Latif Textile Mills (Pvt.) Limited (“LTML” or “the Company”) is a private limited company, incorporated in 1985 under the Companies Act, 1913 (now Companies Act, 2017). The Company is primarily engaged in the manufacturing and export of textile products, with operations spanning spinning and terry towel segments.

LTML has established its presence as a mid-sized textile manufacturer with a gradual shift toward value-added terry towel exports over recent years. Historically, the Company operated across both spinning and towel segments; however, in response to sectoral pressures and working capital dynamics, management has progressively reduced reliance on standalone yarn sales, prioritizing captive consumption to support downstream towel production. The strategic transition reflects management’s intent to enhance margin resilience, improve cash flow visibility, and reduce exposure to volatility in the domestic yarn market.

As of end-FY25, LTML operates an integrated production facility comprising 7,104 spindles, 5,560 rotors, 128 terry looms, and 102 stitching machines. Annual installed capacity stands at approximately 10.5mln kgs of yarn and 4.2mln kgs of terry products. The Company’s manufacturing facilities are located at Nooriabad, providing logistical access to export channels. Operational focus during FY25 remained centered on terry towel production, particularly bar mops, with exports largely directed toward the USA and Europe. Yarn produced at the spinning unit is predominantly utilized internally, supporting towel manufacturing and limiting receivable exposure associated with local yarn sales. To mitigate elevated energy costs, LTML operates a diversified energy mix, including captive generation, grid supply, and a 2.0 MW solar power plant, which remained operational throughout FY25, meeting the overall 5.6MW requirement of the Company. Management continues to evaluate further renewable capacity expansion to structurally reduce energy cost pressures.

LTML is family owned within three brothers and their families, Mr. Younus Haji Latif, Mr. Junaid Haji Latif, and the late Mr. Amanullah Haji Latif. As of end-June 2025, the Company remains 100% sponsor-owned, with shareholding distributed among family members. During FY25, certain changes in shareholding were observed, primarily reflecting intra-family realignment. These changes did not involve any dilution of sponsor authority or control.

Despite internal reallocation, ownership stability remains intact, with effective control continuing to rest with the sponsor families. There were no changes in control, board composition, or management structure during the year. The observed ownership adjustments did not carry governance or credit implications.

The sponsors possess considerable industry experience, with long-standing involvement in textile manufacturing, exports, and operations management. Active sponsor participation in day-to-day decision-making supports operational continuity, responsiveness to market dynamics, and execution of strategic initiatives, particularly the Company’s ongoing transition toward value-added exports and energy optimization.

The sponsors’ financial profile is assessed as adequate, providing support to the Company’s operations and capital needs. While LTML’s equity base reflects pressures from prior-period losses, sponsor backing, retained earnings recovery in FY25, and continued access to bank financing underpin financial flexibility. 

LTML, being a private limited company, is governed by a two-member Board of Directors, comprising Mr. Owais Amanullah (Director) and Mr. Jawad Junaid, who also serves as Chief Executive Officer. Both directors have been associated with the Company’s Board for over 14 years, providing continuity and stability in strategic oversight. The Board structure reflects the Company’s closely held ownership profile, with governance and decision-making remaining sponsor-driven. While the compact Board facilitates swift decision-making and close alignment between strategy and execution, the inclusion of independent representation could further strengthen governance depth over time.

Mr. Owais Amanullah is a Commerce graduate with over two decades of experience in the textile industry, contributing significantly to the Company’s operational and commercial oversight. Mr. Jawad Junaid holds a BSc (Hons) in Management & Marketing from the University of Manchester and has been actively involved in the business since 2004, leading key strategic and operational functions. The combined experience of the Board members supports informed decision-making, particularly in navigating cyclical industry conditions and export-oriented operations.

The Board operates through regular and frequent informal interactions, wherein members collectively review operational performance, financial position, and strategic initiatives. While no formal Board committees are constituted, the active involvement of directors ensures close monitoring of the Company’s affairs. As the business evolves, further formalization of governance processes, including structured committees, may enhance Board effectiveness and oversight.

Financial transparency is considered adequate. The Company’s financial statements for the year ended June 30, 2025 are audited by Kreston Hyder Bhimji & Co., Chartered Accountants, who are listed in Category ‘A’ on the State Bank of Pakistan’s panel of auditors. The auditors have expressed an unqualified opinion on the financial statements. The Company maintains satisfactory disclosure practices and continues to engage constructively with external stakeholders, including lenders and the rating agency.

Latif Textile Mills (Pvt.) Limited operates through a functionally structured management framework, comprising four core departments: Sales, Procurement, Accounts, and Mills Management. The Sales and Procurement functions are overseen by directors, the Accounts function is led by the Chief Financial Officer (CFO), while manufacturing operations are supervised by the General Manager Mills. All departmental heads report directly to the Chief Executive Officer (CEO), enabling centralized decision-making and close coordination across operational and commercial functions. The structure is considered appropriate for the Company’s scale and sponsor-led operating model.

Mr. Jawad Junaid, the Chief Executive Officer, holds a BSc (Hons) in Management & Marketing from the University of Manchester and has been actively involved in managing the Company’s business since 2004. His long-standing association with LTML provides strategic continuity and familiarity with the Company’s operating cycles. Mr. Suhail Younus, who oversees procurement-related functions, holds a Bachelor’s degree in Business/Commerce from St. Lawrence and brings over 34 years of experience in the textile industry. His industry exposure supports effective sourcing and supply-chain management. Overall, the senior management team comprises experienced professionals with long tenures at the Company, supporting operational stability.

