FLASHNEWS:

Gul Ahmed Textile Sees Profit Growth Despite Cost Pressures

Karachi, Gul Ahmed Textile Mills Ltd. (GATM) detailed its financial and operational performance during its 9MFY24 analyst briefing today, showing strong sales growth despite increased costs and challenging economic conditions.

According to AKD Securities Limited, GATM reported a 31% year-over-year increase in sales, reaching PkR105 billion, and a 35% increase in earnings, totaling PkR2.3 billion for the nine months ending FY24. However, gross margins contracted from 13.6% in 9MFY23 to 11.5% due to rising energy and labor costs. Looking forward, the company expects exports to remain flat year-over-year at US$360-380 million in FY25, as it plans to shift focus towards high-value partners to mitigate elevated energy costs.

Management voiced concerns about the FY25 budget's regressive impact on Pakistan's textile exports, citing the sector's high taxation relative to regional competitors. They also expect a downturn in textile exports following the fulfillment of current orders, attributing this to stringent budgetary measures and high interest rates. To diversify revenue streams, GATM plans to introduce new product segments in Health and Hygiene and Hotel Contracting, aiming for higher value per kilogram.

The company remains reliant on internal power generation, mainly using gas, and occasionally diesel and furnace oil during gas shortages. With an average energy cost of PkR35/kWh, GATM is pursuing energy cost reductions through solar projects, expecting to commission a 1.4MW solar installation by July 2024 and a 17.1MW setup by January 2025.

Despite challenges, GATM has managed to reduce its long-term debt, though it reported an increase in short-term borrowing due to higher utility costs. The company is also optimizing its retail operations by relocating and expanding stores to better respond to market conditions.