From the Sector

Archroma, a global leader in specialty chemicals towards sustainable solutions, was highlighted for its advanced sustainable practices and innovation in Pakistan by the Swiss Embassy. Foreign Minister of Switzerland, Mr. Ignazio Cassis who was on an official state visit to Pakistan visited Archroma Center of Excellence at Karachi on 9 July 2023 along with high-level officials and three Members of Swiss Parliament.

Mr. Ignazio Cassis was greeted by Archroma employees at the Archroma Center of Excellence. He inaugurated the company’s "Wall of Pride", an impressive collection of recognitions, accolades and honors earned by Archroma in Pakistan since the company’s inception in October 2013.

Mr. Cassis visited the Research & Technology (R&T), Application, Analytical Laboratories & Training Academy spread on three floors at the Archroma Center of Excellence and saw the developmental work in progress. He was shown printing of multi-colored fabrics along with research based developmental analysis in the laboratories.

The globally acclaimed ‘Zero Liquid Discharge Sustainable Effluent Treatment Plant’ and the aniline-free* indigo produced at Jamshoro were the two of the main highlights showcased as best-in-class sustainable practices in the industry. Presentations and discussions were held on continued enhancement of these landmarks with the local industry.

Fibre Extrusion Technology Ltd (FET) of Leeds, UK has completed an international series of exhibitions, culminating in a very successful ITMA 2023, the world’s largest international textile and garment technology exhibition, which took place in Milan, Italy in June.

 “This was a very hectic period for FET, organising participation in three exhibitions in Europe and Asia over a period of less than four months” commented FET’s Managing Director Richard Slack. “However, this provides a great opportunity for smaller specialist companies like FET to raise our profile on the international stage, showing what we can offer, alongside major corporations. Being able to meet so many customers face-to-face, post pandemic also indicates a welcome return to normal business relationships.”

Prior to this was INDEX 23 in April, the world’s leading nonwovens exhibition in Geneva. The exhibition season began earlier in the year with the “Green Textile and Innovation Technology Forum and Exhibition” in Hong Kong, taking a small booth to support the event and FET’s official agent in the region, Chemtax.

FET designs, develops and manufactures extrusion equipment for a wide range of high value textile material applications worldwide and the variety of these three exhibitions illustrates FET’s scope in the industry.

The Munich-based startup Sizekick launches a new technology and attracts well-known brands and retailers to reduce size-related returns in e-commerce. With the apparel technology know-how of the strategic partner and investor Hohenstein and the AI-based technology of Sizekick, more sustainable shopping in e-commerce with less CO₂ emissions will be made possible. The technology company is now celebrating a successful market entry: The newly developed sizing AI is now available for fashion e-commerce stores and is pleased about the first successfully acquired customers. The first customers to join the company include the Swiss multi-brand store for sustainable fashion, Rrrevolve, the premium outdoor brand Black Diamond from the USA, and Marc Cain, a global brand with German roots in the premium sector.

The solution promises to add value for both brands and consumers when shopping online by taking individual body measurements into account when recommending the right clothing size. The AI-based technology always offers two options to help arrive at the appropriate size recommendation. With BodyFinder, the AI suggests realistic body shapes to choose from. Alternatively, the video-based BodyScanner option enables a body scan via the smartphone's video function. All it takes to do this is to turn around in front of the phone's camera. Fashion brands and fashion retailers now have easy access to the new technology, as integration in the e-commerce store takes just a few minutes.

Hohenstein's expertise helped the Sizekick team to link accurate body measurements with the right product properties. Hohenstein is considered a leader in the field of size & fit and has been advising companies in the textile industry for over 75 years. The Sizekick fit analysis not only supports the brands' product teams, but is also used as direct input for Sizekick AI.

• Currency-neutral revenues flat versus the prior-year level
• Top-line development reflects improved sell-out trends and conservative sell-in strategy
• Gross margin up 0.6pp to 50.9%; strong improvement compared to Q1 reflecting better sell-through and less discounting
• Operating profit of € 176 million includes extraordinary expenses of around € 160 million related to one-off costs, donations and accruals for future donations
• Inventory position improves substantially versus Q1 level to € 5.5 billion; now up only 1% year-over-year

In the second quarter of 2023, currency-neutral revenues were flat versus the prior-year level. The top-line development continued to be impacted by the company’s conservative sell-in approach in order to reduce high inventory levels, particularly in North America and Greater China. At the same time, adidas second quarter revenues benefited from the first sale of some of its Yeezy inventory. The initial product drop in June generated revenues of around € 400 million in Q2, which is largely in line with the Yeezy sales generated in the prior year’s quarter.