Management effectiveness is assessed as adequate, supported by experienced leadership and direct sponsor involvement in key decision-making. The centralized structure enables timely execution of strategic and operational decisions, particularly in areas relating to production planning, procurement, and cost management. However, the absence of formalized management committees limits institutional depth, and further strengthening of structured decision-making forums could enhance effectiveness over time.

The Company has implemented an internally developed Visual Basic 6.0 based Management Information System, covering eight functional modules: (i) Accounts, (ii) Production, (iii) Sales, (iv) Purchase, (v) Payroll, (vi) Stores, (vii) Sales Tax, and (viii) Income Tax. Regular internal reports relating to sales performance, inventory levels, procurement activity, and operational metrics are prepared and reviewed by senior management as required. While the MIS supports day-to-day monitoring, further system enhancement could improve analytical depth and reporting efficiency.

The Company has taken steps to strengthen its internal control framework during FY25, including the induction of a dedicated internal audit resource to enhance oversight and monitoring functions. While the internal audit function continues to report within management, this development reflects an increased focus on formalizing control processes. At the operational level, quality testing of cotton, yarn, and fabric is conducted through in-house laboratories across units. The Company also maintains international compliance certifications, including Better Cotton Initiative (BCI) and the Global Recycle Standard (GRS), supporting its export-oriented operations.

Pakistan’s textile exports improved during FY25, supported by gradual normalization in global demand and easing domestic financial conditions. Sector exports increased to USD ~17.3bln in FY25 (FY24: USD 16.7bln), reflecting a recovery led primarily by value-added segments, including garments and home textiles. The operating environment remained constrained by elevated energy tariffs and the full-year impact of the Normal Tax Regime, which has structurally altered post-tax profitability for export-oriented units. However, the progressive decline in policy rates during FY25 provided partial relief to financing costs, improving cash-flow dynamics across the sector. Overall, industry conditions during FY25 reflected a shift towards stabilization, with performance increasingly dependent on product mix, export orientation, and energy efficiency.

Latif Textile Mills (Pvt.) Ltd. operates as a vertically integrated textile manufacturer, with installed capacity comprising 7,104 spindles, 5,560 rotors, 128 terry looms, and 102 stitching machines. The Company maintains presence across spinning and terry towel segments, with a strategic tilt toward value-added terry products, supported by end-to-end weaving and stitching capabilities. LTML is viewed as a moderately positioned player within the organized textile sector, with sufficient operational scale to serve export markets, though without the diversification and scale advantages of large composite exporters.

During FY25, LTML’s topline reflected operational recovery, following the contraction experienced in the previous year. Net sales increased to PKR ~4.35bln in FY25 (FY24: PKR 3.62bln), driven primarily by improved volumetric performance in the terry segment and normalization of operations across key production lines. Export sales constituted ~65% of total revenue in FY25 (FY24: ~54%), with primary markets including North America and Europe, while the remaining sales were generated domestically, largely through yarn-related activity. The improved export mix is viewed as credit-positive, providing relatively better pricing stability and foreign currency inflows.

Profitability indicators during FY25 demonstrated partial recovery, though remained below historical averages. Gross margins improved to ~15% in FY25 (FY24: ~11%), supported by better cost absorption, improved energy management, and easing input pressures. The energy cost-to-sales ratio moderated during the year, reflecting both operational optimization and incremental renewable energy contribution. Consequently, operating margins strengthened to ~8% in FY25 (FY24: ~2%), marking a return toward normalized operating performance. While margin recovery is evident, sustainability remains contingent on energy cost stability and demand consistency.

In line with sector-wide emphasis on cost rationalization, LTML continued to enhance its energy mix during FY25. The Company’s solar capacity reached ~2MW, supplementing captive generation and reducing reliance on grid and gas-based power. These initiatives align with sectoral assessment, which highlights renewable energy adoption as a key mitigant against tariff volatility. While the financial benefits are gradually materializing, continued execution and stable utilization levels are viewed as essential for embedding these gains into the Company’s long-term cost structure.

LTML’s working capital profile remains a key area of focus, reflecting the inherently cash-intensive nature of export-oriented textile operations. During FY25, the Company’s working capital requirements increased in line with higher production activity and export volumes, resulting in elevated reliance on short-term borrowings, primarily to bridge elongated receivable cycles associated with export realizations. Management continues to actively manage trade flows through a mix of export-linked financing instruments and payable optimization. Liquidity remains supported by established banking relationships and available working capital lines; however, the Company’s cash conversion cycle remains sensitive to demand conditions and customer payment behavior, underscoring the importance of disciplined working capital management.

The Company’s debt-servicing coverages, which had weakened during FY24 amid operating losses, have shown early signs of recovery in FY25 in line with the normalization of operations and gradual improvement in profitability. While coverages remain exposed to margin volatility, particularly energy costs and finance charges, the return to positive operating performance has provided some relief at the cash flow level. Additionally, the gradual easing in policy rates during FY25 is expected to support interest cost rationalization over the medium term. Nevertheless, sustained improvement in earnings and internally generated cash flows remains essential for materially strengthening coverage indicators on a durable basis.

LTML’s capitalization profile improved during FY25, reflecting a recovery in the equity base following the loss recorded in FY24, alongside rationalization of longer-term borrowings. At the same time, short-term debt increased to support higher working capital needs, partly offsetting the overall deleveraging impact. Consequently, leverage metrics have moderated from the elevated levels observed in the previous year, though the capital structure remains exposed to operating swings given the Company’s scale and earnings sensitivity. Going forward, continued equity accretion through retained earnings, coupled with disciplined debt management, will remain important to enhance the Company’s financial flexibility and risk absorption capacity.