Financial Analysis Consolidated

In our analysis, companies participating in textile sector were divided in to three categories. In
the first category, companies working in spinning, weaving and finishing group of textiles were
taken, which participated significantly about 89.15 percent share in total number of companies of
textile sector. Second category contained companies related to made-up textile articles and
contributed about 3.10 percent share in total number of companies of overall textile sector. Third
category contained companies attached with production of wool, silk, polyester, artificial fiber
and synthetics items etc. and named as other textiles n.e.s., whose contribution in total number of
companies of textile sector remained around 7.75 percent in FY19. Category wise participation
in different aspects of textile sector is given in the graph below.

Overall balance sheet size of textile sector increased by Rs 120.11 billion, showing YoY increase
of 12.96 percent during FY19 to reach at Rs 1,047.09 billion in FY19 from Rs 926.99 billion in
FY18. Shareholders’ equity also increased by 10.25 percent over the previous year to stand at Rs
417.89 billion by the end of current year. Total liabilities increased by Rs 81.25 billion or 14.83
percent to accumulate its balance up to Rs 629.20 billion in FY19. Sales of the sector moved up
with 25.32 percent in FY19 and remained Rs 188.79 billion more than total sales of the previous
year.
Local sales contributed 51.19 percent share and export sales contributed 48.81 percent share of
overall sales in FY19, were increased with YoY growth of 27.50 percent and 23.12 percent
respectively during FY19 over FY18. Cost of sales inclined with Rs 147.28 billion or 21.99
percent during FY19. Gross profit also increased by 54.70 percent during FY19 when compared
with FY18. Sector’s profit before taxation also increased with 91.39 percent during FY19, which
is Rs 26.05 billion larger than that of previous year. Similarly, profit after taxation increased to
Rs 43.47 billion in FY19 from Rs 21.66 billion in FY18, with a YoY growth of 100.70 percent
during current year over previous year. It should be noted that data of the sector for previous
years were revised for some companies and also the information of some companies that were
previously excluded due to unavailability of data, have been incorporated in this publication.

Analysis of Assets

Non-current assets of the sector stood at Rs 569.61 billion in FY19 as compared to Rs 538.58
billion in FY18, reflecting an increase of 5.76 percent during FY19. Operating fixed assets after
deducting accumulated depreciation which constituted 73.15 percent share of non-current assets
in FY19, increased with 3.88 percent during FY19 when compared to FY18. Capital work in
progress increased as well by Rs 13.86 billion or 112.09 percent during FY19 over the previous
year. Long-term investments of the sector decreased by Rs 6.12 billion or 5.03 percent during
current year over previous year.
Current assets increased by Rs 89.07 billion or 22.93 percent during FY19 when compared to
FY18. Inventories containing 47.76 percent share of current assets in FY19, increased to Rs
228.03 billion during current year from Rs 177.03 billion in the previous year. Raw material was
major part of inventories increased its share in total inventories to 65.15 percent in FY19 from
62.84 percent in FY18 and grew with YoY growth of 33.54 percent during FY19. Trade debt
which contains 24.79 percent share of current assets during FY19, increased by 26.64 percent in
FY19 and reached at Rs 118.38 billion in FY19 from Rs 93.47 billion in FY18. Short-term loans
and advances were moved up by 25.32 percent in FY19 from Rs 19.60 billion in FY18 to reach
at Rs 24.56 billion in FY19.

Analysis of Liabilities and Shareholders’ Equity

Shareholders’ equity increased to Rs 417.89

billion in the FY19 from Rs 379.04 billion in the
previous year. Paid-up capital increased by Rs
7.41 billion or 11.87 percent during FY19 when
compared to FY18, of which 99.55 percent share
contained to ordinary shares. Total reserves,
which comprises of capital reserves, revenue
reserves, constituted 61.77 percent share of total
shareholders’ equity during FY19, reflected an
increase in growth by 12.91 percent during FY19
when compared with FY18. The increase in reserves of textile sector is due to increase of 40.81
billion or 24.95 percent in revenue reserves, which reached to Rs 204.36 billion in FY19 from Rs
163.55 billion in FY18. Capital reserves having 20.83 percent share of total reserves in FY19
posted a decrease of Rs 11.29 billion or 17.36 percent during FY19. Surplus on revaluation of
fixed assets, which has 21.52 percent share of total equity, witnessed raised up to Rs 89.45
billion in FY19 with YoY increase of 2.19 percent during FY19 as compare to previous year.

