Weak local demand and higher input costs corrode Gul Ahmed’s profits

February 26, 2020 (MLN): Gul Ahmed Textile Mills Limited (GATM) has posted net profits of Rs 1 billion with earnings per share at Rs 2.40 per share for the six months ended on December 31 2019. This was 52% lower than the profits of Rs 2.137 billion earned in the corresponding period of last year.

The decline in profits was mainly attributable to the weakness in demand and a rise in the cost of sales.

During the period, the demand remained weak due to cash flow constraints faced by yarn customers as the government has imposed 17% sales tax with effect from July 2019.

In addition to this, rise in input prices such as energy, labour and all imported raw materials during the period further hampered the company’s yarn as well as its retail business.  

The Operating cost of the company grew by 12% YoY to Rs 4.4 billion while finance cost rose by 55% YoY due to higher interest rates.

However, by utilizing full production capacities, the company managed to increase its revenues from Rs 27.49 billion to Rs 31.8 billion but due to the above-mentioned facts both the gross profits and the gross margins of the company dropped by 2.48% and 2 ppts respectively.

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