Mergers, Mixed Results, Credit Issues
Jim Phillips, Contributing Editor
Strategic mergers, however, combine the strengths of both companies, create an expanded product offering and place the unified entity in a much stronger market position.
Such is the case with the recent merger of Tuscarora Yarns Inc., Mount Pleasant, N.C., and CloverTex LLC, Clover, S.C. A Tuscarora spokesman said the companies produce complementary products marketed to different customers. "It's a good fit," he said. The combined company will operate under the Tuscarora name.
April Business Mixed
Quite a few spinners reported in March an unexpected, but most welcome, business uptick that raised hopes that sales were beginning a slow-but-extended growth pattern. But for some spinners, the optimism of March was quenched by a return to the flat business conditions of the early first quarter.
"We were excited for awhile, but then things went right back to where they were before," said one spinner. "It seems like there was a flurry of restocking activity and then nothing."
Added another spinner: "Right now, we are day-to-day and week-to-week. Our order backlog is short and what orders are coming in are very small."
A North Carolina spinner reports stronger-than-expected demand for ring-spun cotton, but relatively weak open-end (OE) business. "Right now, we have a three-week backlog for ring-spun. We're running flat out, seven days a week. Now, last year at this time, our backlog was six weeks, so we are behind where we were, but we are generally pleased," he said. "Our OE business is not nearly as strong. We are running four- or five-day schedules. Our operations there are day-to-day."
Despite mixed results, many spinners remain optimistic the recession will not be as long or as deep as originally expected. "We see some signs that people are beginning to loosen their pocketbooks a little. Retail sales are not off as much has had been forecast, and the housing market is showing some signs of life. We are hopeful business conditions will improve in the last half of the year."
Credit Still A Problem
A major obstacle for many spinners in generating increased sales is continued credit tightness, particularly for customers from Central America. "The US factors and credit insurance people have become extremely conservative in their approach to credit. Anybody that does not have their latest financial statements available, or anybody that is in any way tardy on their payments - they are being flagged and their credit is being withdrawn," said one spinner. He added that a reinstitution of the US Department of Agriculture's GSM-102 program, which issues credit guarantees for the export of US agricultural products, may help relieve some financing stress for cotton products.
"The impact [of tight credit] is quite devastating for business," he said. "Our customers really need to buy on terms. They need a little bit of lag time to get the yarn in and make the fabric. And then their customer needs a little bit of lag in order to take the fabric and make the garment. "So customers that have to prepay, pay before shipment or open a letter of credit - this puts an extreme burden on the system. The banks in Central America, for example, are not particularly strong right now, and just the matter of opening a letter of credit is no longer simple. A lot of the banks just don't have the financial strength to provide letters of credit."
Quick Response Makes A Difference
If there is a silver lining to current conditions, it is that US spinners are more capable than ever of delivering quick response. Said one spinner: "Being able to turn orders around quickly is more important than ever. Asian spinners are having the same financial issues as those in the Western world, and they are not geared to respond very well to small, short, highly specialized orders that require quick turn. We are getting business right now from customers that, in other climates, would not look at us just because of price. But now, getting product manufactured and on the shelves in the shortest time possible is, perhaps, the single most important factor.
If you can produce a quality product quickly, there is opportunity out there."
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