Non-Current liabilities increased with YoY growth of 9.22 percent to reach Rs 170.33 billion
during current year from Rs 155.95 billion in previous years. Long-term borrowing, which has
77.84 percent share of non-current liabilities in FY19, was increased by Rs 10.88 billion or with
8.94 percent YoY growth during FY19. Employee benefits obligations stood at Rs 11.37 billion
during FY19, which is Rs 2.99 billion or 35.69 percent more than that of the previous year.

Current liabilities increased from Rs 392.00 billion in FY18 to Rs 458.87 billion in FY19 with
YoY growth of 17.06 percent during the period under review. Trade credits and other accounts
payable comprises of 23.31 percent share of total current liabilities increased by Rs 16.32 billion
or 18.00 percent during FY19 when compared with FY18. Short-term borrowings scaled up from
Rs 232.40 billion in FY18 to Rs 276.64 billion in FY19 and remained major part of current
liabilities with shares of 59.29 percent and 60.29 percent during FY18 and FY19 respectively.
Current portion of noncurrent liabilities increased by 0.25 percent during FY19, which
constituted 9.09 percent share of total current liabilities in FY19.

Operating Efficiency and Ratio Analysis

Sales related to the textile sector showed significant improvement during FY19 and witnessed an
increase of Rs 188.79 billion or 25.32 percent during FY19. Total sales of textile sector increased
to Rs 934.30 billion in FY19 from Rs 745.50 billion in FY18, of which 84.64 percent of total
sales related to spinning, weaving and finishing category of textile sector in FY19. Share of local
sales in overall sales remained slightly larger than export sales, and this share improved from
50.32 percent in FY18 to 51.19 percent in FY19. Moreover, export sales showed a significant
increase of Rs 85.63 billion in FY19 which is 23.12 percent more than that of FY18. Cost of
sales also increased with Rs 147.28 billion or 21.99 percent during current year as compared to
the previous year. Cost of material, which constitute 69.96 percent share of total cost of sales
during FY19 increased with YoY growth of 29.10 percent during FY19. Gross profit of the
sector increased from Rs 75.88 billion in FY18 to Rs 117.40 billion in FY19 witnessed a YoY
growth of 54.70 percent during current year over previous year.

General, administrative and other expenses increased by 25.99 percent during FY19 to touch Rs
57.87 billion during current year. Other income also grew up during FY19 and increased by Rs
7.98 billion or 38.12 percent during current year as compared to previous year. It shows that
EBIT (Earnings before Interest and Taxes) increased to Rs 88.43 billion in FY19 form Rs 50.88
billion in FY18, which is 73.81 percent more than EBIT in FY18. Financial expenses grew by
51.41 percent during FY19 or Rs 11.50 billion more than that of FY18. Profit before taxation
shifted up to Rs 54.55 billion in FY19 from Rs 28.50 billion in FY18. Tax expenses were also
increased by 61.91 percent during FY19. Profit after tax move up by Rs 21.81 billion or 100.70
percent during FY19 to touch Rs 43.47 billion during FY19 from Rs 21.66 billion in FY18. Cash
dividend during FY19 constituted 32.35 percent of profit after taxation.

Key Performance indicators of the sector witnessed rise during current year FY19 as compared
to previous year FY18 with reference to profitability and efficiency. Return on assets increased
from 2.41 in FY18 to 4.40 in FY19 and return on equity moved up from 5.76 in FY18 to 10.91 in
FY19. Basic earnings per share increased from 3.39 in FY18 to 6.27 in FY19. Net profit margin
increased from 2.91in FY18 to 4.65 in FY19. Asset turnover was moved up to 0.95 during FY19
from 0.83 in FY18 and ratio of the financial leverage of the sector shifted up to 2.48 from 2.39
during FY19 as compared to FY18.
Textile Sector – Overall (Thousands Rupees)
Items 2014 2015 2016 2017 2018 2019

