Khyber Textile Mills (PSX: KHYT) was incorporated as a Public Limited Company in Pakistan in 1961. The company was initially engaged in the manufacture and sale of cotton and polyester yarn and cloth, however, since 2017, the company has suspended the textile production line and is engaged in the agricultural livestock business. Moreover, it has been renting its excess buildings for warehousing and rental purposes since 2016 as an alternate line of business.
Pattern of Shareholding
As of June 30, 2024, KHYT has 1.227 million shares outstanding which are held by 522 shareholders. The general public has a majority stake of 98.27 percent in the company. The remaining shares are held by insurance companies, joint stock companies, financial institutions, investment companies, etc.
Historical Performance (2019-2024)
Except for a year-on-year dip in 2024, KHYT’s topline (sale of livestock) has been enlarging over the period under consideration. Conversely, its bottom line is in the positive zone only in 2021. It is striking to note that even in 2021, the company made operating losses just like any other year, however, “other income” came to rescue the bottom line from making net losses. Another key observation is that the KHYT has been making a gross profit in all the years under consideration; however, hefty administrative expenses didn’t allow the gross profit to trickle down. Administrative expenses stood as high as 371 percent of the company’s top line in 2019. However, over the years, the company has been able to squeeze its administrative expenses proportionally which stood at 92.32 percent of KHYT’s topline in 2024.
Let’s delve into these two accounts – “other income” and “administrative expenses” which have been the game changers for KHYT’s bottom line. The “Other income” account mainly comprises trade creditors written back. In the administrative expenses account, the main culprit is depreciation expense which inflates this account to an abysmally high value. Another factor that tends to buttress the company’s bottom line is the rental income on its vacant buildings and warehouses. The company has also started making paltry agricultural income since 2020.
In 2019, the company’s textile business remained halted; however, the company recorded 100.91 percent year-on-year in its revenue on the back of the sale of agricultural livestock. KHYT’s topline stood at Rs.3.516 million in 2019. Cost of sales mounted by 49.66 percent in 2019 which mainly comprised of animals purchased as well as animal food and medicines consumed during the year. KHYT recorded a 724 percent year-on-year rise in its gross profit which stood at Rs.1.096 million in 2019. This translated into a GP margin of 31.17 percent in 2019 versus a GP margin of 7.6 percent recorded in the previous year. Administrative expense remained largely intact during the year; however, it stood at 370 percent of KHYT’s topline in 2019 versus 749.20 percent of its topline in 2018. The company’s rental income grew by 8.86 percent in 2019 to clock in at Rs.6.854 million. Operating loss dropped by 22.74 percent in 2019 to clock in at Rs.5.417 million. KHYT wrote back liabilities worth Rs.15.952 million in 2018 which it didn’t do in 2019. This resulted in a net loss of Rs.3.547 million in 2019 versus a net profit of Rs.10.705 million recorded in the previous year. Loss per share stood at Rs.2.89 in 2019 versus EPS of Rs.8.72 recorded in the previous year.
Unlike other industries which remained under severe pressure during 2020 owing to the global pandemic, KHYT’s topline boasted the highest year-on-year growth of 129.27 percent in 2020 to clock in at Rs.8.061 million. The main source of revenue the sale of livestock appears to be unaffected by the lockdowns imposed in March 2020. Cost of sales surged by 174.55 percent in 2020 mainly on account of the higher cost of animals purchased during the year. Gross profit improved by 29.29 percent in 2020, however, the GP margin dipped to 17.58 percent. Administrative expenses mounted by 36 percent in 2020 mainly on account of higher depreciation expenses incurred during the year. With government restrictions on all non-essential business activities, the company’s rental income took a hit in 2020. KHYT recorded an operating loss of Rs.9.92 million in 2020, up 83.15 percent year-on-year. Unlike last year, the company wrote back liabilities worth Rs.6.128 million in 2020. Consequently, the company posted a net loss worth Rs.1.957 million in 2020, down 44.82 percent year-on-year. This translated into a loss per share of Rs.1.57 in 2020.