Footwear revenues grew 1% during the quarter, reflecting strong growth in football, basketball, tennis and US sports. Apparel sales declined 3% in the second quarter. As the apparel market continues to be particularly overstocked, the company continued its conservative sell-in strategy to improve sell-through and margins in the medium term. Accessories grew 8% during the quarter driven by growth in football.  

Lifestyle revenues were down during the quarter despite extraordinary demand for the company’s Samba, Gazelle and Campus franchises. While adidas slowly started to scale its offering for these product families during the second quarter, the total volume still only represents a small portion of the company’s overall business. Sales in the adidas Performance categories continued to show positive momentum. This reflects strong demand for new product introductions such as the latest iterations of its Predator, X and Copa football boots, as well as jerseys for both the FIFA Women’s World Cup 2023 and the company’s unique portfolio of football teams ahead of the start of the European club season. In addition, the Adizero product family in running continued to gain a lot of attention around marathon races across the world, translating into higher demand. At the same time, the brand’s Barricade tennis franchise grew strongly, leveraging the excitement around major tournaments.

In euro terms, the company’s revenues declined 5% to € 5.343 billion in the second quarter (2022: € 5.596 billion).

Stronger sell-out trends and conservative sell-in
As a result of the company’s initiatives to reduce high inventory levels, currency-neutral sales in wholesale declined 10% despite double-digit growth in Greater China and Latin America. At the same time, direct-to-consumer (DTC) revenues grew 16% versus the prior year. This development was driven by strong growth in both the company’s e-commerce business (+14%) as well as own retail stores (+19%), reflecting continued strong sell-out trends across most regions. The outperformance of the company’s DTC channel versus the wholesale business was also related to the first sale of the Yeezy inventory, which was done exclusively through adidas’ own e-commerce channel.

Double-digit growth in Greater China and Latin America
Currency-neutral sales in North America declined 16% during the quarter. The region is particularly affected by elevated inventory levels in the market and – in response to this – the company’s significantly reduced sell-in. Revenues in Greater China grew 16% in Q2, reflecting double-digit sell-out growth in both wholesale and own retail. Sales in EMEA were down slightly (-1%) despite double-digit DTC growth. While the company’s initiatives to reduce inventory levels and discounting weighed on the overall top-line development in the region, adidas recorded significantly improving full-price trends during the quarter. Revenues in Asia-Pacific increased 7% during the quarter, driven by strong double-digit growth in DTC. Latin America continued to increase at a double-digit rate (+30%), reflecting strong growth in both wholesale and DTC.

Gross margin improves to 50.9%
The company’s second quarter gross margin increased 0.6 percentage points to 50.9% (2022: 50.3%). This improvement was mainly driven by price increases the company has implemented as well as by an improved channel mix. At the same time, higher supply chain costs and unfavorable currency movements continued to strongly weigh on the gross margin development. While still adversely impacting the company’s gross margin in the quarter, discounting levels significantly improved compared to the first quarter of the year.  

Operating profit of € 176 million, resulting in an operating margin of 3.3%
Other operating expenses were up 3% to € 2.582 billion (2022: € 2.501 billion). As a percentage of sales, other operating expenses increased 3.6 percentage points to 48.3% (2022: 44.7%). Marketing and point-of-sale expenses decreased 7% to € 617 million (2022: € 663 million). As a percentage of sales, marketing and point-of-sale expenses slightly decreased by 0.3 percentage points to 11.5% (2022: 11.8%). Operating overhead expenses were up 7% to € 1.965 billion (2022: € 1.838 billion), reflecting higher logistics expenses. In addition, the company recorded one-off costs of around € 50 million related to the strategic review the company is currently conducting as well as donations and accruals for further donations in an amount of around € 110 million. As a percentage of sales, operating overhead expenses increased 3.9 percentage points to 36.8% (2022: 32.8%). The company’s operating profit amounted to € 176 million (2022: € 392 million) in the quarter. This amount includes the extraordinary expenses of in total around € 160 million reflecting the one-off costs related to the strategic review as well as the donations and accruals for further donations. The sale of the Yeezy product positively impacted adidas’ operating profit by an incremental amount of around € 150 million in Q2. The operating margin reached 3.3% in the quarter (2022: 7.0%).

Net income from continuing operations of € 96 million
After taxes, the company’s net income from continuing operations amounted to € 96 million (2022: € 360 million), while basic EPS from continuing operations decreased to € 0.48 (2022: € 1.88).

