Ibrahim Fibres Limited

Ibrahim Fibres Limited is a giant in the textile industry. With nearly Rs 23 billion in market capitalisation, the company takes its place among the top stocks on the KSE. It is one of the largest producers of polyester in the country. The company's core business is the production of polyester staple fibre (PSF). Its three polyester plants are located in Faisalabad and have the capacity to produce almost 400,000 tons of PSF.
These plants are based on the engineering and technology of Lurgi GMBH Germany, which is a part of Air Liquide France - market leaders in polyester polymer capacities with over 50 percent share in the world market. Other than that, the firm divides its spun yarn operations into three textile plants. These are equipped with Real Time Ring Monitoring System, Uster Ring Expert, Spin Vision, and Coner Pilot for online monitoring and analysing. Suffice to say, these plants are state-of-the-art; one of these plants is originally its own, while the other two are acquisitions - previously A.A Textile and Zainab Textile. Collectively, these three plants give Ibrahim Fibres over 136,000 spindles to its name
Ibrahim Fibres also has two power plants whose power generation capacity is 73.3 MW. These cater to the company's industrial operations for an uninterrupted and stable power supply. Finally, it is worth mentioning that the consortium of Ibrahim Leasing Limited and Ibrahim Group assumed control of Allied Bank in August 2004 by injecting Rs 14.2 billion into the capital of Allied Bank, acquiring 325 million additional shares of the company.
Prior Performance Ibrahim Fibers has seen an outstanding up tick in its top line over the past five fiscal years, but its profitability has fluctuated and eventually dwindled. As of FY14, the company's gross and net profits and profit margins were at historic lows.
Fiscal '14 were particularly rough on the company. As per the Director's report, the year under review witnessed a depression in the demand and prices of PSF. This happened after the National Tariff Commission withdrew anti-dumping duty on the import of PSF from China. The decision was taken at the onset of FY14 and PSF was dumped heavily by Chinese companies in the local market at exceptionally low prices. Thus, the profitability of the company was adversely affected. In addition, net profits were particularly low due to an exorbitantly high finance cost incurred over the year, since it was the first full year of operation after expansion. The projects included investments in power generation and polyester plant.
Moreover, Ibrahim Fibres does not have much of an export market - the company's exports exist only in name, and amount to even less than 0.1 percent of its sales. As such, given that the local market was being attacked by Chinese dumping, the company could do nothing as it had nowhere else to sell its product.
Recent Performance For the nine months ended FY15, Ibrahim Fibres' top line declined by 25 percent year-on-year, and gross profit plummeted by a heavy 86 percent. Both gross and net profit margins have fallen to near one percent for the nine-month period.
As mentioned earlier, PSF sales took a beating owing to the influx of Chinese dumping. In terms of textile, the company's yarn sales have also been lower. This is because the price of cotton has been on a downtrend lately, skewing the blend ratio of yarn in favour of cotton and thereby challenging the PSF growth in the country. Yarn production was also lower over the period, due to BMR activity being carried out at one of the textile plants.
Ibrahim Fibre's saviour came in the form of its associate company, Allied Bank, which gave its bottom line a near Rs 2 billion cushion. Otherwise, the net loss for the period would have stood south of Rs 1.5 billion.
Outlook The main challenge to the PSF industry as of right now is the dumping of Chinese products. The company has mentioned in its reports that it has been lobbying to convince the NTC to re-impose the duty. However, little has been seen or done on this front. There is some hope, however, as the PSF feedstock prices are expected to have bottomed out. Thus, the coming quarters might yield more fruitful results.

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Ibrahim Fibres Limited

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Rs (Million)                       9MFY15     9MFY14        YoY

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Net Sales                          27,684     37,014       -25%

Cost of Sales                      27,450     35,387       -22%

Gross Profit                          233      1,627       -86%

GP Margin                              1%         4%       down

                                                         300bps

Selling & Distribution Expenses       188        181         4%

Administrative Expenses               454        463        -2%

Other Operating Expenses                -      1,601          -

Finance Cost                        1,268      1,508       -16%

Other Income                           61         33        85%

Net Share of Profit of Associate    1,996      2,003         0%

Reversal of/Provision for Taxation    -55        406          -

Net Profit                            436      1,103       -60%

NP Margin                              1%         3%       down

                                                         200bps

EPS                                  1.40       3.55       -61%

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