Blessed Textiles Limited

Blessed Textiles Limited (PSX: BTL) was set up under the repealed Companies Ordinance, 1984 as a public limited company. The company’s business is manufacturing and selling yarn and woven fabric. It also generates electricity but primarily for its own consumption.

Shareholding pattern

As at June 30, 2022, close to 49 percent shares are held under the associated companies, undertakings and related parties. Within this category, majority shares are held by M/S. Faisal Spinning Mills Limited. Over 35 percent shares are with the directors, CEO, their spouses and minor children, within which the major shareholders are Mrs. Samia Bilal, Mrs. Fatima Amin, while roughly 4 percent shares are owned by each of the following: Mr. Muhammad Amin, Mr. Adil Shakeel and Mr. Bilal Sharif. The general public owns 9 percent shares while another 6 percent shares are held under insurance company. The remaining less than 1 percent shares are with the rest of the shareholder categories.

Historical operational performance

The company has mostly seen a growing topline with the exception of FY16. Profit margins in the last six years have been more or less stable between the years FY17 and FY20 before witnessing a sharp rise in FY21 and FY22.

Revenue in FY18 grew by over 27 percent to cross Rs 10 billion in value terms. This was attributed to double-digit growths seen in both, local sales and export sales, at 29 percent and 22 percent, respectively. While fabric sales had declined, local sales and export sales of yarn had increased. But with production cost remaining close to 90 percent, gross margin grew marginally to 10.4 percent. This also reflected in the net margin that was marginally higher at 3.6 percent, compared to 3 percent in the previous year.

Topline continued to grow in FY19, at over 20 percent crossing Rs 12 billion in value terms. Local sales and export sales yet again registered double-digit growth at 17 percent and 25 percent, respectively. A further breakdown reveals that sales of fabric reduced in the domestic market, but increased three times in the international market encouraged by currency devaluation. Cost of production fell to almost 87 percent of revenue allowing gross margin to reach 13 percent. Net margin also increased, although marginally, to 5 percent, as finance expense grew to consume 3 percent of revenue. The latter was a result of an increase in interest rates.

Growth subdued in FY20 as topline grew by less than 1 percent. Although export sales posted a growth of 31 percent, local sales reduced by 5.7 percent. Within the local sales, majority of the decrease was seen in sales of fabric, while that of yarn increased. Cost of production reverted to almost 90 percent of revenue, reducing gross margin to 10 percent for the year. Net margin also followed as it decreased to 3.4 percent.

Topline growth recovered in FY21 as it witnessed growth close to 25 percent to reach Rs 15.4 billion in value terms. While growth in export sales was relatively curtailed at 5.6 percent, local sales picked up incredibly by 46 percent. The comparatively low growth in export sales can be attributed to border closures during peak Covid-19 months, as well as the resultant delay in shipments and lack of cargo ships. With production cost falling to its lowest seen thus far at 78.5 percent of revenue, gross margin escalated to 21.45 percent, followed by net margin that was recorded at 13.9 percent. Bottomline, at over Rs 2 billion was also recorded at its highest thus far.

Recent results and future outlook

The company witnessed the largest growth in revenue in FY22 at nearly 43 percent to reach an all-time high Rs 22 billion in value terms. Export sales grew by 68 percent while local sales posted a growth of almost 29 percent. A further breakdown of sales reveals that there was a growth in both, local sales and export sales of yarn and fabric as demand had been recovering after the lockdowns that were in place during Covid-19 pandemic. Cost of production fell to another low of 77 percent that allowed gross margin to peak at almost 23 percent. However, growth in net margin year on year was marginal at 14.5 percent due to increase in distribution expense as a share in revenue, as well as a higher taxation expense. The increase in distribution expense was due to higher ocean freight and forwarding associated with export sales, and commission associated with local sales.

Global events such Ukraine-Russia war, along with a slowdown in China, and tighter financial conditions in prominent economies such as US and European countries adversely impacted business sentiments, and demand. Combined with this is the havoc created by the floods in the country as well as the political situation on the domestic front that is increasing uncertainty. Thus, future profitability will be impacted due to currency devaluation and reliance on imports for raw materials.