Textile industry in shambles: another company reduces production by 50%
In the midst of ongoing economic challenges faced by the textile industry since the second half of last year, another textile business has reduced its operations. Crescent Fibres Limited (CFL) has announced to reduce its production by 50% due to worldwide global recession and lack of demand. The company made the announcement to the Pakistan Stock Exchange (PSX) on Tuesday.
"As you are aware, the global economy is heading towards a recession and this has led to widespread demand destruction in the textile as well as other sectors. Keeping in view the global economic situation and outlook, the company has decided to curtail production by up to 50%. We believe this is a temporary measure and will continue to monitor the situation and be ready to restart as soon as demand improves which we expect in the second quarter of 2023."
The announcement comes after the textile industry has been facing one of the worst crises in the country's history. Inflation, lack of demand, and tough economic conditions have forced many textile businesses in the country to either reduce production or close down.
At the end of last week, Suraj Cotton Mills, an associated company of CFL, also reduced its production by 40% due to economic downturn. Earlier last month, Kohinoor Spinning Mills temporarily shut down citing the worst crisis faced by the textile industry. Nishat Chunian, another leading textile company, also announced to partially close production last month.
In other sectors, Fauji Fertilizer closed its Diammonium Phosphate (DAP) Plant temporarily last month. 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. On Monday this week, KSB Pumps, a major producer of industrial pumps, also closed its main hasanabdal factory plant due to a lack of demand.
For the fiscal year ending June 2022, CFL earned a sales revenue of Rs. 8,098 million, an increase of 32% on a yearly basis. Similarly, it earned a Profit after Tax (PAT) of Rs. 654 million, up 44% compared to the same period last year. However, while the last annual financials of the company were rosy, its quarterly financials were less than ideal.
In the first quarter ending 30th September, 2022 of the company's new fiscal year, the company posted a PAT of only Rs. 8.05 million against a PAT of Rs. 141.7 million in the preceding quarter. This is a significant decline of over 94%. The company also posted an Earnings Per Share (EPS) of just Rs. 0.65 against an EPS of Rs. 11.41 in the last quarter.
According to the company's last quarterly report, textile demand had started to decline in the fourth quarter of the last fiscal year. This was worsened due to a weakening global economy, rising interest rates, inflation, and volatility in financial markets which negatively impacted demand. In Pakistan, rising cost of doing business and low cotton yield have also severely impacted the textile industry.
Crescent Fibres Limited (CFL) started operations in 1969 and is listed on the Pakistan Stock Exchange. The principal business of the Company is manufacture and sale of yarn.
In textiles, the company operates 67,064 spindles in two units located at Bhikki, Dist Sheikhupura, Punjab and Nooriabad, Sind, and specialises in the production of high value added polyester / cotton, chief value cotton (CVC), and pure cotton yarns. The units are based on the latest equipment and are staffed by well qualified and experienced personnel. The facilities are capable of producing 22 million pounds of ring spun yarn per year. The product range includes coarse, medium and fine count yarns ranging from 10/1 to 80/1.
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