From the Sector

Kornit Digital Ltd. unveiled its Impact Report for 2021 highlighting progress made against goals and further expanding its commitment to a long-term strategy designed to transform the world of fashion and textiles into one that is more sustainable. The comprehensive analysis details Kornit’s performance related to climate action, waste management, green chemistry, and diversity in the workplace, as well as other areas of the Company’s Environmental, Social, and corporate Governance (ESG) framework.

Key Accomplishments Against Baseline (2021)  
Kornit’s ongoing dedication to improving ESG practices within its own operations has resulted in Company-wide achievements in the areas of:

Climate Action and Waste Management*

• ~16% reduction in GHG emissions intensity from x 9.11-e to 7.68 MTCO2-e
• 39% reduction in hazardous waste intensity from 1.7 tons to 1.04 tons
• 57% reduction in non-hazardous waste intensity from 33 tons to 14 tons

Green Chemistry

• Complete elimination of Acute Toxic Amines (CLP category 1, 2, 3) CMR
• 20% reduction of VOC level in Robusto Inkset and 30% of VOC in Eco Ink/Green

DEI and Community Engagement

• An increase in women in management, from 30% to 35%
• Reporting 88% of employees feeling respected and free to be authentic at work - *Intensity measures are per $1 million of revenue.

Kornit Digital’s Impact Strategy
Propelled by an ambition to make a positive impact across all areas of its business and throughout the fashion and textile industries, Kornit further adjusted its Impact Strategy this year towards more expansive, longer-term goals and objectives. Kornit’s refined strategy reflects the Company's dual role as a change agent in the industry—both as a leader empowering the fashion industry to be more sustainable, and as an accountable participant responsible for embracing social and environmental change to make the world a better place.  
The holistic strategy accounts for both roles, across two fundamental pillars—"Enable the Change” and “Be the Change”—and incorporates both social and environmental KPIs designed to meet the Company’s goals and respond to stakeholders’ input, as well as industry and ecosystem needs

Kornit is officially unveiling the report during a press event at PRINTING United Expo 2022.

*Intensity measures are per $1 million of revenue.

Tonello will be unveiling the release of their new, more efficient and more responsible Laundry (R)Evolution, including three tools, at Kingpins Show in Amsterdam, from October 19-20.

Configurator
The new Configurator allows clients to choose the technologies, software, and accessories for their next laundry, combining diverse solutions and thus obtaining a real projection of energy and resource consumption, as well as savings and sustainability benefits.

B.O.P. (Be On Point)
The seamless integration with THE Laser, B.O.P. is based on the most recent developments in Computer Vision It makes positioning laser designs on garments automatic and rapid It allows a choice of different production modes and detects up to 8 garments at the same time.

Metro
Metro is a software that automatically and transparently measures the actual consumption of a laundry, summarizing these figures in each garment’s “environmental passport”.

At the show, Tonello will also demonstrate their technologies by washing the MSP Collection, in collaboration with PVH Europe, Kingpins, and designed by Piero Turk.

Coisne et Lambert, the group composed of the two companies TDV Industries and Klopman International, a leader in the production and marketing of technical fabrics for the professional clothing and PPE sector, announced the acquisition of TAD Teintures et Apprêts Danjoux.

TAD is specialized in the dyeing and finishing of knitted fabrics and has been in the market for over 30 years. Based in Le Coteau (France), the company has a production site of 9,000 m² and is a major player in the civil and administrative markets for technical textiles for professional clothing, medical, sport and apparel.

With a well equipped R&D laboratory, responsive and innovative sampling and production processes, TAD is ISO 14001 certified to manage its environmental performance.

TAD will extend the group's textile know-how adding expertise in knitwear finishing (dyeing, finishing and functionalities). The complimentary nature of their skillsets will allow the three companies to develop synergies for the benefit of their common and specific markets.

This integration will enable TAD to strengthen its specific business model and its services as a French finishing company over the long term, for the benefit of its historical and future customers.

The group, which is made up of the two companies TDV Industries and Klopman International, achieved a turnover of 185 million euros for the 2021-2022 financial year and employs more than 600 people. It also intends to expand its presence in new markets and geographical areas. Klopman International and TDV Industries want to offer markets more complete, flexible and competitive solutions for professional, civil and military clothing.