Outlook

adidas expects revenues to decline at a mid-single-digit rate
On July 24, adidas had adjusted its full year financial guidance to reflect the positive impact of the first sale of some of its Yeezy inventory and a slightly better-than-expected development of the adidas business in the first half of the year. At the same time, macroeconomic challenges and geopolitical tensions persist. Elevated recession risks in North America and Europe as well as uncertainty around the recovery in Greater China continue to exist. In addition, the company’s revenue development will continue to be impacted by the initiatives to significantly reduce high inventory levels. As a result, adidas now expects currency-neutral revenues to decline at a mid-single-digit rate in 2023 (previously: decline at a high-single-digit rate).

Underlying operating profit anticipated to be around the break-even level
The company’s underlying operating profit – excluding any one-offs related to Yeezy and the ongoing strategic review – is still anticipated to be around the break-even level. Including the positive impact from the first Yeezy drop of around € 150 million, the potential write-off of the remaining Yeezy inventory of now € 400 million (previously: € 500 million) and one-off costs related to the strategic review of up to € 200 million (unchanged), the company now expects to report an operating loss of € 450 million in 2023 (previously: loss of € 700 million).

On August 2, the company launched a second drop of Yeezy inventory. Throughout the month of August, adidas is making a range of existing products available through both its own e-commerce channel as well as the digital platforms of selected wholesale partners. If successful, this second drop would further improve the company’s results. However, as the results of this drop are yet unknown, it is not accounted for in the company’s current top- and bottom-line outlook for 2023.

The priority of sweater manufacturers has always been to select ingredients and fibers that are soft, hypoallergenic, and of the finest quality to meet consumer expectations that their sweaters are comfortable yet durable and easy to care for. According to the recent Eastman consumer study of sweater lovers, the sweaters consumers want to add to their wardrobes are soft, comfortable, stylish, and versatile. However, consumers are very disappointed when their sweaters look and feel differently after wearing and washing. Choosing fibers and materials that deliver comfort, quality and ease of care is essential to win with consumers. Today, these are compounded by the ever-present consumer demand for a sustainable paradigm. The promise of Naia™ from Eastman is exactly to make sustainable style accessible to brands and inclusive for everyone through a portfolio of fibers that doesn’t compromise on quality, comfort, or garment care.

The results of soft and cozy blends between the versatile Naia™ fibers and other materials can be appreciated in the collections of Naadam and The Gap, which this year presented its third collection of men's sweaters blended with Naia™ and cotton. By using Naia™ blended knits in their collections, brands are not just choosing a sustainable ingredient, but also a certified and circular supply chain: all Naia™ cellulosic fiber is produced in a safe, closed-loop process where solvents are recycled back into the system for reuse. Eastman Naia™ partners with Textiles Genesis to provide track and trace solutions for brands. All Naia™ fibers are OEKO-TEX™ STANDARD 100 certified, ensuring no use of hazardous chemicals, and certified by TÜV AUSTRIA as biodegradable and compostable, also in the ocean, as supported by a recently published ocean degradation study conducted by Woods Hole Oceanographic Institution (WHOI).

Naia™ fibers are designed to create unlimited possibilities for uncompromising, sustainable style: among these, Naia™ Renew staple fiber permits to create eco-conscious blends that are supremely soft, quick-drying and consistently reduce pilling which are ideal for T-shirts, casual wear, sweaters, comfy pants and home textiles. Produced from 60% sustainably sourced wood pulp and 40% certified* recycled waste materials, Naia™ Renew creates the same top-quality fabrics as traditional Naia™ fibers, but with a reduced carbon footprint of around 35% — and it’s available at scale. The innovative cellulosic acetate materials can be blended with cotton, modal, merino wool, recycled polyester, or multiple content fancy yarns. Naia™ blended yarns deliver super softness for supreme wearing comfort in knitwear, and sweaters made with Naia™ Renew can have good dimensional stability and shape retention even after multiple washes. Versatile Naia™ denier sizes can be used in different yarn spinning processes, giving the yarn spinners freedom of creativity for trendy yarn designs perfect for year-round basic sweaters with good quality and a durable look. The unique cross section of Naia™ staple fibers enables designs that accommodate four seasons of wearing comfort.

INDA and EDANA, the leading trade associations representing nonwovens and related industries, joined forces to implement and support the industry’s first Quality and Audit Program (QAP) in the United States. This joint effort will increase the reach of, and support for, the program in the North American absorbent hygiene products and wet wipes industries.

