Employment losses and closures that started last year in textile and ready-made clothing, one of the locomotive sectors of Turkish industry and exports, have reached their peak. In the first quarter of this year, nearly 10 percent of the total concordats were realized only in the textile sector. When other categories such as clothing, carpet and yarn were added to this figure, the rate increased to 15 percent. On the other hand, according to the data, textiles, which ranked second amongst the sectors with the most concordat declared last year, moved first place this year. The textile sector was followed by construction, furniture and agriculture. Amongst the sectors with the highest concordat risk, Textiles rank 2nd with 195 companies. Finally, while a bankruptcy decision was made for Rof Tekstil in March, a temporary suspension decision was also given for CNC Tekstil, Durtaş Tekstil, Hazar Tekstil and MSA Tekstil. Commenting on the news prepared by Yener Karadeniz from Ekonomi newspaper, representatives of the textile and ready-made clothing sectors expect the closures and employment losses, which are expected to continue until the end of the first half, to bottom out as of the last quarter of the year.
Business people stated that Turkey's largest chambers whom are working to ensure that receivables in the concordat should cover public and bank receivables instead of companies, and emphasized that otherwise, a domino effect and concordat wind will be dominant.
According to the Social Security Institution (SGK) data, 646 companies in the textile sector terminated their activities in the whole of 2023, with an employment loss of 87 thousand people. In clothing, the number of companies closed exceeded 2 thousand with the employment loss recorded as 111 thousand. The number of companies operating in the two sectors decreased from 64 thousand to 60 thousand 249 as of January with the employment loss approached 200 thousand. Employment in the sector, which was 1 million 25 thousand at the end of 2023, continued to decrease in January as well and recorded as 1 million 7 thousand 547. Industry representatives stated that this figure dropped below 1 million with the employment outflows in February and March, and further stated that with the recovery in the second half, there will be an increase in employment again in the last quarter.
Non-Performing Loans Reached 1 Billion TL
The development shown itself also in the increase in the amount of non-performing loans in the sector. According to the data of the Banking Regulation and Supervision Agency, the amount of loans under non-performing, which was at the level of 5 billion TL in the textile and textile products category in January last year, increased by 18.7 percent to 5 billion 961 million TL in February this year. Thus, the amount of loans under non-performing in the sector increased by 943 million TL in a 1-year period.
Capacity utilization rates have bottomed out. Capacity utilization rates announced by the Central Bank had bottomed out in January this year with 69.5 percent in textiles and 74.7 percent in clothing. The rate in question was recorded as the lowest level of the last 8 months for textiles and the lowest level of the last 2.5 years for ready-made clothing. However, signs of recovery have begun to be observed in two sectors in the last two months. As of March, capacity utilization rates in textiles increased to 71.8 percent with the similar trend in clothing recorded as 75.4 percent. Another trusted database, the Istanbul Chamber of Industry Turkey Sectoral PMI Survey, does not reveal a positive outlook for the coming period. According to the February 2024 data of the survey, the most significant decrease in employment realized in clothing and leather products and textiles, which were both at the same rate. February PMI data indicated that the loss of momentum in new orders of Turkish textile companies continued. Although the decline slowed down compared to January, high trend maintained. While the decrease in production slowed down, the contraction in employment occurred at a higher rate. In clothing, although production PMI continued to decrease in February, the decrease slowed down compared to the previous month. This situation also applies to new orders. Employment and purchasing activities continued to decline, but the decline in employment was at its lowest rate of the last seven months.
''Garment and Ready-to-Wear Exports May Remain 5-10% Below of Last Year''
Reminding that apparel exports fell by 8.6% in the January-February period this year, Ramazan Kaya, President of the Turkish Clothing Manufacturers Association (TGSD), said; “European buyers have started to become more active in Turkey. For this reason, March will follow a little more balanced path." Reminding that demand decreased in the past period, Kaya said, “Brands put the brakes on and reduced their purchase quantities. The reason was lack of demand and stock. These stocks are melting. We think that demand will increase in the last quarter with the effect of the beginning of normalization in the economies. The most important problem during this period was not being able to hold the price due to costs. Since we cannot reduce these costs, we are working to move from basic businesses to value-added enterprises. Like more designs, collections, R&D and projects... Already entry-level brands have turned into competitors. We also focus on the middle and upper segment. Recently, we have been working with more boutique and medium-sized brands. We are in the midst of change and transformation." Kaya predicted that garment exports may remain 5-10 percent below of last year.
Companies Without Financial Power Will Go Bankrupt
Şeref Fayat, President of TOBB Ready-Made Clothing and Apparel Sector Assembly, stated that some movement has started in the EU PMI index on the export side and said, "Due to the problems experienced in the Red Sea and the decrease in the stocks of the brands in the last month, we are entering a period gradually inwhich exports are dealing tremendously with market prices and even the middle-upper segment are entitled to receiving orders. Eventhough the export exchange rate was not at the desired level, an improvement noticed in demand. These orders are reaching a point where they can benefit us in the second half of the year." However, Fayat explained that this process will also be a period in which companies without financial strength will be suspended and continued as follows; “As we know that domestic demand will be further reduced, the process in the concordat side will continue. Employment losses will continue until the end of the first half. Consolidation continues. Currently, companies are selling at cost or even at a loss. We cannot increase the price. But as we continue to receive orders in the middle and upper segments, we will enter a period in which the losses will end and then we will start making money."
"We Made a Bottom, From Now on the Direction is Up"
Ahmet Öksüz, President of Istanbul Textile and Raw Materials Exporters Association (İTHİB), reminded that 4-5 years ago, celebrating exceeding the 1 million employment limit in two sectors and said, “Now we are back to 4-5 years ago. I believe that we now have bottomed out and there will be an upward trend from now on. Of course, the course of the economy and the increase in exchange rates are also important. It has been a little better for a month now, as demand can be seen. However, employment is a big problem. Not only are companies laying off employees, employees are also taking their own leave." Stating that one of the most important reasons for this outlook is the inability to hold prices due to costs, Öksüz said, “There are people who go to Egypt for this reason, but when you take into account the efficiency there, a number of drawbacks are present. Moving facilities is a little more easier in ready-made clothing than in textiles. Turkey can no longer maintain prices with basic jobs. This is one of the reasons for the shift to countries such as Egypt. Turkey should now turn to more value-added businesses. We have a chance there."
