LAHORE: Nishat (Chunian) Limited (NCL), one of the leading textile companies in the country, is going to close almost a quarter of its production capacity after a month due to unfavourable market conditions. The company made the announcement to the Pakistan Stock Exchange (PSX) on Wednesday.
“The Company has an installed capacity of 219,528 spindles and 2880 rotors in its spinning division. Company has decided to temporarily close 51,360 spindles after one month, due to current market conditions. However, the remaining units are operating normally. Company will restart these spindles as soon as market conditions improve”, read the notification.
The announcement of partial closure comes after a number of companies across various sectors announced closures in the past few weeks. Two weeks ago, Kohinoor Spinning Mills temporarily shut down citing the worst crisis faced by the textile industry. Fauji Fertilizer also closed its Diammonium Phosphate (DAP) Plant temporarily last week.
Suzuki announced its first plant shutdown for 2023 after a string of nonoperational days last year. Similarly, Toyota also shut down production in December for the remainder of the year.
Similarly, Balochistan Wheels and Millat Tractors have also had non-operational days.
At the start of this week on Monday, the patron-in-chief of the All Pakistan Textile Mills Association (APTMA), Dr. Gohar Ejaz, wrote a letter to the Prime Minister of Pakistan detailing the challenges faced by the textile industry and the exports sector.
According to the letter, the textile industry was already operating at less than 50% capacity utilisation across the country. The letter further said, “A substantial number of jobs have already been lost and many more are to follow if remedial measures are not urgently undertaken.”
Just last week, the APTMA, in another letter to the Prime Minister, also said that textile exports are expected to drop below $1 billion per month from January 2023. The expected decline was due to supply-chain disruptions, liquidity constraints, energy shortages, and the non-functioning of new projects.
Financials
According to the unconsolidated financial statements of the 1st quarter of FY23, NCL’s sales revenue increased by 3% compared to the same period last year to Rs. 15.25 billion. However, the company made a loss after tax of Rs. 130 million against a profit after tax of Rs. 2.03 billion in the preceding quarter. This is a huge decline of 106% which suggests the severity of the conditions faced by the textile industry in general.
The losses translated into a negative Earnings Per Share (EPS) of Rs. 0.54 as compared to a positive EPS of Rs. 9.23 in the same period of the last financial year.
In the last quarter ending September 30, 2022, NCL generated negative cash from operations of Rs. 4.34 billion against a positive cash of Rs. 265 million in the same quarter last year. The cash flow generated from operations is one of the most important indicators of liquidity available in the business.
The quarterly directors’ report said, “This period has turned out to be a difficult one, with reduced profit margins and the high cost of borrowing being the primary reasons for the loss. On the domestic front, fluctuations in the USD exchange rate and the recent surge in political instability are turning out to be very challenging for the industry.”
On Wednesday, the share price of NCL opened at Rs. 22.11 and went to a high of Rs. 22.9. After the PSX notification in the afternoon, however, it dropped to a low of Rs. 21.30 and finally closed at Rs. 21.53. The stock price registered a day decline of 5.86%.
Nishat (Chunian) Limited is a public limited Company incorporated in Pakistan and listed on Pakistan Stock Exchange Limited. Its registered office is situated at 31-Q, Gulberg II, Lahore. The Company is engaged in the business of spinning, weaving, dyeing, printing, stitching, processing, doubling, sizing, buying, selling and otherwise dealing in yarn, fabric and made-ups made from raw cotton, synthetic fibre and cloth, and to generate, accumulate, distribute, supply and sell electricity and steam.
Nishat Chunian is big group. if they close production. it means that economic position is very critical
According to the quarterly report given to shareholders by the board of directors, “This period has turned out to be a difficult one,” with decreased profit margins and the high cost of borrowing being the primary reasons for the loss.