Pincroft announced the adoption of an innovative precision spray technology that allows the application of many finishes for textiles, including permethrin for vector protection, to the face of the fabric to avoid contact with the skin.

The system is a more versatile and environmentally friendly alternative to the traditional application method of padding and offers the possibility of applying the chemistry on either face side or both sides of the fabric across the full width.

The benefits of this new equipment are countless not only for the end user but also for the environment. The system allows for a reduction of energy, water and wet pick up of up to 50%, while 100% of the chemistry is recycled. Thanks to the equipment’s precision application technology, less water and chemistry are needed, and its no immersion system means the fabric would require less saturation and a shorter drying time.

Mike Collins, Pincroft’s Managing Director: “This innovative equipment can be used in two ways. The single sided spray finishing can be used where the full effectiveness of the finish is only required on the face side of the end item, for example, vector, fluorocarbon and antimicrobial protection. The dual spray finish may be used to simulate the traditional padding method where full effectiveness of the finish is required dependant on end use, for instance, crease recovery, fabric softening, soil release and moisture management.”

This vector protection solution provided by Pincroft is ACTIGARD®, a branded technology developed by Sanitized AG, with long lasting active ingredients that have proved highly effective against mosquitoes and ticks. This product endures a high number of washes, is suitable for military uniforms and conforms to Standard 100 by Oeko-Tex®.

In view of the drastic deterioration of the market environment in the current quarter, the Lenzing Group suspends its guidance for the development of earnings in the 2022 financial year.

The further course of the 2022 financial year can only be estimated to a limited extent due to the extremely low visibility on the demand side and the high volatility of energy and raw material costs.

• Integrated Sustainability Report 2021 – 2022 published

DyStar, a leading specialty chemical company released its twelfth annual Sustainability Performance Report. The report is prepared in accordance with the updated GRI Standards 2021: Core option. DyStar continues to adopt the Integrated Reporting <IR> framework to communicate how the group has successfully created tangible value across multiple stakeholder groups in six major capitals.

DyStar reports that they have inched themselves closer to some of their 2025 target of reducing the environmental footprint by 30% for every ton of product, from 2011 levels. Here are some key highlights for FY2021:

• Recorded more than 29% increase in revenue compared to 2020
• Zero workplace fatalities, high-consequence injuries, and work-related ill health
• 40% reduction in Greenhouse gas (GHG) emission intensity, compared to 2011
• 37% decrease in wastewater emission intensity, compared to 2011

The Group was able to remain resilient and steer itself toward optimistic growth and recovery from the global pandemic in FY2021. In face of recent geopolitical events and macroeconomic factors such as soaring energy costs, DyStar and the wider supply chain will continue to face challenges. As a result, the company believes it is crucial to stay committed to their 2025 Sustainability goals to continue generating value for all stakeholders in the longer term, well beyond these turbulent times.

The report communicates DyStar’s progress towards its sustainability agenda and material topics. As part of our commitment to environmental sustainability, only an e-magazine and a PDF version will be made available for download from www.DyStar.com/sustainability-reports/

• Aims to tackle the immense textile waste generated in urban environments, on the back of import bans of waste materials
• Addresses the shortcomings of current textile recycling technologies, which are unsuitable for urban settings due to the use of heavy chemicals
• Technologies developed by the newly-formed RGE-NTU Sustainable Textile Research Centre will be test-bedded in RGE’s pilot urban-fit textile recycling plant, projected for completion as early as 2024

Royal Golden Eagle (“RGE”), a global group of resource-based manufacturing companies, which includes a world-leading viscose fibre producers Sateri and Asia Pacific Rayon (APR), is developing urban-fit, closed-loop textile-to-textile recycling solutions, through the newly-formed RGE-NTU Sustainable Textile Research Centre (RGE-NTU SusTex). This is a five-year research collaboration between RGE and Nanyang Technological University, Singapore (“NTU”), to accelerate innovation in textile recycling that can be deployed in urban settings. The research centre will develop new technologies to recycle textile waste into fibre and create new, next-generation eco-friendly and sustainable textiles.

