Strong growth spurs mill to go for major expansion

Premium Textile is investing most of its earnings to boost sales by 60%.


Farhan Zaheer March 17, 2013
The Premium Textile Mills' stock price closed at Rs106 in trading on the KSE on Friday, March 15. PHOTO: FILE

KARACHI: It is generally perceived that Pakistani businesspersons mostly complain, and only occasionally feel grateful of the good that they derive from their homeland. In a refreshing break from this trend, Premium Textile Mills looks not only satisfied with its continuous growth, but is also going for a major expansion drive to boost volumes by 60% in the next six months.

Premium Textile Mills, a Karachi-based company listed on the Karachi Stock Exchange, intends to invest most of its earnings from the last three years, during which it earned handsome profits.

“We have had three good years, and now we want to invest most of what we have earned because we believe in continuous expansion,” Yasin Siddik, executive director of Premium Textile Mills Limited, tells The Express Tribune. “We believe in non-stop modernisation and improvement in efficiency, without which one cannot survive.”

The company is targeting a 60% increase in sales by September this year in the wake of an ongoing expansion drive, including the hiring of 800 more employees that will take its total workforce to 2,100 individuals.



Premium Textile is a spinning mill that exports 55% of its products, while the rest is sold in the domestic market. It also has two sister concerns – an export-oriented private limited garment company, and an automobile parts manufacturing unit in Karachi.

“There is no dearth of textile companies that reaped rich dividends in the last two or three years,” Siddik says. “But yes, scores of companies could not sustain the ups and downs and either restricted their operations or packed up.”

A myth

Siddik believes that the exodus of textile businesses from Pakistan to Bangladesh is just a myth. “I know some companies have diversified and started working in Bangladesh, but there are very few textile firms that have shut down completely in Pakistan and shifted to Bangladesh,” he says, adding that some sections of the value added textile industry had hyped up the issue in an attempt to press the government for concessions.

In recent years, spinning mills in Pakistan have enjoyed very good times with a sharp increase in yarn exports to China. Commenting on this, Siddik points out that it has become much more expensive for the Chinese to produce basic textile products, including yarn, prompting them to shift focus to value added products and imported yarn and fabric from Pakistan and other countries, where cost of production is comparatively lower.

Earnings

In fiscal year 2011-12, sales of Premium Textile dropped 11% to Rs4.13 billion. After-tax profit stood lower at Rs194 million, as against Rs243 million in the previous year; but it was still not as bad, considering a sharper decline in profits of other leading textile companies because of a sudden fall in world cotton prices.

The company’s stock price closed at Rs106 in trading on the KSE on Friday, March 15. According to Siddik, the share price stood below Rs30 three years ago, when the company posted profits of Rs2.8 million, a negligible figure compared to current earnings.

“We have been paying dividends for the last 18 years without any break, which has fostered confidence among our shareholders. This has definitely helped us,” he says.

He stresses that a 5% income tax benefit is not enough to encourage companies to get listed on stock exchanges. Earlier, when Premium Textile was listed in the early 80s, the tax benefit was 10%. “This is why we do not see any enthusiasm among companies to be listed on the bourses,” he observed.

Published in The Express Tribune, March 18th, 2013.

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