Nishat Chunian announces partial shutdown after one month

KARACHI:

Pakistan’s fifth largest textile company in terms of sales, Nishat Chunian Limited, has announced a partial shutdown of its production unit“after one month due to current market conditions”, according to a bourse filing on Wednesday.

The textile giant has 219,528 spindles and 2,880 rotors in spinning divisions.

“The company has decided to temporarily close 51,360 spindles (23.4% of the total) after one month,” Company Secretary Samina Aslam said in a notification to Pakistan Stock Exchange (PSX).

However, the remaining units are operating normally. “The company will restart these spindles as soon as market conditions improve,” read the notification.

“On the domestic front, fluctuations in the US dollar exchange rate and the recent surge in political instability are turning out to be very challenging for the industry,” the textile firm reported in its interim financial information for the quarter ended September 30, 2022.

“On the international front, the Russia-Ukraine war is a huge blow to the global economy, which has yet to fully recover from the effects of the pandemic,” it said.

Nishat reported a net loss of Rs130.83 million in the Jul-Sept 2022 quarter as compared to a net profit of Rs2.22 billion posted in the same period of previous year.

“This period (Jul-Sept) has turned out to be a difficult one, with reduced profit margins and high cost of borrowing being the primary reasons for the loss,” the company explained.

A majority of textile companies in the country manufacture goods mostly for export. The US and Europe are the major textile export markets for Pakistan.

Global economic slowdown and a recession-like situation in Europe have started hitting local companies’ textile exports in recent months.

Textile firms earn around 60% of total exports. Their partial or complete closure is a cause of concern at a time when the country’s foreign exchange reserves have depleted to less than five weeks of import cover at $6.11 billion.

Pakistan’s textile export earnings declined by 18.15% to $1.42 billion in November 2022 as compared to $1.73 billion in the same month of previous year, according to the Pakistan Bureau of Statistics (PBS).

Cumulatively, in the first five months of current fiscal year, textile export earnings decreased by 5.10% to $7.36 billion as compared to $7.75 billion in the corresponding period of last year.