This move comes on the back of the tightening of waste import bans in countries such as China, India and Indonesia, which are among the world’s largest waste processors. The stricter import bans have left cities in need of viable local textile recycling solutions to tackle the immense textile waste generated.

RGE Executive Director, Mr Perry Lim, said, “Current textile recycling technologies, which rely primarily on a bleaching and separation process using heavy chemicals, cannot be implemented due to environmental laws. At the same time, there is an urgent need to keep textiles out of the brimming landfills.” He added, “As the world’s largest viscose producer, we aim to catalyse closed-loop, textile-to-textile recycling by developing optimal urban-fit solutions that can bring the world closer to a circular textile economy.”

Globally, an estimated 90 million tonnes of textile waste is generated and disposed of every year, with less than 1% being upcycled into new clothing or other textile materials. By 2030, the amount of global textile waste, which currently accounts for almost 10% of municipal solid waste, is expected to reach more than 134 million tonnes. The textile industry is also responsible for 10% of global greenhouse gas emissions – more than international flights and maritime shipping combined.

At present, most of the available textile recycling technologies are open-loop, where textile waste is typically downcycled to lower-quality products (insulating materials, cleaning cloths, etc.) or be used in waste-to-heat recycling.

“Closed-loop textile-to-textile recycling processes, particularly chemical recycling, are still under development. Scaling up the technologies to industrial scale remains a challenge. A key bottleneck is that refabricating textile waste into fibre needs purity standards for feedstock. However, most of the clothes that we wear are made of a mixture of different synthetic and natural fibres, which makes separating the complex blends of materials challenging for effective recycling.

“Our aim is to address this industry pain point by developing viable solutions that use less energy, fewer chemicals and produces harmless and less effluents, and then potentially scale up across our global operations,” Mr Lim said.

To tackle the key challenges in closed-loop textile recycling, RGE-NTU SusTex is looking into four key research areas, namely cleaner and more energy efficient methods of recycling into new raw materials, automated sorting of textile waste, eco-friendly dye removal, and development of a new class of sustainable textiles that is durable for wear and, at the same time, lends itself to easier recycling.

Technologies developed by RGE-NTU SusTex will be test bedded at RGE’s pilot urban-fit textile recycling plant in Singapore, which is projected for completion as early as 2024. If successful, RGE has plans to replicate the plant in other urban cities within its footprint.

• European Textile Industry calls for immediate action to tackle the energy crisis;

The European textile & fashion in Europe, represented by EURATEX, calls for a single European strategy to tackle this energy crisis. To safeguard the future of the industry, a revision of the electricity price mechanism is necessary and an EU wide cap on gas prices at 80€/MWh. Special company support needs to be granted to avoid bankruptcy and relocation of textile production outside Europe.

Gas and electricity prices have reached unprecedented levels in Europe. Due to severe global competition in the market that characterizes the European textile & clothing industry, these cost increases are impossible to pass on to customers. This has already led to capacity reductions and production stops. Closures and the shift of production outside Europe are being forecasted should the current situation persist, leading to further de-industrialization of our continent and increased dependency on external suppliers.

Specific segments of the textile industry are particularly vulnerable. The man-made fibres (MMF), synthetic and cellulose-based fibres, industry for instance is an energy intensive sector and a major consumer of natural gas in the manufacturing of its fibres. The disappearance of European fibre products would have immediate consequences for the textile industry and for society at large. The activities of textile dyeing and finishing are also relatively intensive in energy. These activities are essential in the textile value chain in order to give the textile products and garments added value through colour and special functionalities (e.g. for medical applications).

The European textile industry calls for an EU-wide cap on gas prices at €80/Mwh, and a revision of the price mechanism for the electricity market, to reduce the huge price gaps with our foreign competitors.

Governments should ensure that critical industries, such textiles and all its segments, are able to ensure gas and electricity contracts towards the end of the year at an affordable price. Stable and predictable energy supply is of the utmost importance. Gas restrictions and rationing must only be used as a last resort. No mandatory consumption cuts should be foreseen.

