Evaluation of the prospects for textile machinery orders
According to Swiss Helvea (financial research and brokerage firm) are the fundamentals in the market for man-made yarn deteriorating and a “mini cycle” is coming to an end and cotton yarn spinning mills are still with high margins, but dimming volume development
Helvea sees signs of a clear deterioration in the market for man-made yarn, particularly at the margin front and especially in view to input and manufactured polyester staple fibres and development for the filament yarns follow the same trend.
Starting from the third quarter of 2010 up to the year 2011 the market was marked by sharply rising margins for the yarn producers with a peak in the fourth quarter of 2010 at roughly 46 US cents/kg. The fall in yarn prices however almost completely erased these margins, leaving the producers only with the coverage of conversion and main raw material costs. The reason for this development is to be seen in the weak demand from the downstream textile industry and a sharp fall in the prices of cotton yarn. There is also observed a deterioration in the market for filament yarns (nylon) and Helvea therefore cannot see a recovery for new textile machinery and expects demand to start declining again over the coming quarters. The analyst considers that recovery has been short and without any signs for continuation.
The situation continues to detoriate also in July 2012. The China Chemical Fibres Association (CCFA) expects fibre production growth to slow in the second half of 2012 and predicts that the industry will suffer four to six quarters due to adjustments.
The situation for the cotton yarn market is a bit brighter in terms of price decline in relation to its input cost for cotton. According to Helvea the cotton yarn market has gone through an unprecedented recalibration process and is therefore better positioned than it was around 12 to 18 months ago. Truly yarn prices have declined (see also TextileFuture’s Newsletter of July 16, 2012) and the underlying conversion margin increased sharp, e.g. plotted 20 Ne yarn jumped at the end of June to 49 to 50 % leading to a historical extreme high and therefore spinning mills are not to complain about margins. On the other hand the customers are still in a very erratic order attitude in order to avoid inventory risks. Capital expenditure is dampened but it looks like as the bottom is reached and the cotton textile machinery business will recover, but slower than expected before.
Following its findings, Helvea lowered its estimates on the 2013 and 2014 business of Swiss Oerlikon Textile (textile machinery), by 3 % in sales for 2013 or from CHF 1900 to CHF 1881 million and 2013 by 9 % or from CHF 1946 to CHF 1806 million for 2014. Swiss Rieter Textile Systems 2013 sales were adjusted from CHF 1040 to 920 million and 2014 from CHF 1050 to CHF 990 million and for PTC Premium Textile Components the level of 2013 was kept with CHF 240 million and 2014 with 255 million. For both companies resulted also a downward revision of EBIT (operational result), with the exception of PTC were the previous levels were maintained for the two years.