Business Recorder
Ahmad Hassan Textile Mills [PSX: AHTM] was incorporated in Pakistan as a public limited company in 1989. The principal activity of the company is the manufacturing and sale of yarn and fabric. The company also took a ginning factory on lease from its associated company and started cotton ginning business. Pattern of Shareholding As of June 30, 2024, AHTM has a total of 8.47 million shares outstanding which are held by 651 shareholders. Directors, CEO, their spouse and minor children have the majority stake of 57.06 percent in the company followed by local general public holding 31.06 percent shares. NIT and ICP accounts for 10.78 percent shares of AHTM. The remaining shares are held by other categories of shareholders. Financial Performance (2020-25) AHTM’s topline slid twice during the period under consideration i.e. in 2020 and 2023. Conversely, its bottomline plunged in 2023 and 2024. AHTM’s margins registered reasonable growth until 2021 followed by a dip in 2022. In 2023, gross and operating margins picked up while net margin continued to drop. In 2024, all the margins hit their lowest level followed by a rebound in 2025. The detailed performance review of the period under consideration is given below. In 2020, AHTM’s topline declined by 48.40 percent to clock in at Rs.3753.59 million. Due to COVID-19 related lockdowns and demand destruction, the company produced 51.229 million square meters [converted into 60 picks]. This resulted in capacity utilization of 66.86 percent versus capacity utilization of 72.4 percent recorded during the same period last year. Increase in sales proceeds from export sales resulted in an increased GP margin of 7.21 percent in 2020 versus GP margin of 6.32 percent recorded in 2019. In absolute terms, gross profit tapered off 41.17 percent in 2020. Decline in direct exports resulted in 69.27 percent drop in distribution expense in 2020. Administrative expense also shrank by 48.80 percent in 2020 due to lower payroll expense as the company radically streamlined its workforce from 645 employees in 2019 to 314 employees in 2020. Higher profit related provisioning resulted in 47.44 percent expansion in other expense in 2020. Conversely, other income eroded by 64.65 percent in 2020 due to high-base effect as unlike 2019, the company didn’t record duty drawback of taxes on export sales, profit on sales tax refunds and gain on disposal of property, plant and equipment in 2020. Exchange gain also nosedived during the year. AHTM recorded 36 percent lower operating profit in 2020 with OP margin clocking in at 5.43 percent versus OP margin of 4.38 percent recorded in 2019. On the positive front, the company was able to cut down its finance cost by 65.35 percent in 2020 due to decline in working capital related financing. Net profit enlarged by 182.92 percent in 2020 to clock in at Rs.115.87 million with EPS of Rs.13.68 versus EPS of Rs.2.84 recorded in 2019. NP margin also jumped up from 0.56 percent in 2019 to 3.1 percent in 2020. In 2021, AHTM’s topline posted a marginal year-on-year growth of 1.19 percent to clock in at Rs.3798.38 million. This was the result of greater proceeds from export sales. AHTM recorded 6.78 percent stronger gross profit in 2021 with GP margin clocking in at 7.60 percent. Sales volume remained lackluster during the year, resulting in 41.73 percent drop in distribution expense. Conversely, administrative expense spiked by 11.84 percent during in 2021 due to higher payroll expense as the company inducted additional human resource which drove its workforce to 336 employees. Other expense mounted by 54.13 percent in 2021 primarily due to higher provisioning done for WWF and WPPF. Other expense was offset by 2250.40 percent higher other income recorded during the year which was the result of unrealized gain recorded on the re-measurement of short-term investment and realized gain on the sale of NIT units. Operating profit improved by 17.48 percent in 2021 with OP margin climbing up to 6.30 percent. Finance cost dipped by 59.22 percent in 2021 due to monetary easing and increase in outstanding liabilities. Net profit picked up by 44.80 percent in 2021 to clock in at Rs.167.79 million with EPS of Rs.19.81 and NP margin of 4.42 percent. AHTM recorded a tremendous 46 percent year-on-year growth in its net sales which clocked in at Rs.5545.46 million in 2022. Export sales which constituted 61.18 percent of the company’s net sales in 2021 grew by 61.5 percent in 2022 to grab 67.68 percent of the topline in 2022. Weaker local currency translated into higher revenue despite demand