Latest figures revealed that textile exports surged 8% to $7.5 billion in the first seven months of FY13. PHOTO: FILE
Profits of textile companies multiplied 12 times in the first half of fiscal year 2012-13, reaching Rs13.2 billion compared to Rs1.1 billion in the same period of previous fiscal year, says a research paper of Topline Securities.
In FY13 to date, the listed textile sector has given 70% price return, outperforming the 30% return of the Karachi Stock Exchange 100-share index.
The brokerage house assessed the financial results of a sample of 70 listed textile companies (excluding Azgard Nine) that represented 97% of the sector’s stock market capitalisation, estimated at more than Rs100 million each.
“We continue to see the sector under a favourable light with our conviction coming from consistent regional textile demand (especially for yarn) and downward sticky cotton prices. Further support to profitability is likely to come from the rupee depreciation, lower finance cost and improved gas supply beyond winter,” it said.
With improved dynamics, the textile sector is in the limelight at the Karachi bourse. Higher regional demand and firm cotton prices have mainly contributed to the manifold increase in profits of this largest industry of Pakistan. Many companies have succeeded in averting inventory losses that have turned loss-making firms into profits.
In terms of quarter-to-quarter performance, profits of textile mills improved by 29% to Rs7.4 billion in the second quarter (October-December) of FY13 compared to Rs5.8 billion in the previous quarter. In the same quarter last year, they had suffered a loss of Rs0.1 billion.
Rising exports, stable cotton prices
Latest figures revealed that textile exports surged 8% to $7.5 billion in the first seven months of FY13 because of stockpiling by China that had pushed up cotton prices in their domestic market and facilitated Pakistan’s exports, the report said.
Apart from this, rising labour cost has also placed China’s low value added textile firms at a competitive disadvantage in the region.
“Turnaround in profits is also attributable to stable cotton prices as textile units suffered huge inventory losses last year due to a sharp decline in cotton prices,” it said.
Published in The Express Tribune, March 14th, 2013.
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I am an Assistant Manager in a reputed textile company, but still our higher management says we are suffering a big loss. So we are not in a position to go for increments!!!