Gadoon Textile Mills Limited (PSX: GADT) announced its FY18 result yesterday which saw the company post solid growth in both its top-line and bottom-line. Even though the overall textile sector is going through a rough patch, GADT seems to be doing a good job of shaking the general sectoral trend. The script closed 2.2 percent higher on yesterday’s market close.

The company’s top-line increased by a decent 19 percent in FY18 on a year-on-year basis and crossed the Rs27.5 billion mark. Growth in revenues comes on the back of an increase in total exports which include yarn and knitting exports. Recall that the total knitwear exports recorded an increase of 15 percent as compared to FY17 and GATM has been in a good position to tap into that growth. Comparatively, the company’s local sales only saw a slight bump.

GADT’s increase in exports is attributable to the rupee depreciation as well as the government’s incentive package for textile exporters. Distribution costs have increased aggressively on account of increased freight incurred on higher exports of yarn and knitted fabrics. The company’s finance cost has increased by 68 percent on a yearly basis. That is attributable to the conversion of the GADT’s foreign currency exposure to local borrowing.

The bottom-line was strengthened by the company’s ‘other income’ as well as share of profit from associates – both those accounts saw a health boost of 68 percent and 24 percent, respectively. The revised export package has attributed to the rise in the company’s ‘other income’ due to additional rebate realisation.

GADT is investing in balancing, modernization and replacement (BMR) activities in order to boost its competitiveness in comparison to regional competitors. However, energy prices are still on the higher side for local industry, whereas the imposition of illogical duties is not helping either. The re-imposition of duty on imported cotton is a decision that should be revisited, especially in light of the consistently missed production targets of the local cotton crop.