Textile Companies Post 32% Increase in Profits During H1FY21

The profits recorded by Pakistan’s listed textile companies jumped 32 percent in the first half of the fiscal year 2020-21 compared to the same period in the last fiscal year.

This is being attributed primarily to a spike in textile exports, improvement in other income, and decline in finance cost, according to a report by Topline Securities brokerage house.

The research house filtered out companies based on the minimum market capitalization of Rs. 1 billion and included 21 firms in its sample. The listed enterprises represent 82 percent of the textile sector’s market capitalization.

On a year-over-year basis, overall revenues increased by 12 percent during the period under review. Textile exports during the first half of the fiscal year 2020-21 increased by 8 percent in dollar terms and 13 percent in rupee terms, leading to this ultimate increase in revenue.

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The report stated that the backlog of orders from the second half of the fiscal year 2019-20, along with diversion of orders from comparable economies such as India and Bangladesh, due to COVID-19 lockdowns, helped in increasing exports for Pakistan.

It added that the increase in pricing and depreciation of the rupee against the US dollar, by 4.6 percent, also offset the international price hike caused by rising cotton prices in the country. “Gross margins remained largely unchanged at 16 percent, however, gross profits increased by 9 percent year-on-year.”

Local cotton prices went up over 7 percent in the six months under review to an average of Rs. 9,154 per maund (approximately 40 kgs) mainly due to a 34 percent decline in local cotton production.

Lower interest rates also led the finance cost to decline by 14 percent year-on-year in the first half of FY21.