Sectoral data and the company's position in the sector - Comparative advantages

Brief presentation of the sector and the company's position in it

Textiles is a significant sector for Greek manufacturing industry which includes many sub-sectors such as spinning, weaving, knitting, clothing and other closely connected sectors.

According to data from the Greek Association of Textile Industries, the textiles sector accounts for approximately 15% of Greece's GDP while employing 70,000 people. If the people employed in clothing are included too, the total number of workers approaches 120,000 representing around 28% of employment in domestic manufacturing.

Exports of textile products and off the peg clothing rank the wider sector as the larger export sector in the domestic manufacturing industry, representing around 23% of all products exported or 47% of exported industrial products while it also accounts for approximately 28% of Greece's industrial production using domestic raw materials, cotton.

The textile sector in Greece showed significant growth rates during the 1970's and 1980's, a period during which is maintained a leading position in domestic manufacturing. Since then it has been in decline with a significant reduction in domestic production and investment activities resulting in a shrinkage of the sector and many textile industries suspending work altogether.

The main problems facing the Greek yarn production industry today relate to the abolition of national protectionist measures with the unification of the single market by the EU, the abolition of the Multifibre Agreement and liberalization of international trade in general and the customs union between the EU and Turkey.

Nonetheless, the most significant problem relates to competition faced by Greek products from third countries (mainly Turkey, Pakistan and India) on both the Greek and European market. Over production at a world level has led to a reduction in average sales prices for yarns including synthetic yarns and a gradual relocation of a large volume of production to low cost countries.

Today the number of spindles in operation in the yarn production industry is estimated to be approximately 750,000 - 800,000, having fallen from 1.5 million at the beginning of the 1980's. It should be noted though that a significant number of these relate to new, state of the art, spindles operating at greater speed, which are installed at new spinning frame units, or replacing older spindles.

Over recent years the Greek yarn production industry has shown signs of an up turn. New state of the art units have been opened while old spinning frame units have been modernized with new mechanical equipment. There is also an intense level of mobility with acquisitions and alliances between enterprises in their effort to vertically integrate production and strengthen their position in the marketplace. The new spinning frame units being constructed replace existing, older technology or increase existing capacity (and speed of machines) in the sector.

According to market sources, the healthiest enterprises have remained in the sector while it should also be noted that the ability of quite a few of these enterprises to make investments increased due to capital raised from the Stock Exchange

Ongoing modernization of production units is necessary in order to attain a reduction in production cost, improved quality and specialization in products with large added value so as to boost competitiveness of Greek enterprises on both the Greek and international markets. Quite a few large companies in the sector already produce high quality products.

"Nafpaktos Textile Industry S.A." holds around 2.5-3% of yarn production in Greece and around 2% of the domestic consumption. It holds the leading position in Greece in the production of fabric for shirts since it covers approximately 70% of domestic production and around 15% of total domestic consumption.

Comparative Advantages

Compared to the average performance of the sector for the years 1999 and 2000 the company's performance is noteworthy as can be seen from the following table :

NAFPAKTOS TEXTILE INDUSTRY S.A.
	SECTOR		COMPANY
	1999	2000	1999	2000
Gross profit margin	12,3%	15,7%	24,2%	26,6%
Operating cost margin	0,9%	3,2%	19,1%	23,9%
Net profits margin	7,6%	5,2%	19,7%	23,1%
Gearing	59%	46%	15%	16%
Liquidity	1,5	1,4	4,4	4,6
(%) EBITDA	20,4%	23%	28%	30,9%

*Source: Sectoral Study on 'Spinning Mills' - October 2001 - ICAP

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