In 2021, KHYT’s topline grew by 19.31 percent year-on-year to clock in at Rs.9.618 million. Gross profit in absolute terms grew by 17.97 percent in 2019, however, GP margin nosedived to 17.38 percent in 2021. Administrative expenses dropped by 6.18 percent in 2021. This was the only year during the period under consideration where the company posted net profit. While rental income continued to slide in 2021 to the tune of 19.86 percent year-on-year, trade creditors written back during the year amounting to Rs.18.122 served as a knight in shining armor. Consequently, KHYT posted a net profit of Rs.5.412 million in 2021 with EPS of Rs.4.41 and NP margin of 56.27 percent.
In 2022, KHYT’s net sales strengthened by 51.72 percent to clock in at Rs.14.59 million. Gross profit heightened by 125.89 percent in 2022, resulting in an improved GP margin of 25.88 percent. Lower depreciation expense drove down administrative expenses by 7.91 percent in 2022. Rental income which was plunging for the past two years, ticked up by 1.62 percent in 2022. Operating loss plummeted by 36.2 percent in 2022 to clock in at Rs.6.303 million. The company didn’t write back any liabilities in 2022. This resulted in a net loss of Rs.5.297 million in 2022 with a loss per share of Rs.4.32.
KHYT recorded 85.75 percent enhancement in its topline in 2023 which clocked in at Rs.27.104 million. Cost of sales mounted by 79.61 percent in 2023, resulting in a 103.34 percent rise in gross profit. GP margin slightly ticked down to clock in at 28.33 percent in 2023. Administrative expenses inched up by 3.42 percent in 2023 mainly on account of higher payroll expenses incurred during the year owing to inflationary pressure. The number of employees stood at 9 in 2023. Moreover, no salaries were paid to the company’s directors, CEO, and other executives. Rental income grew by 2.14 percent in 2023. KHYT recorded a 28.17 percent decline in its operating loss which stood at Rs.4.528 million in 2023. No liabilities were written back during the year, resulting in a net loss of Rs.3.915 million in 2023, down 26.11 percent year-on-year. Loss per share stood at Rs.3.19 in 2023.
In 2024, KHYT’s topline dipped by 32.28 percent to clock in at Rs.18.355 million. The cost of sales also dipped by 31.48 percent in 2024. This resulted in 34.3 percent lower gross profit in absolute terms. GP margin also eroded to 27.48 percent in 2024. Administrative expenses inched up by 6.85 percent in 2024 due to higher payroll expenses in line with inflationary pressure. Rental income improved by 27.67 percent in 2024. Operating loss multiplied by 27.10 percent in 2024 to clock in at Rs.5.755 million. No liabilities were written back during the year. This resulted in a net loss of Rs.4.663 million in 2024, up 19.12 percent year-on-year. Loss per share was recorded at Rs. 3.8 in 2024.
Recent Performance (1HFY25)
During the period under consideration, the company repurposed its vacant land for agricultural activities. However, the company continued to rent out some of its vacant buildings and warehouses as additional sources of revenue. During 1QFY25, KHYT didn’t make any livestock sales. No cost of sales was incurred and hence no gross profit/loss was recorded during 1QFY25. The only source of income was rent which grew by 46.15 percent to clock in at Rs.2.202 million in 1QFY25. Administrative expenses surged by 36.76 percent in 1QFY25. KHYT recorded an operating and net loss of Rs.3.956 million in 1QFY25, up 42 percent year-on-year. Loss per share stood at Rs.3.22 in 1QFY25 versus a loss per share of Rs.2.27 recorded during the same period last year.
Future Prospects
KHYT doesn’t appear to be resuming its textile business in the near future under the litigation of default pending in the High Court to recover outstanding liabilities. Its accumulated loss stood at Rs.14.517 million as of September 30, 2024, versus an accumulated loss of Rs.10.56 million recorded during the same period last year. The unavailability of credit lines is impeding the company from carrying on the BMR process and acquiring the working capital required to resume its textile production.