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Tuesday, May 28, 2024

Profits of textile sector in Pakistan plunge by 64 percent in first quarter of 2024

Stress on Pakistan’s textile industry listed at the capital market continued in the first quarter of 2024 as the sector grappled with challenges not only in exports but also in domestic markets.

It is surprising that at a time when KSE-100 has broken all the records butTextile Composite sector suffered a 64.2 percent YoY decline in net profit during the quarter, declining to Rs5.27 billion against Rs14.72bn in the same period last year.

In view of global economic slowdown demand for textile products remained subdued in the international market as the overall exports of the textile industry have remained stagnant.

On the domestic front high energy costs, costly financing, and the imposition of government taxation have escalated the cost of doing business. As per the results available at PSX web page,  sales revenue of textile sector worth worth Rs133.27bn as against Rs108.48bn during corresponding period of last year. This translated into an increase of 22.9 percent YoY.

But the increasing energy costs and escalating raw material prices compressed the profit margins significantly. The cost of sales ballooned by 35.0 percent YoY, depressing the gross profit by 16.1 percent YoY to Rs21.63bn during the period under review. Other income of the sector declined by 20.8 percent to stand at Rs2.79bn in Q1 2024 as compared to Rs3.52bn.

The selling and distribution expenses fell 27.9 percent YoY to Rs2.33bn depicting less efforts at sales level, administrative expenses fell 52.1 percent YoY to Rs1.55bn, while other operating expenses surged 379.1 percent YoY to Rs5.76bn.

Due to high policy rate the financial costs increased by 37.1 percent YoY to Rs7.18bn as compared to Rs5.24bn earlier. Moreover, the sector paid a higher tax worth Rs2.33bn against the Rs1.68bn paid in the corresponding period of last year, depicting a rise of 38.7 percent YoY.

Experts say the next quarter would be challenging for the textile sector in view of current global economic situation and local pressures on costs  

The sector result includes all big names like GATM, ILP, KTML, and NML. Most of these companies anticipate further pressure. With real GDP expected to grow at 2 percent this fiscal the overall economic activities are would remain subdued.

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