A. Non-Current Assets (A1+A3+A4+A5+A6) 448,105,735 472,329,293 503,176,341 529,584,065 538,577,386 569,608,316

1.Capital work in progress 23,383,059 16,413,576 13,710,830 23,420,221 12,361,255 26,217,332
2.Operating fixed assets at cost 471,785,758 570,529,109 551,432,660 601,179,433 642,995,274 692,789,735
3.Operating fixed assets after deducting accumulated depreciation 322,372,227 335,155,252 358,396,664 371,301,024 401,111,216 416,673,150
4.Intangible assets 185,842 166,030 183,738 217,540 166,204 230,530
5.Long term investments 98,658,787 116,707,452 127,946,726 131,945,777 121,687,770 115,568,596
6.Other non-current assets 3,505,820 3,886,983 2,938,383 2,699,503 3,250,941 10,918,708
B. Current Assets (B1+B2+B3+B4+B5+B6) 302,399,385 280,166,412 291,622,760 341,308,053 388,409,064 477,483,350
1.Cash & bank balance 8,381,816 7,813,234 11,039,558 6,003,770 7,114,667 14,935,123
2.Inventories; of which 149,333,862 130,532,402 133,412,899 153,409,955 177,030,131 228,033,964
i)Raw material 77,027,476 69,052,697 70,270,981 86,428,055 111,252,109 148,565,945
ii)Work in progress 16,794,411 14,551,382 14,233,821 15,894,120 17,832,515 21,744,700
iii)Finished goods 55,448,825 45,643,345 47,448,040 50,012,496 46,752,641 57,052,512
3.Trade Debt / accounts receivables 69,324,895 62,323,355 57,261,191 65,635,427 93,473,185 118,376,924
4.Short term loans and advances 12,870,585 14,523,634 17,165,572 18,105,409 19,596,390 24,557,652
5.Short term investments 11,334,426 12,644,972 13,327,241 21,575,996 16,760,165 12,821,082
6.Other current assets 51,153,801 52,328,815 59,416,299 76,577,496 74,434,526 78,758,605
Total Assets (A+B) / Equity & Liabilities (C+D+E) 750,505,120 752,495,705 794,799,101 870,892,118 926,986,450 1,047,091,666
C. Shareholders' Equity (C1+C2+C3) 324,063,064 333,171,531 353,452,281 372,600,505 379,037,825 417,892,838
1.Issued, Subscribed & Paid up capital 58,107,620 58,893,928 60,970,482 61,412,886 62,421,972 69,829,197
i)Ordinary shares 56,954,287 57,745,595 59,822,149 60,301,220 61,310,306 69,517,531
ii)Preference shares 1,153,333 1,148,333 1,148,333 1,111,666 1,111,666 311,666
2.Reserves 193,424,508 200,776,257 215,713,435 231,150,171 228,593,022 258,112,723
i)Capital Reserve 69,217,164 79,543,025 91,635,391 96,257,222 65,041,494 53,752,630
ii)Revenue Reserve 124,207,344 121,233,232 124,078,044 134,892,949 163,551,528 204,360,093
of which: un-appropriated profit(loss) / retained earnings 46,864,246 35,917,315 37,797,586 41,354,859 62,262,035 104,841,806
3.Surplus on revaluation of fixed assets 72,530,936 73,501,346 76,768,364 80,037,448 88,022,831 89,950,918
D. Non-Current Liabilities (D1+D2+D3+D4+D5) 127,380,880 118,738,363 122,062,281 152,760,568 155,947,442 170,327,238
1.Long term borrowings 90,429,712 82,876,579 88,971,192 119,730,996 121,704,737 132,587,830
2.Subordinated loans / Sponsor's loans 6,321,803 6,277,300 5,534,128 5,220,080 5,319,567 4,558,088
3.Debentures/TFCs (bonds payable) 692,747 2,956,129 913,358 390,474 145,853 0
4.Employees benefit obligations 5,855,629 6,889,286 7,391,419 7,598,538 8,375,600 11,365,224
5.Other non-current liabilities 24,080,989 19,739,069 19,252,184 19,820,480 20,401,685 21,816,096
E. Current Liabilities (E1+E2+E3+E4) 299,061,176 300,585,811 319,284,539 345,531,045 392,001,183 458,871,590
1.Trade credit & other accounts payables 67,893,163 71,280,383 75,029,554 76,468,058 90,626,802 106,942,491
of which: i) Trade credits 28,183,352 33,268,904 35,374,856 34,537,153 36,035,778 42,558,803
