Cheap imports take toll on Arab Polvara

Egypt's Arab Polvara Spinning and Weaving calls for government help against textile dumping from India and Pakistan, but the company has performed poorly against domestic rivals too.

Egyptian cotton may be a byword for luxury, but a glut of cheaper imports from the Indian subcontinent has left some textile producers looking threadbare.

Arab Polvara Spinning & Weaving on Sunday urged the Egyptian government to intervene in the markets, seeking to ease pressure from cheaper imports from India and Pakistan.

The textile producer's stock fell 3.42 per cent on Sunday and remained unchanged yesterday.

But international rivals are not the only worry. Arab Polvara has trailed all of its listed rivals in the industry, even accounting for the dismal performance of the sector this year.

After losses of 20.1 million Egyptian pounds for the second quarter of the year and a 35.3 per cent decline in revenue, the company slashed production capacity by a third in July.

With Egyptian economic growth also stalling, prospects are gloomy in the company's home market.

Arab Polvara's stock has fallen 40.8 per cent since the start of the year and has lost 17.2 per cent since the start of June.

That coincides with a sharp fall in the price of cotton around that time.

Cotton futures traded on the New York Mercantile Exchange have risen by 5.2 per cent since January to US$1.05 per pound, but that is a far cry from highs of $1.41 in April.

Cotton prices are expected to decline in the coming months as a result of slowing global growth and increased demand for synthetic fibres, according to Rabobank.

"Bearish factors including the macroeconomic situation and a large 2011-12 crop forecast will likely result in lower prices in the coming season," analysts wrote in their commodity bulletin last month.

As the stock has tracked movements in the price of cotton, the prospect of a large cotton crop from India and China is also worrisome for investors.