“Difficult times looming in the textile sector”

Advansa is Sabancı’s largest company in the textile sector… Its turnover of 1 billion Euro makes it one of the polyester giants of Europe. The company’s CEO Wahid Tawfik says: “Our goal is to achieve 3 billion Euro by 2015.” When it comes to the sector, he says: “There will be considerable consolidation. A large proportion of the sector is not very strong economically. This will result in acquisitions and mergers over the next 2-3 years. We shall see that difficult times will start from 2007 onwards.”

In 2005 the Sabancı Group bought out all of the shares that its partner DuPont held in DuPontSa. Then it changed the name of the company to Advansa. This meant that the largest polyester producer n Europe became completely Turkish-owned.

With its turnover of nearly 1 billion Euro, Advansa is one of the leading European producers of yarn, fiber, resin and polyester raw materials. It has plants in Britain, Germany and Turkey and a total annual capacity of over 1.3 million tons. We spoke with Advansa CEO Wahid Tawfik about the global textile sector.

* In recent years the textile sector has been having a difficult time all over the world. What is happening at the moment?
Perhaps all over the world but particularly in Asia, these problems are the result of excess capacity. The global capacity utilization rate in the textile sector is 70 percent. Despite continuing investments, the remaining 30 percent consists of unused capacity.

This situation has created economic problems and for the last 5-6 years put the sector under pressure. Another factor in the equation is the increase in the cost of raw materials as a result of the rise in the price of oil. The developments in 2005 in particular, such as the freeing up of trade and the quotas on global trade, have further complicated the situation. But these complications are still not completely clear. Because the real impact on sound foundations have yet to become concrete.

* Which countries are production and demand shifting towards?
Production is continuing to fall in Europe and North America in favour of Asia. In North America the decrease is around 2-3 percent. In Europe it is about 1-2 percent. Even though there is a decline in production in Western Europe, there is an increase in Turkey and the developing markets in the EU.

As a result, in the future I believe that there will be an increasing shift towards brand names, specialty and high-functionality products. We are expecting an increase in demand for these products. This increase will result from a change in consumers’ lifestyles.

* What kind of developments will occur in the textile sector in the future?
We predict that there will be a major consolidation in the sector. I mean, a large proportion of the sector today is not strong economically. This will result in acquisitions and mergers over the next 2-3 years. It won’t be just in textiles, it will also happen in petro-chemicals and polyester.

We expect that there will be difficult times from next year onwards. There does not appear to be any prospect of a fall in the price of raw materials. One should bear in mind that next year in particular may be difficult.

Özgür Gözler
[email protected]