Pakistan’s textile juggernaut, Nishat Mills Limited (PSX: NML) recently released its 1HFY18 result which saw modest growth of 6 percent in its top-line. Textile exports have started picking up and registered an increase of 8 percent in 1HFY18 on a year-on-year basis. NML’s increase in revenue could be attributed to the rise in overall textile exports coupled with an increment in value added segments of the company.
However, a more than proportionate increase in its cost of sales due to higher cotton prices during the period took a hit on as gross margins which remained largely flat in 1HFY18 as compared to the same period last year.
The company was able to effectively manage its administration expenses which went down by 10 percent as compared to 1HFY17. On the other hand, NML got a boost of 6 percent in its other income on year-on-year basis which could be attributed to higher dividend payout from its power sector subsidiaries.
NML’s finance cost also went up by 7 percent on account of higher short-term borrowings to meet working capital needs.
NML has been looking to enhance its manufacturing capabilities to produce more technical and industrial fabric variants including polyester and viscose, in order to diversify its product range. This decision will be beneficial in getting more export revenue given cotton-based products are on the decline in global textile markets.
The company has also increased production capacity of its home textile division by 20 percent with and boasts of a higher number of digital printing machines. NML has also installed a new wider width washing plant enabling it to increase production capacity of reactive dyed and printed fabric.
This increased production capacity along with better quality products utilising technical fabrics will aid the company in getting more export orders. Add to this the recent PKR depreciation of 5 percent against the dollar and 10 percent against the pound, and export numbers for the textile composite will likely be higher in FY18.
NML also announced its intent to increase its share to 12 percent by subscribing 96 million shares in Hyundai Nishat Motor Private Limited (HNMPL) which will be an investment of Rs960 million. The growing demand for automobiles will also be a catalyst for NML earnings once its auto business gets going.
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