Karachi: The textile sector in Pakistan experienced mixed financial outcomes in fiscal year 2024. While the sector saw a 22% year-over-year increase in revenue, attributed to stronger exports, earnings were negatively impacted by a combination of margin declines, currency fluctuations, and a significant rise in financial charges.

According to JS Global, during the fourth quarter of FY24, the sampled companies reported a 12% increase in topline growth year-over-year. However, gross margins decreased by five percentage points over the same period, and a rise in financial charges dampened the overall impact on the bottom line, which saw a modest increase of 3% year-over-year. On a quarter-over-quarter basis, both revenue and gross margins fell by one percentage point.

For the entire fiscal year, despite the notable revenue growth driven by enhanced exports of Pakistani textile products, the sector faced challenges such as a 3 percentage point decline in margins and a 46% increase in financial charges, all of which kept earnings growth negative. Looking ahead to FY25, the sector remains hopeful for improved earnings, banking on a recovery in export demand and favorable shifts in importer preferences from competitors like Bangladesh and China to Pakistan, India, and Vietnam. Additionally, a decline in interest rates, which have already decreased by 450 basis points since June 2024, is expected to provide some relief in finance costs. However, potential benefits could be offset by increased taxes due to a shift in the tax regime starting from FY25.