contraction. Capacity utilization also dropped from 81.59 percent in 2021 72.16 percent in 2022. High inflation, Pak Rupee depreciation and elevated energy tariff drove cost of sales up by 48.37 percent in 2022. In absolute terms, gross profit grew by 17.2 percent in 2022, however, GP margin went down to 6.10 percent. Selling & distribution expense escalated by 78.89 percent in 2022 mainly on account of export related expenses including bank charges followed by freight charges incurred during the year. Administrative expense heightened by 38.94 percent in 2022 primarily due to payroll expense on account of inflationary pressure. Number of employees ticked down from 336 in 2021 to 322 in 2022. Other expense surged by 22 percent in 2022 predominantly due to exchange loss. Other income dipped by 86 percent in 2022 due to unrealized and realized loss recorded on the re-measurement and disposal of investments respectively coupled with considerably lower gain recorded on the sale of property, plant & equipment in 2022 versus the previous year. Profit on trading of yarn lent a helping hand to the financial performance of the company as it grew from 0.2 million in 2021 to 14.43 million in 2022. AHTM recorded 7.22 percent taller operating profit in 2022; however OP margin dipped to 4.63 percent. Finance cost multiplied by 89.82 percent in 2022 due to higher discount rate and higher working capital related borrowings obtained during the year. The company recorded 20 percent higher net profit to the tune of Rs.201.32 million in 2022 with EPS of Rs.23.76. NP margin went down to 3.63 percent in 2022. In 2023, AHTM recorded 21.97 percent decline in its topline which clocked in at Rs.4327.10 million. Due to lower demand, the company produced 35.106 million square meters of fabric, down 18.68 percent year-on-year. This resulted in capacity utilization of 58.68 percent in 2023. Export sales drastically dropped during the year due to global recession and stood at 42.42 percent of AHTM’s net sales mix in 2023. Cost of sales slid by 24 in 2023, resulting 9.19 percent higher gross profit. GP margin progressed to its optimum level of 8.54 percent in 2023. Despite lower sales volume, inflationary pressure pushed distribution expense by 45.56 percent in 2023. AHTM continued to streamline its workforce which stood at 302 employees in 2023; however, this couldn’t be reflected in the payroll expense which spiked by 29.77 percent in 2023 owing to high inflation. Other expense ticked up by 7.73 percent in 2023 as higher exchange loss was counterbalanced by lower profit related provisioning done during the year. Other income strengthened by 44.97 percent in 2023 due to higher dividend income and gain realized on the sale of investments. Profit on trading of yarn plunged by 96.15 percent in 2023. AHTM recorded 3.82 percent decline in its operating profit with OP margin jumping up to 5.71 percent. Finance cost mounted by 71 percent in 2023 due to monetary tightening. Outstanding borrowings plummeted during the year. Net profit tapered off by 53.85 percent in 2023 to clock in at Rs.92.92 million. This culminated into EPS of Rs.10.97 and NP margin of 2.15 percent. In 2024, AHTM’s topline grew by 17.36 percent to clock in at Rs.5078.32 million. Export sales continued to slide due to dampened global demand and were recorded at 34.43 percent of the company’s net sales mix in 2024. High prices of yarn and elevated energy tariff pushed cost of sales up by 20.57 percent in 2024. Consequently, gross profit dampened by 17 percent with GP margin sliding down to 6 percent in 2024. Distribution expense grew by 16 percent in 2024 due to higher freight charges. The company inducted new employees during the year which took the tally to 313 employees. This resulted in higher payroll expense; however, administrative expenses plummeted by 3.57 percent due to lower depreciation expense. Other expense dropped by 62.42 percent in 2024 as the company booked lesser provisioning for WWF and WPPF and also because no exchange loss was incurred during the year due to stable local currency. AHTM recorded a tremendous exchange gain during the year which drove other income up by 803.24 percent in 2024. However, this couldn’t buttress the operating profit which eroded by 5.33 percent in 2024 with OP margin falling down to 4.6 percent. Finance cost multiplied by 52.72 percent in 2024 due to higher discount rate and increased working capital related borrowings. Net profit slumped by 56.24 percent to clock in at Rs.40.66 million in 2024 with EPS of Rs.4.80 and NP margin of 0.80 percent. In 2025, AHTM’s net sales