Is Textile Sector In Pakistan Are Suffering Stressful Environment?

There is my some analysis and opinion about textile sector in Pakistan are in dangerous situations. recently I’ve viewed some reports and editors publishing and analyzing a business that give me an idea about how this sector have brutally effect by the country economic instability. So lets discuss about the economics of the country.

State Bank of Pakistan cuts is policy rate or interest rate to 12% its means that they decided to promote the business that need borrowing rather than selling equity of making funds for running business. Current CPI is 263.95 which fall from 266.15 of previous month Jan 2025. Inflation rate also decreasing from 2.7% to 1.5%. it reflect the overall economy of the country that government have issued a strict policies to make an countries economy strong. Pakistani rupees is still stuck in the range between 278 Pkr 282 Pkr. Whereas core consumer prices in Pakistan increased 7.80 percent in February of 2025 over the same month in the previous year. Core Inflation Rate in Pakistan averaged 8.60 percent from 2010 until 2025, reaching an all time high of 20.00 percent in May of 2023 and a record low of 3.40 percent in September of 2015. This kind of number have to explain most of the things. First is that government policies have on way to start reviving its economy. But the IMF have forced to rush on things in the form additional taxes and levies.

There is Hugh shoutout for making an incredible report on textile sector by JS Global Capital. Which clear most of the ideas about how textile sector worked in under stress zone in the Pakistan. There most of the companies have performed overwhelming increase in growth about 16% YoY and majority companies have decreased its finance cost of 13% YoY.

Most company have fallen their cost of b 6.5 ppt YoY and 5 ppt QoQ . This is on an average rate which present the current period debt efficiency of the companies. In some time textile sector not performing well due to some genuine reasons which I discuss further in report. Due to some reasons most countries have gain market share of export textile like China, India, Bangladesh etc. On of the most sensitive reason where the companies not perform is that have energy crises. Low Energy consume and have high cost had chances to break their consumer behavior but this risk damaging the country health for making an stance of how public treat this company in textile sector e.g charges extra levies and taxes. During seven months of 2025 locally cotton have decreased its share to 34% because of high tariffs on fueling and high taxes before any export.

Government increased the gas tariffs on CPP by 55 to 20%. Where most of the company have shutting the business, some company have shifted their places and some survived in market. Companies have aggressively acted on new tariffs and thinking of new alternative source of energy. CPP stands for Captive Power Plant which have those company of held a high amount of capacity of generating products in a single manner. Some of the following company have required a certain amount of energy.

1- ILP (Interloop Limited) –> 8% mostly from gas
2- GATM (Gul Ahmed Textile Mills Limited) –> 10% from gas.
2- KTML (Kohinoor Textile Mills Limited) –> 16% from diesel and
4- NCL (Nishat Chunian Limited ) –> 10% mostly from bio and gas
5- NML (Nishat Mills Limited) –> 14% mostly from gas

This type consumption have taking high amount of expenses from companies which effect the business earning. Government also sales tax impose on export depending company and return file before export which make the cash flow shortage in that periods. Which make the company taking high borrowing resulting the high interest expenses in the earning reports.

In 2nd Quarter of FY2025 overall garments export have increased its revenue 12% YoY, knitwear have 19% YoY increase and bedwear have 16% increase YoY. Where the overall cotton production in 2QFY2025 from July 2024 to Jan 2025 have 7 million bales which is decreased to 34% YoY . This types of problems have resulting the more import a raw material to fulfilling the market demand, in that case 3.4x times high as previous of 2.9X of $614 million worth of raw material import. In international market the cotton index have 0.77/ LBS which have down 20% compared to previous month. 31 Jan 2025 government imposed high levy taxes on CPP gas dependent companies which will increased from $9 / MMBTU to $10.75/MMBtu and aim to increase $15/ MMBtu in august 2026.Due to increased in taxes, expenses and additional levies company have necessary to take loan and that is why 23% YoY increased in debt in textile sector. Textile sector have crucial to play in Pakistan economy which have export related sales have need to its export where as export have 18% YoY increased. Most of the company have reported to improving 1.2 % ppt increased QoQ and 1.7% ppt decreased YoY which have on average gross margins have 14% in textile sector because of efficiently managing inventory and receivable side.

KTML Kohinoor Textile Mills Limited have performed better as compared which have 104.8% return compared to its previous earning report and its peers its considered usually higher that others. NML Nishat Chunian Limited and NCL Nishat Company Limited have also give return in 43% and 35% respectively. But Interloop (ILP) is one company which suffer cash trouble in the 2nd quarter due to earning lose and loss in apparel product also interloop spend high amount of Capex for new commissioning plant and I think that in future Interloop have far more place to go as compared to its peers.

Lastly I’m able to share that textile sector is top notch sector in Pakistan contain high margin and highly return but some how there is some economic issues that haunting the entire sector in past few years but it has a lot of potential to come a bigger picture in an upcoming years.