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March 14, 2014

Profits of textiles rise by 26 percent

 
March 14, 2014

KARACHI: Pakistani textiles posted earnings growth of 26 percent in the six-month period ended December 31, 2013, an analyst said on Thursday.
“This was due to improved demand and stable yarn margins. Further boost to the profits was provided by depreciating rupee and declining finance cost,” Tahir Saeed at Topline Securities said.
The profits of the listed textile firms increased by 26 percent to reach Rs17.5 billion, while gross profits posted a growth of 14 percent to Rs39 billion in the first half of FY14.
Favouring fortunes resulted in improved overall textile output in the period under review, which can be gauged from 6.8 percent uptick in sales to Rs283 billion, he said.
“This can also be observed from 7.8 percent growth in the country’s textile exports in the period under review to $6.9 billion. In terms of rupee, overall textile exports went up by 19 percent to Rs730 billion,” Saeed said. Strong cotton yarn, grey cloth and bedwear demand from China and other neighbouring countries has contributed to higher unit sales, while margins increased due to stable cotton prices and around seven percent rupee depreciation against the dollar, he said.
In the first half of FY14, local cotton prices remained in the range of Rs6,806 to Rs7,771 per 40kg as compared to Rs5,573 to Rs6,645 in the period under review, depicting less volatility this time.
The textile sector performed well in the first quarter of FY14 but then profits decline slightly by 0.3 percent in the second quarter of FY14 due to massive surge in the fuel and power costs and lesser textile exports in the second quarter of the current fiscal year, Saeed said.
“The rupee appreciation, relatively less orders from China, dumping of Indian yarn in the country, any disruption in the gas supply to the textile sector and materialisation of proposed 2 percent to 17 percent tax on exports of textile products may exert pressure on the profits of the textile sector going forward.

However, recently awarded GSP Plus status from the EU and resultant surge in the local demand will likely to ease off this pressure to some extent,” Saeed added.