ticked up by 10.79 percent to clock in at Rs.5626.43 million. Export revenue of the company that faced pressure in the first two quarters of 2025, rebounded in the latter half of the year, however, couldn’t reach the last year level. No indirect export sales were recorded in 2025. Local sales performed staggeringly during the year constituting 90 percent of the company’s sales mix versus its share of 65.32 percent recorded in the previous year. In order to meet the rising demand, the company produced 46.387 million square meters, up 37.88 percent year-on-year. This translated into capacity utilization of 77.54 percent in 2025. Focus on value-added segment coupled with cost cutting measures implemented during the year such as the commissioning of 932 KW solar power project, which took the total solar generation capacity to 2776 KW, resulted in 40.15 percent stronger gross profit in 2025 with GP margin jumping up to 7.64 percent. Downtick in export sales resulted in 21 percent decline in distribution expense in 2025. Conversely, administrative expense surged by 11.36 percent in 2025 due to higher payroll expense due to inflationary pressure as well as workforce expansion from 313 employees in 2024 to 351 employees in 2025. Increased profit related provisioning pushed up other expense by 52.73 percent in 2025. Other income deteriorated by 92.56 percent in 2025 due to considerably lower exchange gain, no dividend income as well as loss realized on the re-measurement of investment. AHTM recorded 32.87 percent higher operating profit in 2025 with OP margin of 5.52 percent. Despite monetary easing, finance cost escalated by 21.88 percent in 2025 due to greater utilization of credit facilities as credit period of fabric in the market increased during the year. AHTM’s net profit strengthened by 131.67 percent to clock in at Rs.94.20 million in 2025 with EPS of Rs.11.12 and NP margin of 1.67 percent. Recent Performance (1HFY26) During the first half of the ongoing fiscal year, AHTM recorded 19.31 percent decline in its net sales which clocked in at Rs.2459.44 million. This was due to drastic decline in the export of fabric during the year on account of increase in global competition owing to demand destruction. This might also be the result of the decrease in US tariff rate on Indian textile exports from 50 percent to 18 percent which exerted immense pressure on the Pakistani textile sector. However, in consequence of operational efficiency and cost cutting measures implemented during the period, coupled with the reduction of industrial electricity tariff rate by Rs.4.04 per unit and lessening of wheeling charges to below Rs.9 per unit, AHTM’s GP margin grew to 8 percent in 1HFY26 versus 7 percent in 1HFY25. Lower sales volume translated into 58.46 percent plunge in distribution expense in 1HFY26. Conversely, administrative expense surged by 13.82 percent in 1HFY26 due to inflationary pressure which pushed up the minimum wage rate. Increased profit related provisioning appears to be the cause of 47.72 percent higher other expense recorded in 1HFY26. Other expense was conveniently offset by 26.78 percent stronger other income recorded during the period. This might be due to stronger cash position of the company and disposal of short-term investment at a gain during 1HFY26. AHTM posted 9.89 percent drop in its operating profit in 1HFY26 with OP margin clocking in at 5.89 percent versus OP margin of 5.27 percent recorded in 1HFY25. Monetary easing squeezed finance cost by 49.44 percent in 1HFY26. AHTM recorded 108.39 percent stronger bottomline to the tune of Rs.62.885 million in 1HFY26. This translated into EPS of Rs.7.42 in 1HFY26 versus EPS of Rs.3.56 recorded in 1HFY25. NP margin also progressed from 1 percent in 1HFY25 to 2.56 percent in 1HFY26. Future Outlook Global recession has resulted in demand destruction for the textile industry. Relative stability of local currency has further eroded the margins on export sales. On the positive front, gradual reduction of discount rate has proved to be a good omen for AHTM. This coupled with the decline in energy tariff, wheeling charges, export refinance rates and elimination of cross subsidy from industrial sector to other consumer segments will buttress the financial performance of AHTM. Moreover, the company continues to invest in renewable energy solutions such as solar power plant to further cut down its energy cost. AHTM also plans to invest in energy efficient high speed looms and other machinery to boost productivity and reduce operational cost.
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