By  on February 3, 1994

LONDON (FNS) -- The recession continues to grip most of western Europe, but there are at last some bright spots on the horizon for apparel machinery manufacturers.

Industry executives predict the European market will edge into growth of 5 to 10 percent this year after several years of struggle. But executives aren't exactly jumping up and down over their prospects; many of the major European markets are expected to remain difficult this year and pick up only in 1995. "Things reversed in September, about the time of IMB in Cologne," said Daniel Harari, president and director general of Lectra Systemes, the CAD/CAM producer. "In the recession, some companies have proven stronger than others, and they want to invest to increase their market share.

"That's in sharp contrast to the last several years, where apparel machinery producers have struggled against contracting clothing industries and recession throughout Europe. For example, Brother recently announced its pre-tax profits fell 45 percent to 603 million yen ($5 million) on a 10.1 percent drop in sales to 144.5 billion yen ($1.19 billion) in the year ended Nov. 20. It attributed the profits fall to the downturn in European demand for its industrial sewing machines.

The primary growth markets in 1994 are expected to be the UK and Portugal as well as lower-cost markets such as Turkey, Morocco and Eastern Europe, industry executives said. Germany is expected to pick up late this year in some sectors. The UK is pulling out of its two-year recession, and apparel manufacturers are beginning to order everything from sewing machinery to computer-aided design systems to knitting machines.

Shima Seiki, the knitting machinery company, is receiving significant orders for its latest range, said Graham Binnie, sales director of Shima Seiki Europe. Pringle, for example, is investing up to 1 million pounds ($1.49 million) a year in new knitting machinery to meet demand for its Nick Faldo line of knitwear. "Another good market for us at the moment is Italy, where knitwear companies are buying our finer-gauge machines," Binnie said. "Italy is so fashion conscious that knitwear companies have to invest to keep up with the latest trends."

France, Italy, Spain and Germany generally remain difficult for machinery because of the recessions in those markets, executives said. "Germany isn't doing too badly for us, but that's because orders from Eastern Europe go through our German company," Derek Garner, divisional manager for industrial sewing machines at Brother Europe, said. "The German market itself isn't buoyant at all because it is struggling with its high cost structure."Machinery producers said the rush by European apparel companies to produce in lower-cost markets continues, which is why there is good growth in machinery orders in Turkey, Morocco and Eastern Europe. "Eastern Europe is now slowly taking shape," Stephan De Roeck, communications manager at Gerber Garment Technology (Europe), said. "People have been talking about that market for years but it has developed slowly." Turkey is also booming for the same reason. Turkey is much more modern and international than Eastern Europe at this stage, however.

"The switch to low-cost countries will change the way companies invest," Harari of Lectra believes. Apparel producers will look more toward CAM, database management, costing software and other tools to cut the time it takes to produce a garment. Lectra's CAM sales were 30 percent higher in 1993 than they were a year earlier, indicating companies are looking more toward production than design systems.

In addition, companies are moving to center their design functions in Europe and their production in the low-cost countries of the Far East. But they are insisting that their subcontractors invest in the most up-to-date production systems. "That means companies can go to Vietnam or Indonesia and get the low wage costs with high quality," Harari said, adding he believes the Far East always will have an edge over Eastern Europe because of its lower wages.

Of course, the return to some sales growth in Europe doesn't mean there will be a corresponding improvement in profits. Industry observers say there continues to be reports that machinery producers are offering discounts of up to 20 percent simply to sign orders and keep their factories busy. European machinery manufacturers also face increasing competition from producers in lower-cost countries such as China. This means they are having to cut their margins to compete on price and not simply technology.

For example, at IMB there were numerous entry-level systems at significantly lower prices to encourage smaller apparel manufacturers to automate. Lectra has cut the price of its entry-level CAD system to about 130,000 French francs ($22,033), which is about half what it was two years ago. It also has instituted a modular approach to all its systems and made them all software compatible so that companies never have to throw away an investment, Harari said.Because of these types of moves by machinery producers, industry executives see a bright outlook even though many western European economies continue to be mired in recession. "Despite everything, we see that the market recession has generally has bottomed out," De Roeck of Gerber said. "It's the beginning of some slow growth."

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