2.Short term borrowings 180,468,339 178,224,812 188,842,726 208,428,248 232,404,271 276,643,024
3.Current portion of non-current liabilities 29,361,611 28,900,956 35,314,047 36,930,085 41,612,527 41,718,166
4.Other current liabilities 21,338,063 22,179,660 20,098,212 23,704,654 27,357,583 33,567,909
F. Operations
1.Sales 721,751,201 648,382,449 596,540,344 645,036,516 745,504,913 934,295,657
i)Local sales (Net) 327,319,567 291,935,632 280,879,155 321,585,761 375,102,911 478,261,437
ii)Export sales (Net) 394,431,634 356,446,817 315,661,189 323,450,755 370,402,002 456,034,220
2.Cost of sales 656,065,506 595,082,347 546,379,303 588,000,467 669,620,449 816,899,872
i)Cost of material 454,520,751 377,090,968 335,768,549 381,985,089 442,679,904 571,501,927
3.Gross profit / (loss) (F1-F2) 65,685,695 53,300,102 50,161,041 57,036,049 75,884,464 117,395,785
4.General, administrative and other expenses 37,640,266 39,010,813 37,213,398 38,602,686 45,934,369 57,871,463
 i)Selling & distribution expenses 18,997,199 19,255,952 17,898,888 19,318,667 21,424,551 27,380,472
ii)Administrative and other expenses 18,643,067 19,754,861 19,314,510 19,284,019 24,509,818 30,490,991
5.Other income / (loss) 19,996,517 19,145,707 20,699,693 25,605,384 20,927,889 28,905,657
6.EBIT (F3-F4+F5) 48,041,946 33,434,996 33,647,336 44,038,747 50,877,984 88,429,979
7.Financial expenses 25,838,870 24,013,397 18,786,624 18,195,043 22,376,841 33,881,368
of which: (i) Interest expenses 21,834,360 20,257,617 15,296,939 15,995,936 19,736,339 28,664,539
8.Profit / (loss) before taxation (F6-F7) 22,203,076 9,421,599 14,860,712 25,843,704 28,501,143 54,548,611
9.Tax expenses 4,178,789 4,826,277 5,045,373 4,638,896 6,841,222 11,076,894
10.Profit / (loss) after tax (F8-F9) 18,024,287 4,595,322 9,815,339 21,204,808 21,659,921 43,471,717
11.Cash dividends 7,975,479 8,493,383 7,520,045 7,960,902 10,244,221 14,065,102
12.Bonus shares / stock dividends 478,826 485,125 615,619 974,810 79,476 750,491
G. Statement of Cash Flows
1. Net cash flows from operating activities 29,292,818 34,799,564 16,337,197 (6,674,404) 5,208,205 29,636,382
2.Net cash flows from investing activities (43,956,932) (34,644,187) (29,352,273) (46,048,394) (23,662,204) (51,706,858)
3.Net cash flows from financing activities 15,711,581 (268,221) 12,167,409 46,507,316 12,617,464 24,168,376
H. Miscellaneous
1.Total capital employed (C+D) 451,443,944 451,909,894 475,514,562 525,361,073 534,985,267 588,220,076
2.Retention in business (F10-F11-F12) 9,569,982 (4,383,186) 1,679,675 12,269,096 11,336,223 28,656,124
3.Depreciation for the year 23,047,266 22,740,337 23,547,194 25,570,422 26,883,072 30,358,628
4.Salaries, wages and employee benefits 68,181,811 67,935,250 66,727,145 71,950,049 78,724,094 91,225,066
I. Key Performance Indicators
P1. Net Profit margin / Net profit to sales (F10 as % of F1) 2.50 0.71 1.65 3.29 2.91 4.65
P2. Asset turnover (F1 to Avg {Current year(A+B),previous year (A+B)}) 0.98 0.86 0.77 0.77 0.83 0.95
P3. Return on Assets (F10 as a % of Avg {Current year(A+B),previous year (A+B)} 2.44 0.61 1.27 2.55 2.41 4.40
P4. Financial leverage (Avg. {Current year(A+B),previous year (A+B) to Avg. Current 2.33 2.29 2.25 2.29 2.39 2.48
year(C),previous year (C))})
P5. Return on equity (F10 as % of Avg {Current year(C),previous year (C)} 5.68 1.40 2.86 5.84 5.76 10.91
V3. Basic earnings per share (Rs./share) ( F10 to No. of shares) 3.06 0.77 1.61 3.43 3.39 6.27
Spinning, Weaving, Finishing of Textiles – Overall (Thousands Rupees)
Items 2014 2015 2016 2017 2018 2019

