After a promising first quarter, Nishat Mill Limited (PSX: NML) has slightly underwhelmed investors in the second quarter. For the half-year ended FY17, Pakistans leading textile composites sales were up two percent year-on-year, but higher costs saw gross profit decline by 14 percent. The bottomline was flat year-on-year, as against 97 percent growth in the first quarter.
The increase in Nishats cost could likely have been due to a significant jump in cotton prices, not to mention an increase in minimum wage. The slight growth in the companys topline is due to better performance from its value-added textile segment, while the yarn, weaving, and dyeing divisions continue to bring in lower returns.
Nishat Mills bottomline is largely supported by its other income, which for the current quarter was equal to 98 percent of the gross profit! Other income saw 15 percent growth due to associate companies paying strong dividends during the period.
Going forward, Nishat is likely to be a key beneficiary of the textile incentive package and its potential diversification into the auto space is another exciting prospect.
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