Grey cloth demand boosts Nishat Mills' Q1 bottom-line

For the first quarter ended September 2013, the company’s profit after tax increased significantly by 47.89 per cent at Rs 1.57 billion as compared to the corresponding quarter of last year. The growth was also higher than average 40 per cent growth registered by Pakistan’s textile sector in Q1 FY14.

The net sales of the company grew by 4.81 per cent during the quarter, helped mainly by strong demand for grey cloth in Europe, China and other neighboring markets. While sales of both the processed textiles and garments divisions witnessed decline during the quarter, the weaving division performed remarkably well. The company’s Grey Cloth sales registered an increase of 20.33 per cent at Rs 3 billion as compared to Rs 2.5 billion in the year ago period.

On the other hand, the yarn division recorded a decline of 3.33 per cent in sales at Rs 3 billion followed by “Processed and Home Textile” division with a decline of 3.39 per cent in sales at Rs 4.9 billion. “Overall bearish sentiments are prevailing in international and domestic markets as further decrease in yarn prices is expected. Resultantly, it is generating selling pressure especially in local market. Moreover, rising cost of energy is an additional burden on us,” said the company in a statement.

Garments division witnessed a decline of 16.77 per cent in sales at Rs 1.1 billion. “The profitability of Garments division of the Company decreased in the first quarter of financial year 2013-14 primarily because of low sales in the US and EU regions,” said Nishat Mills in a statement.

The company managed to boost its gross profit margins with production efficiencies and better cost management. The gross profit margin increased from 15.74 per cent in the corresponding quarter to 18.41 per cent in the current quarter. Margins were also boosted by stable cotton prices and around 6 per cent rupee depreciation against the dollar during the quarter.

Decrease in finance cost by 10.76 per cent in the current quarter as compared to corresponding quarter in the last year through better working capital management and reduction in borrowing rates was also key contributor to the profitability, said Nishat Mills.

The company also sees bright future prospects for the country’s textile sector, citing the expectations of increased textile exports to the EU after grant of Generalized System of Preferences Plus (GSP-plus) status from the European Union (EU) in January 2014.

Fibre2fashion News Desk - India