A. Non-Current Assets (A1+A3+A4+A5+A6) 392,242,886 414,243,762 439,050,074 470,538,115 478,787,008 503,958,916

1.Capital work in progress 22,317,647 15,261,222 8,907,216 14,187,488 9,575,326 18,899,982
2.Operating fixed assets at cost 399,659,164 494,391,696 491,593,554 513,777,616 544,381,705 589,132,196
3.Operating fixed assets after deducting accumulated depreciation 279,568,078 292,135,517 315,138,488 323,452,002 346,504,341 361,047,443
4.Intangible assets 108,099 103,109 121,321 139,419 105,774 152,097
5.Long term investments 87,085,933 103,245,181 112,280,027 130,446,367 119,813,017 113,726,679
6.Other non-current assets 3,163,129 3,498,733 2,603,022 2,312,839 2,788,550 10,132,715
B. Current Assets (B1+B2+B3+B4+B5+B6) 267,810,546 245,347,454 251,592,345 288,012,968 333,443,855 411,342,299
1.Cash & bank balance 7,976,247 7,430,826 10,156,768 5,477,689 6,180,353 14,114,356
2.Inventories; of which 128,639,814 110,525,464 111,842,947 129,736,446 147,030,828 191,496,667
i)Raw material 70,285,113 63,056,070 64,038,958 78,377,054 97,946,750 131,293,799
ii)Work in progress 15,975,641 13,755,647 13,507,292 15,104,739 16,701,925 20,355,498
iii)Finished goods 42,315,910 32,428,769 32,855,429 35,199,681 31,213,079 39,186,299
3.Trade Debt / accounts receivables 66,280,627 58,956,022 53,320,343 60,382,490 85,702,010 108,632,832
4.Short term loans and advances 11,496,039 13,139,403 15,172,162 15,653,188 16,260,972 20,622,324
5.Short term investments 11,334,426 12,639,834 13,325,768 21,493,565 16,726,952 12,810,555
6.Other current assets 42,083,393 42,655,905 47,774,357 55,269,590 61,542,740 63,665,565
Total Assets (A+B) / Equity & Liabilities (C+D+E) 660,053,432 659,591,216 690,642,419 758,551,083 812,230,863 915,301,215
C. Shareholders' Equity (C1+C2+C3) 287,844,487 295,429,885 304,679,500 319,663,766 322,716,185 359,018,725
1.Issued, Subscribed & Paid up capital 51,288,570 51,327,863 52,740,446 52,592,014 53,363,099 60,652,312
i)Ordinary shares 50,135,237 50,179,530 51,592,113 51,480,348 52,251,433 60,340,646
ii)Preference shares 1,153,333 1,148,333 1,148,333 1,111,666 1,111,666 311,666
2.Reserves 169,153,395 176,482,371 182,024,867 195,582,436 188,914,228 215,671,351
i)Capital Reserve 67,304,431 77,586,794 81,564,291 92,397,875 61,223,717 50,007,208
ii)Revenue Reserve 101,848,964 98,895,577 100,460,576 103,184,561 127,690,511 165,664,143
of which: un-appropriated profit(loss) / retained earnings 35,476,828 25,336,315 26,056,940 21,797,107 39,075,632 73,044,517
3.Surplus on revaluation of fixed assets 67,402,522 67,619,651 69,914,187 71,489,316 80,438,858 82,695,062
D. Non-Current Liabilities (D1+D2+D3+D4+D5) 108,539,939 100,782,711 106,495,053 137,004,217 143,906,529 155,424,600
1.Long term borrowings 75,015,951 69,134,629 77,745,734 107,307,982 113,204,541 121,701,675
2.Subordinated loans / Sponsor's loans 6,321,803 6,277,300 5,534,128 5,220,080 5,319,567 4,558,088
3.Debentures/TFCs (bonds payable) 692,747 2,956,129 913,358 390,474 145,853 0
4.Employees benefit obligations 4,496,485 5,403,396 5,862,503 5,933,205 6,532,929 9,331,953
5.Other non-current liabilities 22,012,953 17,011,257 16,439,330 18,152,476 18,703,639 19,832,884
E. Current Liabilities (E1+E2+E3+E4) 263,669,006 263,378,620 279,467,866 301,883,100 345,608,149 400,857,890
1.Trade credit & other accounts payables 56,983,106 60,888,402 64,142,366 64,044,293 75,585,532 89,249,247
of which: i) Trade credits 27,144,497 27,238,542 29,856,531 29,298,518 30,069,342 35,258,387
2.Short term borrowings 161,508,957 153,948,870 164,139,592 182,103,127 205,250,480 241,319,851
3.Current portion of non-current liabilities 25,061,913 27,429,417 32,767,755 33,831,806 38,868,023 39,267,673
4.Other current liabilities 20,115,030 21,111,931 18,418,153 21,903,874 25,904,114 31,021,119
F. Operations
1.Sales 630,021,979 567,661,596 519,177,829 552,842,491 629,884,557 790,799,795
i)Local sales (Net) 257,953,341 233,249,743 225,104,076 257,591,928 290,537,454 368,505,700
ii)Export sales (Net) 372,068,638 334,411,853 294,073,753 295,250,563 339,347,103 422,294,095
2.Cost of sales 571,754,847 521,749,939 477,779,514 506,453,510 570,076,617 690,857,734
 i)Cost of material 401,820,850 334,509,050 297,524,671 334,830,142 378,203,008 485,020,445
3.Gross profit / (loss) (F1-F2) 58,267,132 45,911,657 41,398,315 46,388,981 59,807,940 99,942,061
4.General, administrative and other expenses 32,354,490 32,858,340 30,054,381 30,536,000 36,739,454 47,660,047
i)Selling & distribution expenses 16,437,089 16,172,591 14,149,536 15,247,204 16,759,373 22,014,239
ii)Administrative and other expenses 15,917,401 16,685,749 15,904,845 15,288,796 19,980,081 25,645,808
5.Other income / (loss) 16,784,226 15,796,748 17,536,424 17,963,071 20,005,350 27,469,443
6.EBIT (F3-F4+F5) 42,696,868 28,850,065 28,880,358 33,816,052 43,073,836 79,751,457
7.Financial expenses 22,435,727 20,683,570 16,662,087 16,305,093 20,574,380 31,160,173
of which: (i) Interest expenses 18,553,834 17,089,689 13,298,241 14,283,259 18,161,900 27,146,559
8.Profit / (loss) before taxation (F6-F7) 20,261,141 8,166,495 12,218,271 17,510,959 22,499,456 48,591,284
9.Tax expenses 3,839,533 4,076,179 4,332,619 5,285,111 5,656,516 9,519,497
10.Profit / (loss) after tax (F8-F9) 16,421,608 4,090,316 7,885,652 12,225,848 16,842,940 39,071,787
11.Cash dividends 6,107,287 8,115,630 6,518,784 7,117,065 8,735,935 12,767,571
12.Bonus shares / stock dividends 21,780 485,125 615,619 953,345 79,476 37,500
G. Statement of Cash Flows
1. Net cash flows from operating activities 25,467,718 32,767,233 16,179,502 (6,911,635) 658,142 26,609,360
2.Net cash flows from investing activities (41,956,076) (32,060,930) (22,822,298) (38,586,030) (24,006,925) (40,894,989)
3.Net cash flows from financing activities 18,021,835 (122,120) 10,012,764 38,477,395 20,934,609 19,546,664
H. Miscellaneous
1.Total capital employed (C+D) 396,384,426 396,212,596 411,174,553 456,667,983 466,622,714 514,443,325
2.Retention in business (F10-F11-F12) 10,292,541 (4,510,439) 751,249 4,155,439 8,027,529 26,266,716
3.Depreciation for the year 18,607,387 18,415,192 19,211,467 20,820,340 21,887,948 24,970,715
4.Salaries, wages and employee benefits 60,771,528 59,567,587 57,268,875 61,084,468 67,184,113 78,089,552
I. Key Performance Indicators
P1. Net Profit margin / Net profit to sales (F10 as % of F1) 2.61 0.72 1.52 2.21 2.67 4.94
P2. Asset turnover (F1 to Avg {Current year(A+B),previous year (A+B)}) 1.00 0.86 0.77 0.76 0.80 0.92
P3. Return on Assets (F10 as a % of Avg {Current year(A+B),previous year (A+B)} 2.60 0.62 1.17 1.69 2.14 4.52
P4. Financial leverage (Avg. {Current year(A+B),previous year (A+B) to Avg. Current 2.29 2.26 2.25 2.32 2.45 2.53
year(C),previous year (C))})
P5. Return on equity (F10 as % of Avg {Current year(C),previous year (C)} 5.96 1.40 2.63 3.92 5.24 11.46
V3. Basic earnings per share (Rs./share) ( F10 to No. of shares) 3.15 0.79 1.49 2.31 3.07 6.50
Here some chunks of Textile Industry names from which we collect the data for financial
analysis.

