The largest textile composite in the country, Gul Ahmed Textile Mills has had a less than eventful fiscal year; the company’s sales growth was a mere one percent year-on-year, while the bottom line declined by a whopping 51 percent. The numbers reflect the malaise surrounding Pakistan’s textile industry.
Gul Ahmed is a largely export-oriented business, with exports amounting to 65 percent of total sales as of FY14. As such, the company has taken a hammering, as the business environment continues to be highly non-conducive– the overvalued Rupee, high cost of doing business, and energy shortages have rendered the textile industry uncompetitive and have taken a toll on exports, limiting top line growth.
Commodity prices have been depressed, with cotton and oil – two major inputs – having seen multi-year lows this past fiscal year. However, yarn prices have also been depressed, and at the end of the day, Gul Ahmed’s spinning segment probably didn’t fare too well.
But on a more positive note, Gul Ahmed’s competitive advantage lies in its strong presence in the retail business. Its flagship store – Ideas by Gul Ahmed – is a heavy hitter in the fashion industry, and the company’s processing segment fetches far better margins than the yarn business. Moreover, the processing segment (fabric, made-ups, home textile) accounts for some 74 percent of revenue as of FY14. So, losses from the spinning segment were largely mitigated by sales from the processing segment. This is reflected in the gross margins having stayed flat at the 18 percent mark.
Nevertheless, the results were not too positive at the end of the day as other operating expenses were higher by 22 percent year-on-year, and this resulted in net profit falling by approximately half, and net margins contracting to 2 percent.
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GUL AHMED TEXTILE MILLS LIMITED
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Rs (Million) FY15 FY14 YoY
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Sales 33,355 33,013 1%
Cost of Sales 27,260 27,037 1%
Gross Profit 6,095 5,976 2%
GP Margin 18% 18% up
20 bps
Other Operating Expenses 4,320 3,553 22%
Other Income 343 236 45%
Operating Profit 2,118 2,659 -20%
Finance Cost 1,334 1,163 15%
Profit Before Taxation 783 1,496 -48%
Provision For Taxation 178 261 -32%
Profit After Taxation 605 1235 -51%
NP Margin 2% 4% down
190 bps
EPS 2.65 5.4 -51%
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Source: company notice to KSE.
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