Companies, just like humans, respond to the environment that surrounds them. And most enterprises in Pakistan have followed the doom and gloom prevalent in the country; well most, sans Nishat Mills.
The textile maker has once again bucked the trend and posted healthy profits in the year ending June. It seems the group is well cocooned to maintain profitability regardless of the market and economic conditions.
Sales volumes were higher for the firm on both domestic and international fronts, thanks to its strong reputation and brand equity, given its long history in the textile business.
A close eye on market trends allowed managers at NML to stock up on raw cotton stocks, before the crisis in the last quarter of the year, helping the firm achieve full utilization of its operative capacity.
Vertical integration, from spinning to value added products, helped the company achieve slightly higher gross margins, already in a comfortable range.
And if strong performance wasn enough to satisfy the companys directors, healthy dividend income from shareholdings in associated companies, primarily MCB, helped bolster the already strong bottom line.
Thats not to say that all is hunky-dory for the firm. Operating costs have risen significantly in the past year. A significant rise in yarn prices due to shortages in the domestic market, coupled with rising fuel costs - NML has its own captive power plant, and the rising inflation may just be some of the cost pressures on the firm. They are likely to stay with the firm and the economy in the near term.
Most interesting in the company announcement was the firms plans to establish a subsidiary in the UAE, with an initial equity investment of $2.7 million. Details of operations have not been clarified yet.
Future outlook for the group remains strong. Despite supply side pressures on the companys core business, investments in associated firms - power sector and banking - are likely to keep the balance sheet solid.
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Nishat Mills Limited (NML)
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Rs (mn) 2010 2009 % Chg
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Sales 31,536 23,870 32%
Cost of Sales 25,555 19,519 31%
Gross Profit 5,980 4,352 37%
Gross Margins 19% 18% 1%
Distribution Cost 1,715 1,316 30%
Admin Expenses 545 435 25%
Other Operating Income 982 599 64%
Finance Cost 1,127 1,447 -22%
PAT 2,915 1,268 130%
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Source: Company announcement
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