Much like the harmonization of test methods years ago, this joint program has the potential to reduce complexity for both suppliers and converters of AHP and wipes. This program grew from the inefficiency of facing multiple audits from converter supplier audit programs, often assessing similar requirements, but according to differing standards.

The program went through a rigorous testing and piloting phase before being rolled out in the summer of 2022. Initially only available in Europe, the program is expanding its reach to cover Asia and the Americas.

More information is available on the EDANA website where converters and suppliers can register to take part. The program is based on a harmonized quality and hygiene standard, which facilitates an objective third-party audit. Organizations can also register to follow a training course to familiarize themselves with the standard.

Am 17. und 18. Juli 2023 informierten sich Teilnehmerinnen und Teilnehmer der Veranstaltung „Textil Innovativ – Technologien für Mobilität und Schutz“ über Trends, Herausforderungen und Lösungen für moderne Mobilität sowie Persönliche Schutzausrüstung (PSA) in Verbindung mit Digitalisierung und Recycling. Zudem wurde zur „Datenbasierten Wertschöpfung in der Textilindustrie“ diskutiert.

Mobilität in der Zukunft ist digital, komfortabel und natürlich nachhaltig. Der Schalter für die Sitzheizung ist in die textile Oberfläche der Mittelkonsole integriert. Das Gewebe der Sitzfläche heizt oder kühlt – je nach Bedarf. Der Dachhimmel leuchtet. Die Karosserie ist leicht und stabil, um Sprit zu sparen und trotzdem bei Unfällen zu schützen. Referenten und Aussteller zeigten, wie sie den besonderen Anforderungen an Maschinen, Produktionsprozesse sowie die neuen Materialien selbst gerecht werden.

Auch das Thema Persönliche Schutzausrüstung (PSA) birgt für Unternehmen Herausforderungen. Viele Funktionen, wie beispielsweise Hitzeschutz, erfordern eine spezielle chemische Ausrüstung der Textilien. Diese unterliegt jedoch häufig umweltschutzrechtlichen Einschränkungen und Verboten. Worauf Unternehmen bei der Produktion von PSA achten müssen, wurde ebenfalls erörtert.

Welche Potenziale die Digitalisierung für genau diese Anforderungen bietet, wurde in der Veranstaltung ebenfalls deutlich. Der Digitale Produktpass kommt. Er ist Teil eines EU-weiten Maßnahmenpakets zur Förderung von Ökodesign und Ressourceneffizienz und soll den Verbraucher informieren, wo das Produkt herkommt, woraus es besteht oder wie man es reparieren kann. Die Umsetzung betrifft alle Branchen und Dienstleistungen, mit weitreichenden Auswirkungen auf die unternehmerischen Geschäftsprozesse. Das setzt eine gewaltige Datenmenge voraus. Wie datenbasierte Wertschöpfung in der Textilindustrie funktioniert, war Thema in der abschließenden Diskussionsrunde.  

An welchen Stellen das Mittelstand-Digital Zentrum Smarte Kreisläufe kleine und mittlere Unternehmen unterstützen kann, erläuterte die Geschäftsführerin Anja Merker in einem Pitch-Beitrag sowie an einem Informationsstand vor Ort. Das Angebot des Zentrums umfasst nicht nur reine Wissensvermittlung zum Unternehmen der Zukunft in Verbindung mit Digitalisierung und Künstliche Intelligenz. Die Partner geben Orientierung und bilden Ihre Mitarbeiter weiter, entwickeln gemeinsam Ideen in Workshops und erarbeiten mit Ihnen Konzepte, die Sie im Unternehmen umsetzen können.

• Revenue of EUR 1.25 bn and EBITDA of EUR 136.5 mn in the first half of 2023
• EBITDA and net result for the period significantly improved compared with the first quarter of 2023
• Cost-cutting program and measures to strengthen sales activities being implemented as planned
• Liquidity position strengthened by successful capital increase and extension of credit terms
• Production of TENCEL™ brand modal fibers successfully launched in China

The business performance of the Lenzing Group, a leading global supplier of specialty fibers for the textile and nonwoven industries, largely reflected the subdued market trends in the first half of 2023. After the market environment deteriorated significantly in the second half of 2022, signs of recovery were evident during the first and second quarters of 2023 in terms of both raw material and energy costs as well as demand. Textile fibers recorded improving demand, and business with nonwoven fibers and with dissolving wood pulp proved to be very stable.

