Blessed Textiles Limited (PSX: BTL) is part of the Umer group of companies. It was established as a public limited company under the repealed Companies Ordinance, 1984. The company manufactures and sells yarn and woven fabric. It also generates electricity but that is limited to the extent of self-consumption.
Shareholding pattern
As at June 30, 2021, about 49 percent shares are held under the associated companies, undertakings and related parties. Within this category, majority of the shares are held by M/S. Faisal Spinning Mills Limited. Another 35 percent shares are owned by the directors, CEO, their spouses and minor children. Of this, a major shareholder is Mrs. Samia Bilal. The general public/individuals own about 9 percent shares followed by over 6 percent held in insurance company. The remaining less than 1 percent shares are with the rest of the shareholder categories.
Historical operational performance
Since FY12, Blessed Textiles Limited has largely witnessed a growing topline with the exception of FY16 when it contracted by 10 percent. Profit margins between FY16 and FY20 have been relatively stable before increasing steeply in FY21.
In FY18, revenue growth for the company stood at one of the highest at over 27 percent, crossing Rs 10 billion in value terms. Export sales and local sales, both witnessed growths, at 22 percent and 29 percent, respectively. Further sales breakdown reveals that yarn sales, both in the domestic market and export market grew, whereas fabric sales declined. On the other hand, production cost remained close to 90 percent; therefore gross margin grew only marginally to 10.4 percent. This also trickled down to the bottomline, with net margin also marginally higher at 3.6 percent, from 3 percent seen in FY17.
Revenue growth in FY19 was sustained in double-digits at 20.4 percent, with topline crossing yet another milestone of Rs 12 billion. Local sales registered a growth of over 17 percent while export sales saw a growth of almost 25 percent. Local sales of fabric reduced slightly, but fabric export sales increased threefold. The latter is also indicative of the fact that currency devaluation made exports favourable in the international market. With cost of production reducing to almost 87 percent of revenue, gross margin improved to 13 percent. However, the increase in net margin to 5 percent was less pronounced compared to the growth in gross margin due to the escalation in finance expense. This was due to the rise in interest rates by the country’s central bank.
Revenue in FY20 was nearly flat as it grew by an insignificant 0.1 percent. While export sales continued to grow, posting a growth rate of almost 31 percent, it was offset to an extent by the fall in local sales. Local sales for fabric particularly had seen a major reduction, whereas yarn sales had increased. Cost of production, on the other hand, rose to nearly 90 percent of revenue, reducing gross margin to 10 percent for the year. This also reflected in the bottomline, with net margin also reducing to 3.4 percent.
The company was back on its growth momentum as it registered a growth rate of nearly 25 percent in FY21, with topline crossing Rs 15 billion in value terms. Both export sales and local sales increased by 5.6 percent and 46 percent, respectively. The increase in export sales is less pronounced most likely due to border closures and lack of cargo ships that has caused delayed shipments. Production cost, on the other hand, fell to an all-time low of 78.5 percent, allowing gross margin to peak at 21.45 percent. Despite the rise in distribution and other expenses, net margin also reached a peak at 13.9 percent as the growth in topline offset the rise in expenses.
Quarterly results and future outlook
Revenue in the first quarter of FY22 was higher by 40 percent year on year. While a breakdown of sales is not disclosed, it is likely that demand has risen in comparison to that seen in the same period last year when lockdowns had only eased and business activity was starting to resume gradually. Production cost was notably lower at over 79 percent of revenue, compared to 90 percent in the first quarter of FY21. As a result, gross margin was significantly improved year on year at 20.6 percent. This was further supported by the decline in finance expense from Rs 92 million in the 1QFY21 to Rs 26 million in 1QFY22. Thus, net margin was also significantly higher at almost 15 percent, compared to 2.6 percent in 1QFY21.
In the second half of FY21, the board of directors had approved the setting up of a new spinning unit that would increase production, as well as help the company achieve economies of scale as the current resources are capable to operate the unit without having to incur additional cost for human resource. Moreover, the company expects the civil work for required infrastructure to be completed by June 2022. In addition, expectation prevails that local cotton production will exceed the estimated 8.5 million bales which will ensure availability of cotton at better prices, compared to when it has to be imported.
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