India’s Arvind Limited is pulling back on its investment in Ethiopian sourcing, citing the unfavorable business conditions since the East Africa nation lost its U.S. African Growth Opportunity Act (AGOA) status.
Arvind chief strategy officer Samir Agrawal said that while the company’s garment output and revenue grew year over year, it has revised its sourcing strategy to reflect the trade environment.
“During the year we completed a restructuring of some of our facilities across India and also started to gradually ramp down Ethiopia,” he said on a recent fourth-quarter earnings call.
AGOA granted duty-free status to goods entering the U.S. from Sub-Saharan African countries. President Joe Biden revoked trade privileges from Ethiopia, Guinea, and Mali beginning Jan. 1, citing the countries’ human rights violations. Ethiopia faced an earlier AGOA suspension in November 2021 in response to the Tigray civil war. H&M, PVH, Hanes, JCPenney, and The Children’s Place were among the Western brands sourcing from Ethiopia’s textile sector.
Arvind is now “reducing the footprint” is has in Ethiopia, where capacity has declined by “about 50 million pieces or so,” or nearly 90 percent of its current output for the Indian firm. The company’s full-year garment production totaled 36 million pieces for 11 percent year-on-year growth.
Arvind plans to transfer most of Ethiopia’s production capacity to its factories in India, where the population has largely recovered from “concerning” Covid outbreaks over the past year, Agrawal said.
“The textile business volumes, especially in export markets, remained quite robust through the year,” he added, noting that the Indian market has also recovered from the second quarter onward. Arvind sold 92 million meters of denim during fiscal 2022, up 30 million meters from the year prior, while woven volumes also “also recovered from 81 million in FY21 to 120 million meters in FY22,” Agrawal said. In total, Arvind’s textile revenues grew by 65 percent.
Despite the trade issues impacting its sourcing strategy, “the key challenge in this segment… has been the continuously rising prices of all the input raw materials.” Cotton prices reached all-time highs at the end of the company’s fiscal year, prompting Arvind to raise prices to offset upstream cost increases, Agrawal said.