Janana De Malucho: A case study in struggling textile spinning mills

Janana De Malucho Textile Mills Ltd (JDMT) closed its fiscal year 2024 books with a net loss of Rs467.6 million, more than five times the Rs80.3 million lost the previous year, and its loss-per-share ballooned from Rs11.61 to Rs67.61 per year.

Three mutually-reinforcing factors explain the plunge. There is the shrinking top-line. Net turnover slipped by Rs131.8 million as cheaper Chinese and Vietnamese yarn crowded the domestic market, eroding both volumes and pricing power.

The second major factor is a run-up in energy costs. Power and fuel expenses leapt 60% to Rs1.16 billion (fiscal year 2023: Rs721 million) after a cumulative 150% hike in government-administered gas tariffs – up to Rs2,750 per MMBtu by February 2024.

Finally, there are the inflation-driven payroll pressures. A steep rise in wages and salaries, coupled with higher input costs, turned a Rs347 million gross profit in fiscal year 2023 into a Rs25 million gross loss and pushed the gross margin to zero .

Management’s response was drastic: the board suspended production citing untenable power tariffs, falling sales and piling inventories . A feasibility study for a 1 MW renewable-energy mix is on the table, but only conditional on new working capital becoming available.