In addition to these measures under discussion, currently a proliferation of contradictory, uncoordinated national initiatives to tackle the energy crisis is observed. This has led to a de facto fragmentation of the Single Market, resulting in a chaotic policy and regulatory environment that adds a further strain on our supply chain, which is fully integrated at European level. Measures that guarantee a level playing field in the EU are utmost important.

EURATEX President Alberto Paccanelli explained: “Given the current situation, a scenario where entire segments of the textiles industry will disappear can no longer be excluded. This would lead to the loss of thousands of companies and tens of thousands of European jobs and would further aggravate the dependency of Europe to foreign sources of essential goods. This applies specifically to SMEs who need temporary support measures (e.g. state aids, tax relieves, energy price cap) to survive the current crisis and to prepare for the green transition in the longer run.”

Cotton Incorporated published its monthly economic letter of August and shared new insights of the cotton prices:

Cotton prices continue to be caught between the two competing storylines that have been in play for the past several months.
On one side, there is the deteriorating global macroeconomic situation.  The International Monetary Fund (IMF) lowered its projection for global economic growth in both 2022 (3.2%) and 2023 (2.9%) in the updates released in late July.  Current IMF forecasts are significantly beneath those from January (called for 4.4% growth in 2022 and 3.8% growth in 2023) and April (called for 3.6% growth in 2022 and 3.6% growth in 2023).  The evolution in the macroeconomy was a likely factor contributing to the shift in investors’ outlook on the commodity sector, which led to a collapse in prices for cotton and a range of other commodities in June and July.

Beyond the weakening macroeconomic environment, there also may be factors associated with cotton supply chains that could affect demand during the 2022/23 crop year.  Downstream consumer markets for cotton can be viewed as more discretionary than other spending categories, such as food, energy, and lodging, that experienced some of the sharpest effects of inflation.  Given price increases for necessities, consumers may have less income to devote to apparel and home furnishings.

In the U.S., consumer spending on clothing has been flat for the past year.  However, it has been holding at levels that are 25% higher than they were in 2019.  If U.S. consumers pull back on clothing purchases, it may hit the market just as retailers have caught up with consumer demand after the onset of the shipping crisis.  In weight volume, the cotton contained in U.S. apparel imports was up 22% year-over-year in the first half of 2022.  Relative to 2019 (pre-COVID and pre-shipping crisis), the volume in the first half of 2022 was up 23%.  Given strong import volumes, if there is a dip in consumer demand, inventory could build both at retail and upstream in supply chains.  This could lead to cancelations, potentially all the way back to the fiber level, where contracts signed at prices higher than current values could be particularly susceptible.

Tight U.S. supply is on the other side of price direction arguments.  Cotton is drought tolerant, and that is why it can be viably grown in perennially dry locations like West Texas.  However, cotton requires some moisture to germinate and generate healthy yields.  West Texas has had very little rain over the past year, and drought conditions have been extreme.  As a result, abandonment is forecast to be widespread.  It remains to be seen exactly how small the U.S. crop will be, but the current USDA forecast predicts only 12.6 million bales in 2022/23 (-5.0 million fewer bales than in 2021/22).

Meanwhile, demand for U.S. cotton has been relatively consistent, near 18 million bales over the past five crop years (an average of 15.5 million bales of exports and 2.7 million bales of domestic mill-use).  A harvest of only 12.6 million falls well short of the recent average for exports alone, and U.S. stocks were near multi-decade lows coming into 2022/23.  All these statistics suggest shipments from the world’s largest exporter may have to be rationed in 2022/23.  If cotton is not readily available from other sources, the scarcity of supply from the U.S. could support prices globally.

Simultaneously, there is weakness from the demand side.  The market has struggled to find the balance between the weakened demand environment and limited exportable supply in recent months.  The conflict between these two influences makes it difficult to discern a clear direction for prices and suggests continued volatility.

