November 12, 2021 (MLN): In view of higher demand, Interloop Limited (ILP) has planned to invest around $100 million to set up a vertically integrated knitwear apparel plant, the management informed during its recent corporate briefing to discuss the latest financial results and future outlook.
The company, under its vision 2025, aims to double its revenue to $700mn by FY2026, from a baseline of FY 2021, with a planned capital expenditure of $300mn which will be financed 50% through debt and 50% through internal cash generation. Meanwhile, the management has intended to avail SBP financing at the rate of 2-2.5% with a maximum limit of $5bn for the next 5 years.
The five-year plan also includes a seamless facility, a denim fabric mill, a sixth hosiery plant, and expand our spinning and yarn dyeing capabilities.
To note, the company’s net income surged by a whopping 95% YoY to Rs2.69bn during the first quarter of the current fiscal year on the back of higher-than-expected revenues and gross margin. Net sales of the company increased by 50% YoY to Rs19.3bn due to the addition of new machinery in its hosiery division, maximum utilization of hosiery plant and depreciation of PKR against US dollar.
Currently, ILP is in process of doubling the capacity of its denim plant which is expected to come online by the end of FY21 taking it to 40,000 pieces/day (Currently 20,000/day). The capacity utilization of the denim plant remained on a lower side, 56%, during FY21 along with negative margins due to cancellation of foreign orders and shipment delays. However, this is expected to increase as international operations revive post-covid, the key takeaways by Taurus Securities said.
Upon completion, both denim and hosiery plants are expected to generate more sales and profits because of economies of scale, Arsalan Hanif, an analyst at Arif Habib Limited said.
Shedding light on future prospects, the management said that ILP’s order books are overbooked for the current financial year.
The company has cotton inventory for the entire year as it has procured cotton early during harvesting season. The cotton requirement of the company is around 175-180k bales per year. The current composition of cotton is 50% imported and 50% local, he added.
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