheen Ahamed, chairman of the Bangladesh Tanners Association, said, "We have not yet reached the pre-pandemic level. Orders are increasing as lockdowns in Europe have been lifted. Vietnam is a big market for us. Although orders have been low for so long, they are rising again now."

According to the World Footwear 2021 Yearbook, in 2020 Bangladesh was the 8th largest footwear producer and 9th largest consumer market.

The manufacturing industry in the Asian country is much orientated to the internal market with only 72 million pairs exported in 2020, making this the 16th largest exporter of footwear.

As per World Footwear data – the global footwear market size stood at $394.12 billion and China holds more than 60%.

The country's footwear export leader Apex Footwear Limited reported slight growth in revenue to Tk1,187 crore in the last fiscal year. Its net profit grew 67% to Tk10.53 crore.

In FY20, Apex Footwear's export fell by 29% due to the pandemic.

Syed Nasim Manzur, managing director of Apex Footwear, told The Business Standard, "We are satisfied with this growth as we are passing through a recovery period."

He said their export started to recover from the pandemic blues from April this year, and Apex would soon return to the pre-pandemic level business if the virus situation does not deteriorate.

"But we need to increase focus for new markets as the country mainly dependent on Europe and the US," he added.

Another 100% export-oriented footwear maker Fortune Shoes posted an 18% growth in sales in the last fiscal year, while its export dropped 23% in FY20.

Leather and leather goods manufacturer Apex Tannery incurred losses till March this year. But in the April-June quarter of FY21, it returned to profit as its exports increased.

Besides, the local market was badly affected by the pandemic as people faced restrictions on movement.

The branded local market leader Bata Shoe saw a 41% drop in sales in 2020. Now it has made a turnaround from the shock but is still behind in the pre-pandemic level.

In the January-June period of this year, its sales rose 97% to Tk400 crore, but still incurring losses due to its high operating cost.

The company said, in its financial report, the revenue increased in compared to the same period of last year due to the boost in sales and clear of aged merchandise by offering a bulk amount of discount to customers.

Industry players estimate that the size of Bangladesh's footwear market is Tk17,000 crore, where pairs of shoes sold each year are not fewer than 20 crore and may be up to 25 crore, according to an EBL Securities research. Besides, the market is growing at 12% each year.

According to the Dhaka Stock Exchange (DSE), six companies are listed from the tannery sector. On the recovering hope, Fortune Shoes' share price jumped 500%, Samata Leather 76%, Bata 67%, Legacy Footwear 49%, Apex Footwear 45%, and Apex Tannery 37% in the last six months.