Outlook
The war in Ukraine and the more restrictive monetary policy pursued by many central banks in order to combat inflation are expected to continue to influence global economic activity. The IMF warns that risks remain elevated overall and forecasts growth of 3 percent for both 2023 and 2024. The currency environment is expected to remain volatile in the regions of relevance to Lenzing.

This market environment continues to weigh on the consumer climate and on sentiment in the industries relevant to Lenzing. Recently, however, the outlook brightened somewhat according to a global survey by the ITMF.*

In the trend-setting market for cotton, signs are emerging of a further buildup of stocks in the current 2022/23 crop season. Initial forecasts also see a further buildup of stocks in 2023/24, albeit to a lesser extent.

However, despite signs of recovery in both demand and raw material and energy costs, earnings visibility remains limited overall.

Lenzing is fully on track with the implementation of its reorganization and cost-cutting program. These and further measures are aimed at positioning Lenzing in the best possible way for the expected market recovery.

In structural terms, Lenzing continues to anticipate growth in demand for environmentally responsible fibers for the textile and clothing industry as well as the hygiene and medical sectors. As a consequence, Lenzing is very well positioned with its “Better Growth” strategy and plans to continue driving growth with specialty fibers as well as its sustainability goals, including the transformation from a linear to a circular economy model.

The successful implementation of the key projects in Thailand and Brazil as well as the investment projects in China and Indonesia will further strengthen Lenzing’s positioning in this respect.

Taking into consideration the aforementioned factors and assuming a further market recovery in the current financial year, the Lenzing Group continues to expect EBITDA in a range between EUR 320 mn and EUR 420 mn for 2023.

*Source: ITMF, 21st Global Textile Industry Survey, July 2023

• Green Fashion community increasingly ‘thinking out of the box’

Networking and agility are in greater demand than ever – that was the conclusion at the close of the 52nd INNATEX which took place from 29 to 31 July 2023. 244 Green Fashion labels presented their collections to 1500 visitors at the international trade fair for sustainable textiles. Audience figures thus matched the level at the previous summer edition of the fair in 2022. With 244 brands, INNATEX again delivered remarkable variety, with many new exhibitors and fresh looks.

“We're pleased that our figures are remaining constant,” says Jens Frey, Managing Director of trade fair organiser MUVEO GmbH. “Undeniably, sustainable brands and the retail trade are currently living through a long period of challenges. But from our point of view, the Green Fashion sector is responding with extraordinary willpower and perseverance. Why? Out of a sense of conviction and because sustainability is the future.”

Future-related topics were also the subject of panel talks and personal discussions at various points. A key aspect was the urgent need for cooperation agreements and networks to open up new sales channels and fields of activity. Experts at the fair also recommended an honest review of business strategies that may have outlived their usefulness. As Dr Eva Stüber of Cologne’s Institute for Retail Studies (IFH Köln) points out, “The pandemic, the war of aggression, inflation, digitalisation – there are many factors prompting a change in lifestyles and demands. What is required now is creativity. Brands and retailers can exploit new potential by, for example, checking their ranges for market relevance, being sharper in their targeting, making shopping a social event, joining up with people from entirely different areas and not immediately rejecting apparently mad ideas.”

From August 20^th to 21^st, 2023, the INNATEX Showroom will take place in Bern.

The 53^rd INNATEX fair will be held from January 20^th to January 22^nd, 2024.

Freudenberg Performance Materials (Freudenberg) is launching its latest innovation Evolon® Ultra Smooth to serve the specific packaging needs of technical industries.

Evolon® Ultra Smooth fabrics are low-linting, strong and hard-wearing. The new materials are designed for industrial parts and components which require low-friction, sliding behavior during the part packing and handling procedures. Furthermore, they are durably hydrophobic and available in different weights. The reusable textile containers made of Evolon® Ultra Smooth can be used in various industries to pack and transport even very heavy and sensitive parts without damage.

The Evolon® Ultra Smooth materials have a point-sealed patterned white surface which is very different from the standard Evolon® packaging textiles and which makes them easily identifiable.  

Evolon® Ultra Smooth materials protect the surfaces of industrial and automotive parts by avoiding micro-scratches or lint contamination. By using Evolon® Ultra Smooth reusable packaging to transport parts with highly-sensitive surfaces, customers reduce the number of damaged parts and the reject rate. The innovation is available worldwide. As Evolon® Ultra Smooth is 100% made in Europe, European customers benefit from even greater flexibility in the supply chain and quick go-to-market.