Happy days are here again!

4 October 2010

During May we received a flood of financial results for the first quarter of 2010. All, without exception, have been positive and the results are unsurprisingly better than the first quarter of 2009. But then again Q1, 2009, was at the depth of the global downturn.

Most tanners, even the larger groups, are generally family or privately owned so details of financial results are scarce. However, at either side of tanners on the leather supply chain sit a number of large multi-nationals who have recently published their results. If the customers are doing well then naturally that will filter through to tanners.
By the middle of May giant meat processors cum tanners, JBS Swift and Tyson both posted significant sales increases. JBS saw overall sales increase by 35%, which was helped by the takeover of Bertin and Pilgrims Pride businesses in 2009. Fellow meat processing giant, Tyson announced a record first quarter performance with an operating income of $126 million up $7 million on the previous quarter.
At the other end of the spectrum Italian leather furniture group Natuzzi expect to improve profitability in 2010 after a disappointing 2008 and improving 2009. France based luxury retailer, Hermes saw sales grow by 25% in the US for the first quarter but Asia saw the largest increase with impressive growth of 47%, excluding Japan. Hermes sales grew by 18.5% for Q1 with even Europe, generally regarded as a slower growing economic area, up by 15%. Like for like sales of fashion and leathergoods for other major brands LVMH rose 10% in the first quarter, while at Gucci Group they were up 6.1%. Burberry posted half year sales up 6% and revenue at Italian footwear retailer Tod’s was also up 3.4% over first quarter of this year.
In China, demand for new cars jumped 63% between January-March compared with the same period in 2009. The good news for tanners is that Chinese consumers specify much more leather in their cars than their counterparts in North America and Europe.
So, what is driving the recovery? Most of the financial results point towards consumer demand from Asia, particularly China. Also, improved consumer confidence in North America appears to be helping sales of leather products particularly at the high-end. Most major European economies are growing at a much smaller rate but most have returned to modest growth following the recession.
Another indicator of an improving market must be the continuing high prices of raw materials. Demand from the retailers has been filtering through to the tanners since the second half of last year when the recovery began and looks set to continue for the rest of the year. Increases in raw material prices mirror the start of the recovery.
After the difficulties of 2008 and 2009 it is good to see that consumer demand in Asia and the US is driving sales and profits back up again.
If you have any comments about this or any other subject that affects the tanning industry please email me.

Martin Ricker  Editor

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