Profile
Legal Structure
Ahmed Fine Textile Mills Limited ("AFTML" or "the Company") operates as a public unlisted Company under the repealed Companies Ordinance, 1984 (now Companies Act 2017).
Background
AFTML, established in 1989, has evolved into a leading player in the textile industry. Initially, focused solely on the manufacturing of yarn and fabric, the Company has significantly expanded its operations and now it operates as a composite unit. In addition to its core expertise in yarn and fabric production, the Company has diversified its product portfolio by venturing into the terry towel segment.
Operations
The Company boasts an annual production capacity of 83,820 spindles, 492 looms, and 39 terry looms. It operates with two state-of-the-art spinning units, located in Multan and Rahim Yar Khan, accompanied by a consolidated annual production capacity of 41.0mln kilograms of yarn, 113.6mln yards of greige fabric, and 5.4mln kilograms of terry towels. The Company’s weaving unit, situated in Multan, specializes in the production of greige fabric and high-quality export-grade towels. This manufacturing infrastructure enables the Company to meet both domestic and international demand efficiently.
Ownership
Ownership Structure
The entire shareholding of the Company rests with the sponsoring family through individual holdings. The major stake (~98.52%) is held by Mr. Abdullah Amir Fazal, Mr. Yousuf Amir Fazal, Mr. Amin Rehman Fazal, and Mr. Sadek Rehman, with each holding approximately 24.63%. The remaining stake (~1.48%) is held by other family members.
Stability
The Company’s ownership structure is expected to remain stable in the foreseeable future, as demonstrated by the transfer of the entire shareholding to the Naseem family, which establishes a clear and well-defined line of succession and ensures a seamless transition of ownership.
Business Acumen
Fazal Group has a longstanding history within the country's economy, strengthened further by its five decades of presence in the local textile industry. The group has weathered several economic cycles over the years, yet its growth has remained intact, enabling the sponsors to navigate the industry's volatility.
Financial Strength
The financial strength of the sponsoring group emanates from its additional operating company in the textile sector, Fazal Cloth Mills Limited, which reported a topline of approximately PKR 90.0bln as of FY25. Furthermore, the group’s strategic investments in the fertilizer and textile sectors reflect the strong financial capacity of the sponsors to support the Company, if required.
Governance
Board Structure
The Company's board is dominated by the sponsoring family. The overall control of the board is vested with seven members, including the Chairman & Chief Executive Officer. The inclusion of an independent director will strengthen the overall governance framework of the Company.
Members’ Profile
The Chairman, Mr. Sheikh Naseem, brings over five decades of experience in the textile industry. He serves as the key decision-maker at Fazal Cloth Mills Limited and holds directorships at other group companies. Mr. Abdullah Amir Fazal has three years of experience in the textile industry and has been a member of the Company's board since 2019. Mr. Naveed Amer, who holds a Master's degree in Business Administration, has been associated with the Company for approximately twenty-six years. Mr. Amir Naseem, Mr. Yusuf Amir, and Mr. Amir Rehman Fazal also bring a wealth of knowledge.
Board Effectiveness
The Company has formed an Audit Committee to assist the board in addressing critical financial and regulatory matters. Additionally, the attendance of members at BOD meetings remained strong, with minutes meticulously recorded to capture key discussions and decisions.
Financial Transparency
To uphold high standards of transparency, the Company has an internal audit department in place that reports to the CEO. M/s Yousuf Adil & Co. Chartered Accountants have been appointed as the external auditors of the Company rated in "Category A" by the SBP panel of auditors. They expressed an unqualified opinion on the financial statements of the Company for the year ended June 2025.
Management
Organizational Structure
The management control of the Company vests with Fazal Group, through Mr. Rehman Naseem serving as the CEO of the Company. The Company's organizational structure has been divided into five functional departments to ensure the smooth flow of operations.
Management Team
Mr. Rehman Naseem, the Chief Executive Officer, is a graduate of Columbia University and brings more than two decades of experience in the textile industry. The Company also benefits from a team of seasoned professionals with long-standing tenure, contributing to its sustainable growth prospects. Mr. Naveed Amer, serving as the Chief Financial Officer holds a master's degree in Business Administration and brings with him over three decades of experience in the textile industry.
Effectiveness
The management meetings are conducted on a periodic basis which ensures accountability. In addition to these scheduled meetings, ad-hoc meetings are held as needed to address specific bottlenecks and troubleshoot any operational challenges. This approach ensures that both routine oversight and urgent concerns are effectively managed.
MIS
For comprehensive reporting, the Company has implemented an Oracle-based Enterprise Resource Planning (ERP) system, which is regularly updated and includes various operational modules.
Control Environment
AFTML is accredited with various international certifications for compliance. The Company is following the latest Quality Assurance Standards for yarn and fabric production. A few of the prominent certifications include ISO 9001, Lycra assured, and Fair Trade.
