Listed textile firms returns grow 35% in Q1 FY13

Thursday, November 08, 2012

 

Textile Firms

KARACHI: The major 15 listed textile units covering 80 percent capitalisation of textile units outperformed at Karachi Stock Exchange (KSE) 100-share index by 18 percent and posted 35 percent returns since the start of financial year 2012-13.

Pakistan’s textile stocks are in the limelight again on the back of earning turnaround and improved future outlook.

The stable cotton prices and improved textile demand from China is the driver behind profitability of the textile sector. In addition, recent reduction in interest rates, duty free export to European Union (EU) and reduction in Gas Infrastructure Development Cess (GIDC) is expected to support bottom-line further.

In the first quarter of 2012-13, these textile units’ sales grew by 25 percent to Rs 48 billion as against Rs 38 billion recorded in the same period last year.

The growth primarily stems from volumetric growth in yarn exports and rupees depreciation against the green back as country’s yarn volumetric export during grew by 62 percent in 1Q FY13 according to Pakistan Bureau of Statistics.

Stable cotton prices culminating into absence of inventory losses also help to support gross margins. Sector’s gross margins have improved by 440bps to 12.5 percent in Q1 FY13 as against 8.1 percent in 1Q FY12.

Analysts said overall textile sector profitability increased to Rs 1.2 billion in Q1 FY13 as compared to loss of Rs 0.5 billion in the same period last year.

As compared to June quarter, though sector’s sales grew by 2 percent, decline of 100bps in gross margins from 13.5 percent culminated into decline in profitability by 6 percent.

The chief reason behind decline in QoQ margins is the imposition of GIDC in Federal Budget FY13, which has now subsequently been brought down.

Other factors for sector’s profitability include the reduction in the GIDC, 150bps reduction in Export Finance Scheme and long term Financing Facility and implementation of Autonomous Trade Preference.

 

Courtesy: Daily Times

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