• Currency-neutral sales up 4%, despite more than € 300 million negative impact from macroeconomic constraints
• Markets representing more than 85% of the business grow 14% overall
• Gross margin down 1.5pp to 50.3% reflecting significantly higher supply chain costs
• Operating profit reaches € 392 million
• Net income from continuing operations amounts to € 360 million
• FY 2022 outlook reflects double-digit growth during the second half of the year

“Our Western markets continued to show strong momentum in the second quarter amid heightened macroeconomic uncertainty. With Asia-Pacific returning to growth, markets combined representing more than 85% of our business grew at a double-digit rate,” said adidas CEO Kasper Rorsted. “With sports back at center stage this summer, revenues in our strategic growth categories Football, Running and Outdoor all increased by double digits. However, the macroeconomic environment, particularly in China, remains challenging. The recovery in this market is – due to continued covid-19-related restrictions – slower than expected. And we have to take into account a potential slowdown in consumer spending in all other markets for the remainder of the year.”

Currency-neutral revenues increase 4% despite macroeconomic constraints
In the second quarter, currency-neutral revenues increased 4% as adidas continued to see strong momentum in Western markets. This growth was achieved despite continued challenges on both supply and demand. Supply chain constraints as a result of last year’s lockdowns in Vietnam reduced top-line growth by around € 200 million in Q2 2022. In addition, the company’s decision to suspend its operations in Russia reduced revenues by more than € 100 million during the quarter. Continued covid-19-related lockdowns in Greater China also weighed on the top-line development in Q2. From a channel perspective, the top-line increase was to a similar extent driven by the company’s own direct-to-consumer (DTC) activities as well as increases in wholesale. Within DTC, e-commerce, which now represents more than 20% of the company’s total business, showed double-digit growth reflecting strong product sell-through. From a category perspective, revenue development was strongest in the company’s strategic growth categories Football, Running and Outdoor, which all grew at strong double-digit rates. In euro terms, revenues grew 10% to € 5.596 billion in the second quarter (2021: € 5.077 billion).

Strong demand in Western markets
Revenue growth in the second quarter was driven by Western markets despite last year’s lockdowns in Vietnam still reducing sales, particularly in EMEA and North America, by
€ 200 million in total. In addition, the top-line development in EMEA was also impacted by the loss of revenue in Russia/CIS of more than € 100 million. Nevertheless, currency-neutral sales grew 7% in the region. Revenues in North America increased 21% during the quarter driven by growth of more than 20% in both DTC and wholesale. Revenues in Latin America increased 37%, while Asia-Pacific returned to growth. Currency-neutral revenues increased 3% in this market despite still being impacted by limited tourism activity in the region. In contrast, the company continued to face a challenging market environment in Greater China, mainly related to the continued broad-based covid-19-related restrictions. As a result, currency-neutral revenues in the market declined 35% during the three-months period, in line with previous expectations. Excluding Greater China, currency-neutral revenues in the company’s other markets combined grew 14% in Q2.

Operating profit of € 392 million reflects operating margin of 7.0%
The company’s gross margin declined 1.5 percentage points to 50.3% (2021: 51.8%). Significantly higher supply chain costs and a less favorable market mix due to the significant sales decline in Greater China weighed on the gross margin development. This could only be partly offset by a higher share of full price sales, first price increases and the benefits from currency fluctuations. Other operating expenses were up 19% to € 2.501 billion (2021: € 2.107 billion). As a percentage of sales, other operating expenses increased 3.2 percentage points to 44.7% (2021: 41.5%). Marketing and point-of-sale expenses grew 8% to € 663 million (2021: € 616 million). The company continued to prioritize investments into the launch of new products such as adidas’ new Sportswear collection, the next iteration of its successful Supernova running franchise and first drops related to the Gucci collaboration as well as campaigns around major events like ‘Run for the Oceans.’ As a percentage of sales, marketing and point-of-sale expenses were down 0.3 percentage points to 11.8% (2021: 12.1%). Operating overhead expenses increased by 23% to a level of € 1.838 billion (2021:
€ 1.492 billion). This increase was driven by adidas’ continuous investments into DTC, its digital capabilities and the company’s logistics infrastructure as well as by unfavorable currency fluctuations. As a percentage of sales, operating overhead expenses increased 3.5 percentage points to 32.8% (2021: 29.4%). The company’s operating profit reached a level of € 392 million (2021: € 543 million), resulting in an operating margin of 7.0% (2021: 10.7%).