AN textile Mills Ltd.(Formerly Ishaq Textile Mills Ltd.), Ahmed Hassan Textile Mills Ltd., Ali
Asghar Textile Mills Ltd., Allawasaya Textile & Finishing Mills Ltd., Amtex Ltd., Apollo
Textile Mills Ltd., Artistic Denim Mills Ltd., Ashfaq Textile, Mills Ltd., Asim Textile Mills
Ltd., Ayesha Textile Mills Ltd., Azgard Nine Ltd., Babri Cotton Mills Ltd., Bhanero Textile
Mills Ltd., Bilal Fibres Ltd., Blessed Textiles Ltd., Chakwal Spinning Mills Ltd., Colony
Textile Mills Limited, Crescent Cotton Mills Ltd., Crescent Fibers Ltd., D.M. Textile Mills
Ltd., D.S. Industries Ltd., Dar Es Salaam Textile Mills Ltd., Data Textiles Ltd., Dawood
Lawrencepur Ltd., Dewan Farooque Spinning Mills Ltd., Dewan Khalid Textile Mills Ltd.,
Dewan Mushtaq Textile Mills Ltd., Dewan Textile Mills Ltd., Din Textile Mills Ltd., Elahi
Cotton Mills Ltd., Ellcot Spinning Mills Ltd., Faisal Spinning Mills Ltd., Fatima Enterprises
Ltd., Fazal Cloth Mills Ltd., Feroze1888 Mills Ltd., Gadoon Textile Mills Ltd., Ghazi Fabrics
International Ltd., Globe Textile Mills Ltd., Gulistan Spinning Mills Ltd., Sapphire Fibres Ltd.,
Sana Industries Ltd., Sapphire Textile Mills Ltd., Sargodha Spinning Mills Ltd., Saritow
Spinning Mills Ltd., Gul Ahmed Textile Mills Ltd., Ibrahim Fibres Ltd., Pakistan Synthetics
Ltd., Rupali Polyester Ltd., S.G. Allied Businesses Ltd. (Formerly: S.G. Fibers Ltd.), Suhail
Jute Mills Ltd., Nishat (Chunian) Ltd., Nishat Mills Ltd., etc.

