Pakistan’s listed textile companies post 11% profit growth in FY26

Pakistan’s top 20 listed textile companies recorded an 11.4% increase in combined profit after tax to PKR 51.96 billion in FY26, supported by lower financing costs and a decline in effective tax rates, according to a report by Topline Securities.

The companies posted combined sales of PKR 1.40 trillion during the fiscal year ended June 30, 2026, remaining broadly flat compared with the previous year. Sales in US dollar terms stood at approximately USD 5 billion despite geopolitical headwinds and domestic freight-related challenges.

The analysis covers 20 listed companies operating across composite textiles, spinning, weaving, woollen products and apparel. Together, these firms accounted for approximately 83% of the total market capitalization of the selected textile companies.

Lower financing costs support earnings

The sector’s profitability improved as finance costs declined 19.2% year-on-year to PKR 54.51 billion in FY26 from PKR 67.43 billion in the previous fiscal year.

Topline Securities attributed the reduction primarily to lower financing rates and a further decline in borrowings under the Export Finance Scheme.

The companies’ effective tax rate also fell to 33.2% from 37.1% in FY25, mainly due to reversals of deferred tax liabilities following changes in the future super tax treatment of exporters.

Combined profit before tax increased 3.4% to PKR 78.80 billion, while tax expenses declined 7.6% to PKR 26.14 billion.

However, the sector’s gross profitability remained under pressure. Combined gross profit edged down 0.2% to PKR 183.71 billion, while sales declined 0.3%. Gross margins remained broadly stable at 13.1%.

Cotton prices were largely unchanged during the year, with the Cotlook A Index averaging around USD 0.79 per pound. Local cotton prices averaged approximately PKR 18,353 per maund, compared with PKR 18,268 in FY25.

Interloop leads listed textile companies

Interloop Limited, Sapphire Textile Mills and Nishat Mills Limited were the three largest contributors to the sector’s combined earnings, accounting for approximately 48% of total profits.

Interloop recorded a 129% increase in consolidated profit after tax to PKR 12.70 billion in FY26 from PKR 5.55 billion a year earlier.

The company’s performance was supported by a 5% increase in sales to PKR 187.70 billion, improved gross margins and lower finance costs. Its gross margin increased by 2.3 percentage points to 22.8%, while finance costs declined 35% year-on-year. Higher other income, primarily associated with discounting income from SIDC, also contributed to earnings growth.

Interloop accounted for approximately 24% of the combined profitability of the 20 listed textile companies.

Sapphire Textile Mills reported a 73% increase in unconsolidated profit after tax to PKR 6.82 billion, compared with PKR 3.95 billion in FY25. Its earnings benefited from a more than doubling of other income to PKR 7.5 billion, alongside lower financing costs and a reduced effective tax rate.

However, the company’s sales declined 13% to PKR 81.18 billion. Sapphire Textile Mills contributed around 13% to the sector’s total profits.

Nishat Mills Limited recorded a 9% decline in unconsolidated profit after tax to PKR 5.48 billion from PKR 6.01 billion in the previous fiscal year.

The decline reflected lower dividend income and weaker gross margins, which contracted to 9.8% from 11.2% in FY25. However, lower tax expenses partly offset the pressure on earnings, with the company’s effective tax rate falling to 20% from 44%.

Nishat Mills’ sales increased 2% to PKR 181.65 billion, and the company contributed approximately 11% of the selected textile companies’ combined profits.

Textile exports reach record high

Pakistan’s textile exports reached a record USD 17.6 billion in FY26, increasing 2% year-on-year, according to figures cited in the Topline Securities report.

Textile products accounted for approximately 57% of the country’s total goods exports during the fiscal year. Value-added textile exports increased 3% to USD 13 billion.

Despite the export growth, the largely unchanged sales of listed textile companies indicate that stronger export performance did not translate into significant overall revenue growth across the selected firms.

Outlook remains dependent on costs and export conditions

Topline Securities expects measures announced in the FY27 federal budget to support textile sector profitability through lower tax liabilities and more affordable financing.

Textile companies are also increasingly shifting towards renewable energy and other lower-cost energy sources to manage energy expenses and remain competitive in international markets.

However, high energy costs remain a major challenge for the sector. Uncertainty surrounding Pakistan’s GSP+ trade status and a potential slowdown in major markets, including the United States and European economies, could also weigh on future export demand.

Topline Securities maintained a Market Weight stance on the textile sector, identifying Interloop as its preferred stock within the coverage universe.