KARACHI, October 13, 2026: Pakistan’s largest listed textile companies recorded an 11% increase in combined after-tax profits in the fiscal year ended June 2026, despite largely stagnant sales, as lower borrowing costs and reduced tax expenses boosted earnings, according to a report by Topline Securities.
The 20 companies covered in the brokerage’s sector report earned a combined Rs51.9 billion in after-tax profit in fiscal year 2026, compared with Rs46.7 billion a year earlier.
However, their combined sales remained almost unchanged at Rs1.4 trillion, declining 0.3% year-on-year. Gross profit slipped 0.2% to Rs183.7 billion, while the gross margin held steady at 13.1%.
Lower Financing Costs and Taxes Support Earnings
The improvement in profitability largely came from lower expenses rather than stronger sales growth.
Finance costs fell 19% to Rs54.5 billion, which Topline Securities attributed to lower interest rates and reduced borrowing under the State Bank of Pakistan’s Export Finance Scheme.
The effective tax rate also declined to 33.2%, from 37.1% in the previous fiscal year. According to the report, companies reversed deferred tax liabilities following changes affecting the future super tax treatment of exporters.
Other income moved in the opposite direction, falling 12.4% to Rs41 billion.
The companies covered include manufacturers in composite textiles, spinning, weaving, woollen fabrics and apparel. Together, they represent 83% of the market capitalisation of the selected listed textile sector, Topline said.
Textile Exports Reach Record $17.6 Billion
Pakistan’s textile exports reached a record $17.6 billion in fiscal 2026, rising 2% from the previous year and accounting for 57% of the country’s total goods exports.
Value-added textile exports increased 3% to $13 billion, highlighting the continued importance of finished and higher-value textile products to the sector.
Cotton prices remained broadly stable during the year. The Cotlook A Index averaged around 79 cents per pound, translating into local prices of approximately Rs18,353 per maund, compared with Rs18,268 a year earlier.
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Interloop Leads Major Profit Gains
Three companies generated 48% of the sector’s combined profit, with Interloop Limited recording the largest contribution.
Interloop, the sector’s largest company by market value, reported a 129% increase in consolidated profit to Rs12.7 billion, accounting for about 24% of the total earnings reported by the 20 companies.
Its gross margin improved by 2.3 percentage points to 23%, while finance costs declined 35%. Other income increased more than sixfold, mainly because of discounting income related to sales-tax receivables.
Sapphire Textile Mills reported a 73% rise in unconsolidated profit to Rs6.8 billion, despite a 13% decline in sales to Rs81.2 billion. Its other income more than doubled to Rs7.5 billion.
Nishat Mills Limited recorded a different outcome, with profit declining 9% to Rs5.5 billion. Lower dividend income and a fall in its gross margin, from 11.2% to 9.8%, weighed on earnings. A reduction in its effective tax rate to 20%, from 44%, helped limit the decline.
Mixed Results Across the Sector
Profitability varied considerably among the companies analysed.
Sapphire Fibres reported an 81% decline in profit to Rs2.6 billion, while Gul Ahmed Textile Mills swung to a loss of Rs338 million from a profit of Rs4.5 billion in the previous year.
Several smaller companies, including JK Spinning Mills, Tata Textile Mills and Fazal Cloth Mills, recorded triple-digit profit growth.
The results indicate that lower financing and tax costs benefited many companies, but individual performance continued to depend on margins, other income and company-specific conditions.
Outlook Depends on Costs and Export Markets
Topline Securities said measures introduced in the fiscal 2027 budget, including lower tax burdens and cheaper financing through the central bank, could provide further support to textile-sector profitability.
Companies are also increasingly exploring renewable energy and other lower-cost power sources to manage operating expenses.
However, the brokerage warned that elevated energy costs would remain a challenge in the near term. Uncertainty surrounding Pakistan’s continued access to the European Union’s GSP+ trade arrangement and the possibility of slower economic growth in the United States and Europe could also weigh on export demand.
Although the sector delivered stronger earnings in fiscal 2026, the largely flat sales figures and declining gross profit highlight the challenges of sustaining growth through operational performance alone.
