Pan Brothers focus to increase production by at least 20pc in 2015

PT Pan Brothers, publicly listed garment manufacturer is currently conducting production trials with the Vietnamese firm through a joint operation, which enables the company to manufacture some of its products in the neighboring country. They expect production to grow by at least 20 percent in 2015 as part of its long-term expansion strategy over the next five years.

The company has outlined a plan to capitalize on opportunities in the Southeast Asian region by cooperating with a Vietnamese garment company, said Anne Patricia Sutanto, Pan Brothers vice chief executive officer, on Monday.

Their collaboration with the Vietnamese company will be officially starting next year if the outcome of the trial is positive. The cooperation will be either organic or non-organic.

The company is conducting trial order of 2 million garments from the Vietnamese firm; this trial would allow the company to figure out if it was feasible to start a joint venture operation.

The average monthly wage of factory workers in Vietnam was around US$140-150 per month, higher than Rp 1.1 million ($89.57) in Central Java where most of the company’s facilities are located, even though the province plans to raise its minimum wage next year.

Pan Brothers was motivated to take a chance on boosting Indonesia’s garment production mainly because the government aimed to advance the country’s garment exports. China, the world’s largest garment exporter, is facing an economic slowdown, which has impacted its textile industry.

According to the data cited by Anne, China’s garment exports have been declining at a rate of 1.9 percent each year from 38 percent exposure in 2012. In the same year, Vietnam’s supply reached 2.3 percent exposure compared to Indonesia’s 1.8 percent.

The statistics show that Indonesia has room to grow its garment industry if they are competitive enough against others countries in ASEAN and South Asian regions.

Aside from the potential expansion into Vietnam, Pan Brothers prepared around $65 million in capital expenditure (capex) to build seven factories in the next three years with its biggest customer, Japan-based Mitsubishi. Abuot $8.9 to 10 million will be used to build two facilities next year.

The company, which currently has 10 factories, has spent around $34.3 million throughout this year to build four factories in Boyolali, Central Java, which will increase its production capacity from 42 million polo shirts annually to 90 million.

Two of the four factories are fully operational, while the physical construction of the other two
was completed just last month.

As of September this year, Pan Brothers booked $252.78 million in sales revenue , decreased by 4.3 percent from $264.14 million in the same period last year. The decrease in sales revenue has caused a lower net profit of $5.31 million in the first nine months of this year, compared to $8.46 million as of September last year.

Pan Brothers biggest export market is Asia, which gets 37.3 percent of total sales, followed by Europe and the US with 30 percent and 26.5 percent, respectively. The company manufacturers for Nike, North Face, Lacoste and Emporio Armani