{Financial Statement Analysis of Companies (Non-Financial) Listed at Pakistan

Stock Exchange 2014-19}
 Strategic Group Mapping of Textile Industry

Barriers to Growth

In recent years, Pakistan has faced competition from regional players including Bangladesh,
India and Vietnam. In the past decade, Pakistan's share in global textile market decreased to 1.7
percent from 2.2 percent, Bangladesh saw an increase from 1.9 to 3.3 percent and India from 3.4
to 4.7 percent. Barriers to growth include:

 Cost of Production:

The rising cost of production in the country has stalled investment as well as export
competitiveness. A vertical shift in monetary policy and KIBOR rates have contributed to an
increase in the cost of doing business and reduced lending abilities of local manufacturers.

 Energy Crisis:

Pakistan is currently facing a large-scale energy crisis. Due to energy demand exceeding supply
by about 5000 MW. The government manages the deficit through daily power cuts (or
blackouts). These power cuts have significantly impacted manufacturing industries in
Pakistan. Several textile mills have closed their units due to inability to sustain operations. In
addition, the mills have reportedly turned away export orders due to the inability to fill these
orders when power cuts per day can last upwards of 12 hours.

 Research and Development:

There has been a limited effort to improve the quality and quantity of textiles in Pakistan through
research and development, limiting the competitiveness of Pakistan's textiles in the global
market.

Reforming Hundreds:
In 1999, as a result of an anti-coup (as claimed by Musharraf Government), Muslim Leagues
government was ousted and Army took over the government. Military government had to face
four serious economic challenges as legacy of Political government:
 a. Heavy external and domestic indebtedness
b. High fiscal deficit
c. low revenue generation capacity; rising poverty and unemployment
d. Weak balance of payments with stagnant exports.

The country faced a serious external liquidity problem as its reserves were barely sufficient to
buy three weeks of imports and could not possibly service its short-term debt obligations.

Formation of Ministry of Textile:

The Ministry of Textile Industry was created in 2004. The need to establish a separate ministry
for textiles had been on the cards for several years as this sector contributes 8.50% of the
national income, constitutes more than 60 % of to the export earning of the country, employs
40% of the industrial labor force.

1. Formulation of Textile policy

2. Coordination and liaison with Federal agencies/institutions, provincial Govts and Local
Governments entities for facilitation and promotion of the textile sector;
3. Liaison, dialogs, negotiations, except trade negotiations, and cooperation with
international donor agencies and multilateral regulatory and development organizations
with regard to textile sector;
4. Setting of standards and monitoring and maintaining vigilance for strict compliance of the
standards throughout production and value chain;
5. Textile related statistics, surveys, commercial intelligence, analysis and dissemination of
information and reports on international demand patterns, market access etc
6. Linkages with cotton and textile producing countries;
7. Training, skill development, research for quality improvement and productivity
enhancement throughout the production/value chain;
8. Management of Textile Quotas; and,
9. Exercise administrative control over:

 Federal Textile Board

 Textile Commissioner s Organization
  Synthetic Fiber Development and Application Center, Karachi
 Textile City Projects, Karachi/Faisalabad
 National Textile University, Faisalabad
 Directorate General of Textiles & Quota Supervisory Council
 All textiles related EPB/EDF funded institutes concerned with skill development in
various sub-sectors of textile industry
 Textile Testing Laboratory, Faisalabad
 Garment City Projects at Lahore, Faisalabad and Karachi.
 Pakistan Cotton Standards Institute, Karachi.

Re-structuring of Textile Industry to Boost-up:

 Low Interest Rates on bank Loans
 Decrease in Cost of Production
 Foreign Contract

Increase in Textile Exports

Pakistan’s textile exports seem to have largely recovered from the Covid-19 pandemic
shocks and are still growing. The recent monthly data published by the Pakistan Bureau of
Statistics for the first four months of the current financial year confirms that the textile
and clothing export shipments are back on growth trajectory both in terms of their
quantity and dollar value.

