Sudden reduction in staff
Garmex Saigon Joint Stock Company (stock code: GMC) is headquartered in Go Vap District, Ho Chi Minh City. The company was established in 1976 - one year after the country's reunification under the name of the Ho Chi Minh City Garment Enterprise Union. In 1993, this Union was reorganized into Saigon Garment Production - Import-Export Company (Garmex Saigon).
In 2004, Garmex Saigon was equitized. Two years later, GMC shares were listed on the Ho Chi Minh City Stock Exchange (HoSE).
As a long-standing enterprise in Ho Chi Minh City, Garmex Saigon received the 3rd class Labor Medal in 2013 and is regularly among the top performing companies voted by Forbes Vietnam Magazine.
Workers work at Garmex Saigon factory (Photo: GMC).
Currently, the company has 5 factories including An Nhon, An Phu, Binh Tien (HCMC), Tan My (Ba Ria - Vung Tau) and Garmex Quang Nam (Quang Nam) with a total area of over 10 hectares, including 70 production lines.
The company produces industrial garments with main products being ready-made clothes; produces beds and wardrobes made of fabric materials.
Garmex Saigon's customers are export markets such as Europe, the US, and Japan with partners such as Decathlon (France), New Wave (Sweden), Nits (Japan), Columbia (USA), Cutter & Buck (USA) or Sport Master (Russia). Fabric industrial cabinets are sold to Binh Thanh Import-Export Production and Trading Joint Stock Company (Gilimex).
However, Garmex Saigon recently admitted to continuing to cut labor and temporarily suspend production to minimize losses in the context of the garment industry "working harder and harder".
The company has drastically cut staff in recent times. While before the pandemic, the company had at times maintained about 4,000 employees, since the beginning of the year, this number has decreased significantly.
As of March 31, the company had reduced its workforce from 1,982 to 185, a 91% reduction. It seemed like it could not reduce any further, but by September 30, the entire company had only 37 employees.
In September, at the extraordinary shareholders' meeting, the company's leadership said that monthly personnel costs were about VND651 million. The board of directors had agreed with employees to reduce salaries from the first months of the year. In 2024, the company will continue to review personnel issues and continue to adjust salaries to match reality depending on the situation.
The company said it will continue to save costs as much as possible and will not re-hire workers for traditional industries. When the market becomes favorable enough, whether the company will invest in restoring the garment industry or not will depend on the market situation.
Declining business results
The story of Garmex Saigon's staff reduction has partly reflected the business situation of the enterprise in recent times. The company often falls into a state of no orders, no revenue from textiles, leading to losses. As of the third quarter of this year, this textile enterprise has suffered losses for 5 consecutive quarters. Accumulated losses have increased to nearly 66 billion VND.
The most brilliant period of Garmex Saigon was 2018 with revenue exceeding 2,045 billion VND and profit of 121 billion VND, the highest in its history of operation. In 2019, the company also had a good profit of 104 billion VND.
Garmex Saigon started to incur losses from the second quarter of 2020 with a loss of more than VND 8 billion, revenue decreased by 31%. At this time, the reason for the decrease in revenue was due to the strong outbreak of the Covid-19 epidemic, reducing orders. The loss continued into the third quarter of 2020, but the company was still profitable throughout the year.
However, Garmex Saigon only really collapsed in 2022. For the first time in the company's history since listing, the whole year's profit lost about 66 billion VND. Revenue also decreased by 73% to 292 billion VND, losing the trillion-VND revenue mark that the company had maintained for 9 consecutive years (since 2012).
Explaining this decline, Garmex Saigon said that in 2022, the company mainly produced processing orders. At the same time, since mid-August, the company had to temporarily stop production at some factories to improve quality, so most of the products produced had to be stored. Entering the fourth quarter, the company received small-quantity processing orders, competitive prices, low productivity, so revenue decreased significantly.
At the extraordinary shareholders' meeting in September, the company's leaders said that the textile industry has not had any major changes, with large inventories abroad. Demand in the US and European markets has not grown significantly, new orders are few, goods are of low value, and the market has not really improved. We will have to wait for the market situation in three more quarters (ie Q2/2024) while interest rates are rising.
Garmex Saigon's revenue comes from two main sources: domestic and export. Before 2021, revenue mainly came from export. From 2022, domestic revenue was the main source, mostly from sales to Binh Thanh Import-Export Production and Trading Joint Stock Company - Gilimex (stock code: GIL).
According to the management report for the first 6 months of the year, Gilimex company owns 7.09% of Garmex Saigon's capital.
In addition to being a major shareholder, Gilimex is a close partner, contributing a significant portion of Garmex Saigon's revenue. In the first 9 months of this year alone, Garmex Saigon's revenue decreased because it no longer recorded sales from Gilimex. In the same period last year, this partner contributed VND 224 billion, accounting for 81% of Garmex Saigon's total revenue. In 2022, revenue from Gilimex accounted for 77% of the structure.
Garmex Saigon's difficulties come from many sides (Photo: GMC).
The difficulty stems from the fact that in December 2022, Gilimex filed a lawsuit against Amazon Robotics LLC (Amazon), demanding compensation of 280 million USD (about 6,600 billion VND).
Gilimex, a major partner of Amazon from 2014 to 2022, invested tens of millions of dollars in manufacturing facilities to build steel and fabric warehouses to store Amazon's goods. However, Gilimex accused Amazon of violating its commitment, causing the company to suffer from excess production capacity and raw materials.
Amazon is Gilimex's largest customer with a total order value of up to 146.6 million USD in 2021. To meet Amazon's demand, Gilimex ignored other large customers such as IKEA and Columbia Sportswear.
This incident affected Gilimex's business results and at the same time affected Garmex Saigon - the partner, as part of its revenue depends on orders from Gilimex.
In the current context, Garmex Saigon said it will optimize existing resources, seek partners to transfer and sell unused assets, and diversify its business lines to minimize risks.
Previously, the company had planned to liquidate raw materials inventory related to processed goods for Gilimex worth 100 billion VND. Gilimex is continuing to work with their partners in the fourth quarter to resolve the problems, so the company also continues to push Gilimex to release inventory for the company in the fourth quarter.
For the raw materials inventory of 24 billion VND, the company plans to liquidate them by competitive bidding. The company even intends to liquidate the Tan My and Quang Nam factories, and is continuing to evaluate the factory prices.
The company also said it will invest in a new housing project of Phu My Joint Stock Company this year. This project has an area of about 1.5 hectares and will be sold at the appropriate time.
Source
Comment (0)