Lahore: Nishat Mills Ltd. (NML), a prominent player in the textile industry, has released its financial results for the first quarter of fiscal year 2026, revealing an 18 percent decrease in standalone earnings. The company reported earnings of PkR772 million, or PkR2.20 per share, compared to PkR944 million, or PkR2.68 per share, in the same period last year. The decline in profitability was primarily attributed to higher-than-expected taxation.
Revenue for the quarter showed a modest increase, climbing 4 percent year-on-year to PkR45.0 billion. This growth was driven by the introduction of the Denim and Workwear segment during the quarter. Despite this uptick in revenue, the bottom line was impacted by increased taxation.
The company's gross margins experienced a slight improvement, reaching 11.0 percent compared to 10.9 percent in the same period last year. This improvement was supported by declining cotton prices and energy costs, owing to lower coal prices and reduced grid tariffs. However, the benefit was largely offset by rising salary expenses.
Distribution expenses rose by 4 percent year-on-year to PkR2.2 billion, reflecting higher volumes. Other income, however, saw a significant decline of 35 percent year-on-year, falling to PkR1.5 billion from PkR2.4 billion in the same period last year. The decline was primarily due to the absence of dividends from power associates LPL and PKGP.
On a positive note, finance costs decreased by 36 percent year-on-year to PkR1.7 billion, mainly due to a drop in policy rates. However, the effective tax rate for the quarter stood at 56 percent, driven by the implementation of turnover tax amid lower profitability.
Despite the decline in quarterly profit, analysts at AKD Securities Limited maintain a 'Buy' stance on NML. They cite expectations of future earnings growth driven by a recovery in textile exports and improving retention prices, along with declining finance costs supporting the bottom line. Additionally, the company's trading discount relative to its portfolio value presents an attractive investment opportunity.