The data shows that the textile shipments have surged by 3.8 per cent to $4.8 billion between
July and October from $4.6bn a year ago. The rise in the textile and clothing group has been a
wee faster than the 0.6pc growth in the overall export. The export recovery is most prominent in
the knitwear, home textiles and denim segments.

There is also a significant decline in certain cases — in the shipments of the basic textile
commodities such as yarn and grey cloth, indicating that the country is exporting more value-
added products than ever before. It also reflects a shortage of raw materials for the value-added
industry owing to an extremely poor cotton harvest this year. Besides, the local cotton prices
have peaked to a 10-year high on account of a sharp drop of 37.6pc in the cotton arrivals for
ginning to 4.6 million bales by December 3 compared with 7.4m bales last year.
 ‘The domestic industry is already planning expansion and is ready to invest $5
billion across the textile chain to double our exports by 2025’

The government has recently announced a lucrative energy package for the industry to help the
exporters recuperate from the Covid 19 shock. The package does away with peak electricity
rates, offers reduced tariffs on additional power consumption, and fixes power price at $0.07 a
unit and gas tariff at $0.065mmbtu for the export industries.

In addition to that, the central bank has reduced interest rates by 625bps, approved refinancing of
wages to prevent layoffs during lockdown period and deferred payments of the principal amount
of loans as part of the debt restructuring offered to households and businesses, provided relief
under the Export Financing Scheme (EFS) and the Long-Term Financing Facility (LTFF).
Furthermore, the State Bank has also launched a long-term concessionary financing facility for
boosting investments in new capacity expansion and up-gradation of technology.

“Most exporters have orders filled till March,” says M I Khurram, chairman of Comfort
Knitwear. “The recent rise in exports is because of strong orders for the winter season in Europe
and the United States. We are expecting exports to increase in the coming months.”

He says the textile exports have been helped by multiple internal and external factors after three
tough years. “Internally, the energy package announced for the export industry and market-based
exchange rates have helped exports become competitive. Moreover, the suspension of the
International Monetary Fund economic stabilization program has also provided the economy
with some breathing space.”

Textile shipments have surged by 3.8% to $4.8 billion between July and October
from $4.6 billion a year ago

The external factors that have helped the orders from the West to almost double since July,
according to Mr Khurram, include the US-China tensions, and ongoing supply disruptions
induced by the Covid-19 pandemic in India and Bangladesh. “These factors have helped Pakistan
grab additional export orders from Europe and America. With Vietnam and Cambodia already
working to their full capacity, the buyers had only Pakistan, where manufacturers had idle
production capacity, to turn to.

“Europe remains our biggest buyer at the moment as the demand in the US remains subdued
owing to rising infections there. But many like us are now planning to expand our production
capacity, hoping we can increase and retain our market share in future as well.”

He says Pakistan could not increase its unit prices in dollars because of product quality issues.
“Since most exporters of value-added textiles are small- to medium-enterprises they do not have
capacity and wherewithal to improve the product quality. Additionally, we grow very poor
quality cotton. Unless we work across the textile supply chain to improve the product quality our
export will not grow rapidly (both in dollar and volume terms).”

Others agree with him. “At present, we are the most competitive textile exporting country in the
world,” argues Khurram Mukhtar, chief executive officer of Sadaqat Limited in Faisalabad.
“Currently, we are witnessing an unprecedented boom in export demand. “We have both cost
and tariff advantages over our Chinese competitors in European and American markets while our
Indian and Bangladeshi rivals are struggling because of supply chain disruptions. Pakistan is now
an emerging country in textiles.”

He sees a resurgence of a strong appetite for value-addition in the country. “The data shows that
value-added exports are rising at the expense of raw materials like cotton, yarn and cloth. Now
we need to prepare ourselves to sustain our increased share in the international market when our
rivals return to it and fight back for their lost share. The domestic industry is already planning
expansion and is ready to invest $5bn across the textile chain to double our exports by 2025. But
for that to happen we require the long-term policy framework in the shape of the textile policy to
ensure that the present favourable policies will not be rolled back in the middle of the way.”

But exporters like Ijaz Khokhar think both the government and the exporting community need to
somewhat temper their optimism. He believes that the resurging virus infections at home and
abroad and possible raw material shortages for the value-added industry could reverse the export
gains in two to three months. “How the situation turns out eight weeks from here depends on if
the government is ready to tweak its policies like removal of customs duty on yarn imports to
support the exporters”

He concludes: “we are seeing unprecedented growth in textile & clothing exports. The new
orders are a windfall for Pakistan’s industry. How long will this windfall last? You never know.
It can sustain for years to come and it can fizzle out soon. It all depends on how we want to steer
this industry into the future.”

Published in Dawn, The Business and Finance Weekly, December 14th, 2020