Net income from continuing operations reaches € 360 million
The company’s net income from continuing operations slightly declined to € 360 million (2021: € 387 million). This result was supported by a one-time tax benefit of more than € 100 million due to the reversal of a prior year provision. Consequently, basic EPS from continuing operations reached € 1.88 (2021: € 1.93) during the quarter.

Currency-neutral revenues on prior year level in the first half of 2022
In the first half of 2022, currency-neutral revenues were flat versus the prior year period. In euro terms, revenues grew 5% to € 10.897 billion in the first six months of 2022 (2021:
€ 10.345 billion). The company’s gross margin declined 1.7 percentage points to 50.1% (2021: 51.8%) during the first half of the year. While price increases as well as positive exchange rate effects benefited the gross margin, these developments were more than offset by the less favorable market mix and significantly higher supply chain costs. Other operating expenses increased to € 4.759 billion (2021: € 4.154 billion) in the first half of the year and were up 3.5 percentage points to 43.7% (2021: 40.2%) as a percentage of sales. adidas generated an operating profit of € 828 million (2021: € 1.248 billion) during the first six months of the year, resulting in an operating margin of 7.6% (2021: 12.1%). Net income from continuing operations reached € 671 million, reflecting a decline of € 219 million compared to the prior year level (2021: € 890 million). Accordingly, basic earnings per share from continuing operations declined to € 3.47 (2021: € 4.52).

Average operating working capital as a percentage of sales slightly decreases
Inventories increased 35% to € 5.483 billion (2021: € 4.054 billion) at June 30, 2022 in anticipation of strong revenue growth during the second half of the year. Longer lead times as well as the challenging market environment in Greater China also contributed to the increase. On a currency-neutral basis, inventories were up 28%. Operating working capital increased 23% to € 5.191 billion (2021: € 4.213 billion). On a currency-neutral basis, operating working capital was up 14%. Average operating working capital as a percentage of sales decreased 0.4 percentage points to 21.0% (2021: 21.4%), reflecting an overproportional increase in accounts payable due to higher sourcing volumes and product costs.

Adjusted net borrowings at € 5.301 billion
Adjusted net borrowings amounted to € 5.301 billion at June 30, 2022, representing a year-over-year increase of € 2.155 billion (June 30, 2021: € 3.146 billion). This development was mainly due to the significant decrease in cash and cash equivalents.

FY 2022 outlook reflects double-digit growth during the second half of the year
On July 26, adidas adjusted its guidance for FY 2022 due to the slower-than-expected recovery in Greater China since the start of the third quarter resulting from continued widespread covid-19-related restrictions. adidas now expects currency-neutral revenues for the total company to grow at a mid- to high-single-digit rate in 2022 (previously: at the lower end of the 11% to 13% range), reflecting a double-digit decline in Greater China (previously: significant decline). While so far the company did not experience a meaningful slowdown in the sell-through of its products or significant cancellations of wholesale orders in any market other than Greater China, the adjusted guidance also accounts for a potential slowdown of consumer spending in those markets during the second half of the year as a result of the more challenging macroeconomic conditions. Therefore, growth in EMEA is now expected to be in the low teens (previously: mid-teens growth), while revenues in Asia-Pacific are projected to grow at a high-single-digit rate (previously: mid-teens growth). Despite the more conservative view on the development of consumer spending in the second half of the year, adidas has increased its forecasts for North America and Latin America reflecting the strong momentum the brand is enjoying in these markets. In North America, currency-neutral revenues are now expected to increase in the high teens. Sales in Latin America are projected to grow between 30% and 40% (both previously: mid- to high-teens growth).   

Due to the less favorable market mix and the impacts from initiatives to clear excess inventories in Greater China until the end of the year, gross margin is now expected to reach a level of around 49.0% (previously: around 50.7%) in 2022. Consequently, the company’s operating margin is now forecast to be around 7.0% (previously: around 9.4%) and net income from continuing operations is expected to reach a level of around € 1.3 billion (previously: at the lower end of the € 1.8 billion to € 1.9 billion range).