Ayesha Mudassar

Kohinoor Textile Mills Limited (KTML) witnessed a decline of 26% and 42.5% in gross and net profits, respectively, in the fiscal year 2022-23, as compared to FY22, WealthPK reports. As per the company's annual report for 2023, KTML posted a gross profit of Rs7.4 billion and a net profit of Rs1 billion in FY23. The combination of "discriminatory" tax policies, strict monetary measures, and the prevailing economic challenges, including high inflation and currency devaluation, collectively dented the company's profitability in the period under review. The significant fall in gross profit, coupled with the inflationary impact, caused a substantial decrease in profit from operations. Moreover, the company experienced a 47% decrease in profit-before-tax (PBT), mainly due to a 107% rise in finance costs over the previous year.

However, KTML observed a 6% year-on-year increase in revenue. This growth can be attributed to the spinning and home textile division, which contributed an additional Rs1.5 billion and Rs1.2 billion during the fiscal year under review. The FY23 witnessed an unprecedented upheaval in the normal working patterns within the textile industry. High energy prices and the removal of subsidies have driven domestic costs to untenable levels, leading weaker companies at risk of closing down or curtailing operations. The company also experienced difficulties in procuring imported raw materials, spare parts, and machinery for expansion due to the State Bank's import controls.

Statement of financial position

The analysis of the company's financial position shows a growth of 16.3% in its non-current assets during the fiscal year ending on June 30, 2023, compared to FY22. This rise indicates the company's investment in the modernisation of production facilities. Moreover, the rise in current assets is primarily attributed to an increase in the stock-in-trade held, which increased from Rs5.9 billion in FY22 to Rs8.8 billion in FY23, aligning with the company's regular business expansion requirements. Equity (share capital and reserves) increased by 8.62% from Rs24.3 billion (FY22) to Rs26.3 billion (FY23).

During FY23, the long-term borrowing witnessed a growth of 43.5% compared to FY22. This growth shows that the company took on additional long-term liabilities or debt for the expansion and modernisation of production facilities and setting up solar-powered generation plants. Furthermore, the rise in short-term borrowing was in line with the growing business operations and high working capital demands of the company.

Statement of cash flow

Operating cash flows decreased significantly due to a significant increase in the cost of raw materials and fuel prices. In addition, the rise in investing cash flows was primarily a result of the substantial expansion and modernisation of production facilities.

The considerable increase in financing cash flows was ascribed to the funding acquired for the expansion and modernisation of production facilities, as well as the implementation of solar-based power generation initiatives.

Company profile and principal business activities

Kohinoor Textile Mills is a public limited company incorporated in Pakistan under the Companies Act, 1913 (now Companies Act, 2017) and listed on Pakistan Stock Exchange Limited. In pursuit of sustainable growth, the company has strategically embraced a policy of horizontal integration encompassing weaving, processing and home textiles activities to address the dynamic challenges posed by the market.

Future outlook

Despite the prevailing economic challenges, the company continues to invest with a focus on quality, capacity increase, and diversification of its product lines. Further, KTML continues to rapidly expand solar energy generation to become a "green company."

Credit: INP-WealthPk