Covid-19 pandemic and the following lockdown caused Gul Ahmed Textile Mills Ltd, an apparel brand in Pakistan, to report losses of Rs. 625 million in the closing financial year of 2019-20. This is down from the reported profit of Rs. 3.6 billion in the last financial year.
According to the financial statement, the company’s operating profit took a huge dip to Rs. 1.8 billion from Rs. 5.5 billion coupled with its staggering high finance cost of over Rs. 2 billion during the financial year 2019-20.
The company’s exports and local sales of the textile made-up dropped due to lockdown in exporting countries and local retail market, resulting in the overall earning reported a huge drop in the said period.
Despite decrease in realizable sales value, the company faced the challenges of higher cotton prices due to short local cotton crop, higher cost of dyes and chemical, ancillary materials, non-availability of export refinance resulting in availing higher rates borrowings etc, the quarterly financial report stated.
Due to its customers based mainly in Europe and then in USA, the company started to have negative impacts in the form of customers seeking more price reductions/discounts, reduction in already ordered quantity and even rescheduling of orders.
This caused lower sales in February and March, reduced margins, and caused buildup in inventory levels. With the enforcement of the lockdown in the third week of March 2020, the entire operations and sales came to a complete halt, the report said.
“Moreover, due to the retail chain spread all over the country in rented premises, we also got hit by the first-time application of IRS 16. Last but not the least, Gul Ahmed also got exposed to minimum income tax liability, which substantially enhanced our post-tax loss,” the report added.
The textile brand also laid-off its employees due to the closing of various production plants in the second half of the financial year.
As the businesses are reopening worldwide including Pakistan, the demand for textile products picked up again, particularly in Pakistan with various export orders are pouring in for Pakistani manufacturers. It is expected that the textile brand, Gul Ahmed, will capitalize on this increase in demand in the local and foreign markets and revive its profitability in the current financial year.