KARACHI: Profits at Pakistan's largest listed textile companies rose 11% in the fiscal year that ended in June, even as sales stalled, with lower taxes and borrowing costs doing most of the work, according to a report by Topline Securities.
The 20 companies analyzed earned a combined 51.9 billion rupees (about $185 million) after tax in fiscal 2026, up from 46.7 billion rupees a year earlier, the Karachi brokerage said in a sector report dated Oct. 13.
Sales were essentially flat at 1.4 trillion rupees, or roughly $5 billion, down 0.3% from the previous year. Gross profit slipped 0.2% to 183.7 billion rupees, leaving the gross margin unchanged at 13.1%.
The gains came from the bottom of the income statement. Finance costs fell 19% to 54.5 billion rupees, which Topline attributed to lower financing rates and reduced borrowing under the central bank's Export Finance Scheme. The effective tax rate dropped to 33.2% from 37.1%, mainly because companies reversed deferred tax liabilities after changes to the future super tax for exporters. Export-oriented companies are being exempted from the levy.
Other income, by contrast, fell 12.4% to 41 billion rupees.
The companies, which include composite, spinning, weaving, woolen and apparel manufacturers, account for 83% of the market capitalization of the selected sector, Topline said.
Pakistan's overall textile exports reached a record $17.6 billion in fiscal 2026, up 2% from a year earlier and equal to 57% of total goods exports. Value-added textile exports grew 3% to $13 billion.
Cotton prices were little changed. The Cotlook A Index averaged about 79 cents per pound, translating to local prices of around 18,353 rupees per maund, compared with 18,268 rupees the previous year.
Three companies generated 48% of the sector's profit. Interloop Limited, the largest by market value, reported a 129% jump in consolidated profit to 12.7 billion rupees, or about 24% of the total. The company's gross margin improved 2.3 percentage points to 23%, its finance costs fell 35%, and other income rose more than sixfold, mainly from discounting income on sales-tax-related receivables.
Sapphire Textile Mills posted a 73% increase in unconsolidated profit to 6.8 billion rupees, even though sales fell 13% to 81.2 billion rupees. Other income more than doubled to 7.5 billion rupees.
Nishat Mills Limited, however, saw profit decline 9% to 5.5 billion rupees on lower dividend income and a drop in gross margin to 9.8% from 11.2%. A lower effective tax rate of 20%, compared with 44% a year earlier, softened the blow.
Results varied widely across the group. Sapphire Fibres' profit fell 81% to 2.6 billion rupees, and Gul Ahmed Textile Mills swung to a loss of 338 million rupees from a profit of 4.5 billion rupees. Several smaller companies posted triple-digit gains, including JK Spinning Mills, Tata Textile Mills and Fazal Cloth Mills.
The report said measures in the fiscal 2027 budget, including lower tax burdens and cheaper financing through the central bank, should support profitability. It also noted that companies are increasingly turning to renewable and other lower-cost energy.
The brokerage warned of risks, however. Elevated energy costs are likely to remain a challenge in the near term, it said, while uncertainty over Pakistan's continued GSP+ trade status with the European Union and a possible slowdown in the U.S. and Europe could weigh on the outlook.