Business Risk
Industry Dynamics
Textile
exports reached USD 17.9bln in FY25, a modest rise from USD 16.7bln the
previous year, reflecting a 7.2% year-over-year growth. The largest
contribution came from the composite and garments segment, at USD 14bln,
which included the weaving segment at USD 1.8bln and the spinning segment at
USD 0.7bln. The production of cotton cloth in FY25 declined by approximately
0.7% year over year, reaching around 877.1mln square meters. During FY25,
about 25.3% of the cotton cloth produced was exported (compared to roughly
27.2% in FY24), with the rest used for the domestic market. The country's
fabric exports fell by approximately 4.4% in FY25 (FY24: up about 5.8% YoY),
with approximately 23.4% of Pakistan's cotton cloth exports going to
Bangladesh (compared to about 19.9% in FY24), followed by the USA with about
8.1% of cotton cloth exports (compared to approximately 7.8% in FY24). In
FY25, the transition from the final tax regime to the normal tax regime is
expected to affect the profitability of export-oriented units, with a 29% tax
on profits and a super tax of up to 10%. The recent removal of GST exemption
(Finance Bill, 2025) on textile inputs for exporters registered under the
Export Facilitation Scheme (EFS) will offer tax protection and create a level
playing field for domestic cotton and yarn producers.
Relative Position
With a production capacity of 83,280 spindles,
492 fabric looms, and 39 terry looms, the
Company falls in the mid-tier of the respective industry.
Revenues
During FY25, the Company's topline exhibited
remarkable growth reaching PKR 47.2bln (FY24: PKR 46.6bln) followed by a
three-year CAGR of 16.7% from 2023 to 2025. The Company's sales mix skewed heavily towards the domestic market. The export sales experienced a decline (FY25: 18.7bln; FY24:
PKR 26.5bln), dominated by the sale of fabric and terry towels which makes up
around 69.4% and 30.0% of the total exports. The Company has established a
stable customer base around the globe indicative of a low geographic
concentration risk. The Company's top 20 client concentration for exports
remained moderate supported by a long association with stable
entities. The local sales have a contribution of approximately 62.0%
recorded at PKR 29.3bln (FY24: PKR 21.6bln). During 1QFY26, the Company's topline posted a dip on a
quarter-on-quarter basis reported at PKR 11.8bln (1QFY25: PKR 12.8bln).
Margins
During FY25,
the Company's gross profit margin increased slightly to 10.3% (FY24: 9.8%)
primarily due to favorable raw material prices and alongside investment in 12-megawatt solar.
The operating expenses reflected an upward trend concomitant with the inflationary trends. The Company's
operating profit margin stood at 7.3% (FY24: 6.9%). The profit before
interest and taxes improved drastically to PKR 1.7bln (FY24: PKR 193mln). The
gradual decrease in interest rates resulted in a massive decrease in the
finance cost (FY25: PKR 1.9bln; FY24: PKR 3.6bln). Consequently, the
Company's bottom line stood at PKR 978mln compared to a net
loss of PKR 188mln in FY24. During 1QFY26, the Company's gross profit
margin and net profit
margin clocked at 11.3% (1QFY25: 10.2%) and 5.3% (1QFY25: 2.6%).
Sustainability
The Company has successfully installed a 12-megawatt solar power system, which is currently operational. Further, the installation of another 6 megawatt solar is still in process to mitigate the energy cost risk. The management strategically invested in a dyeing and printing unit with an overall capacity of 5 tons per annum. These units are expected to be commercialized by the end of FY26.
Financial Risk
Working capital
The Company's working capital cycle is a function of
inventory days and trade receivables days for which the Company relies on
internally generated cash flows and short-term borrowings. During 1QFY26, the Company's net working capital cycle stood at 105 days (FY25: 106 days), despite the optimization of the inventory cycle (1QFY26: 83 days; FY25: 89 days), however, the
receivables cycle reflected a delay in the payments from the suppliers. The Company holds
a limited borrowing capacity as evidenced by the short-term trade leverage of
29.1% (FY25: 31.1%).
Coverages
The incline in PBT ultimately impacted the Company's
Free Cash Flows from Operations (FCFO) reported at PKR 1.2bln (FY25: PKR 4.3bln).
With the decrease in funding cost and FCFO, the Company's interest coverage improved 4.5x (FY25:
2.8x) whereas the core operating coverage remained inched up to 1.6x (FY25:
1.2x). However, the maintenance of coverage ratios remains imperative for the
assigned ratings.
Capitalization
The Company's debt profile comprises subsidized
borrowings by the State Bank of Pakistan (SBP) as well as conventional
borrowings. The Company secured long-term loans amounting to PKR 7.4bln
for venturing into new segments. The Company
has managed to maintain a leveraged capital structure mainly dominated by the
STBs to meet the working capital requirements. During 1QFY26, the total
leveraging went down to 56.0%, compared to 58.5% as of FY25. However,
the Company’s equity base strengthened to PKR 15.5bln (FY25: PKR 13.8bln), with
an unappropriated profit of PKR 6.2bln.
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