Textile composite sector shows 12 percent profits growth

06 Nov, 2008

Among the three textile segments, only one--composite sector--has shown positive growth of 12 percent in profits at Rs 1.5 billion in the first quarter (July-September) of FY09. The net sales of this segment grew by 34 percent to Rs 30.3 billion, primarily on the back of rupee depreciation, enhancing rupee-based export sales, Bilal Hameed, an analyst at JS Global Capital, said.
Gross margins, hence, improved by 450 bps to 21.3 percent. Negative impact on profits came from financial charges, which rose by 117 percent due to higher interest rates, and 34 percent fall in recurring other income, he said. The spinning sector plunged into losses during this period as it booked net losses of Rs 474 million, as compared to profits of Rs 249 million in the same quarter of FY08.
Sales improved by 20 percent, whereas gross margin stood at 12.5 percent, depicting an increase of 100 bps. Conversely, financial charges went up by a considerable 79 percent to Rs 1.5 billion. Other income and share of profit/loss from associates turned negative also, causing bottom line to dip.
The weaving sector also remained in losses as net losses amounted to Rs 24 million, against loss of Rs 5 million in the same period of last year. Although good growth in revenue and gross profit was witnessed, profits in the weaving sector were again victim of higher financial charges.
Similarly, other income, as in other segments, declined by a good 92 percent, providing no support to the bottom line. The analysis is based on a sample of 12 textile composite, 6 weaving and 25 textile spinning companies, representing 78 percent, 94 percent and 70 percent market cap of their respective sectors.

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