It has been a good year so far for Nishat Mills Limited (NML) and the recently released third quarter result has not disappointed either. For the 9MFY19 period, the company saw a 14 percent increase in revenue on a year-on-year basis the back of increased international orders and good performance of the value added segments.
The company’s cost of sales increased by 13 percent on the back of increased prices of raw materials in 9MFY19 as compared to the same period last year. However, the gross margins picked by 137 basis points while the gross profit increased by 24 percent as a result of increased value added sales and cheaper fuel mix for electricity generation.
NML’s spinning division has seen a tougher time relative to other segments given the increase in local cotton rates due to the depressing cotton crop this year. However, the company has commissioned its new open-end yarn manufacturing unit at Ferozewatan in Feb-19 as part of its capacity expansion strategy.
The company’s weaving division continues to show good profits while its home textile division has also operated at optimum capacity. The order flow has been promising and the management expects further orders from international customers.
Once again, the bottom-line surge was helped by the rise in other income which rose by 46 percent for the first nine months of this fiscal year as compared to the same period last year. This might be attributable to exchange gains on foreign currency receivables as a result of the rupee depreciation.
Finance costs increased by almost half for NML in the 9MFY19 period on a yearly basis which might be due to funding of working capital requirements amidst the delay in processing of tax refunds by the government.
NML is investing heavily in balancing, modernisation and replacement and is one of the few textile firms in Pakistan that employs technology at par with its global competitors. It is also planning to acquire 12 Tsudakoma 230CM Airjet Dobby and 10 210CM tappet looms for its manufacturing facility located at Bhikki in line with evolving consumer preferences that require special weaves and modern designs. The company plans to induct these by Jun-19 and this increase in capacity is the result of a bullish outlook the textile sector by the firm’s management.