Masood Spinning Mills Limited (‘MSML’ or ‘the Company’) was incorporated in Pakistan on July 20, 2000, as a public limited Company under the repealed Companies Ordinance, 1984 (now Companies Act. 2017).

The Company is a significant division of the Mahmood Group, which has flourished since its inception in 1935, evolving into a prominent business empire. Mahmood Group operates with a vision of continuous expansion and diversification while delivering premium quality products and services that create lasting value for all stakeholders.

The Company operates three production units: Unit 1 and Unit 2, located in Kabirwala, Khanewal District, near the Company’s head office in Multan, and Unit 3, the socks unit, situated in Phool Nagar, Kasur District. Collectively, these units have an installed capacity of 103,845 spindles and 322 knitting machines. In recent years, the Company invested in a socks manufacturing unit to diversify its product portfolio, which has been operating at maximum capacity utilization since January 2025. The Company’s total electricity requirement of approximately 14.6 megawatts is met through captive power generation. In addition, backup power is available through connections with LESCO and MEPCO to ensure uninterrupted operations. To further optimize production costs, the Company has fully operationalized a 13.5-megawatt solar power project.

MSML is a business venture of the Mahmood Group. The entire shareholding of the Company rests with the sponsoring family through individual holdings and associated companies.

The sponsoring group maintains a clearly defined shareholding structure vested among the three brothers of the Khawaja family. Their mutual understanding and alignment on the operations of the group companies contribute to the overall stability of both the sponsoring group and the Company. However, the formal documentation of a succession plan would further enhance the clarity and stability of ownership.

All three brothers bring extensive experience to the textile industry, each with over four decades of involvement in managing the group’s businesses. The third generation of sponsors is already actively engaged in the day-to-day operations of various group companies, supporting business continuity and future growth.

The Company’s financial strength emerges from the strong financial backing of the sponsors. In addition to MSML, the Mahmood Group operates four other entities within the textile sector: (i) Multan Fabrics (Pvt.) Limited, (ii) MG Apparel, (iii) Cotton Ginning Factories, and (iv) Mahmood Textile Mills Limited. This diversified presence within the textile value chain demonstrates the sponsors’ strong capacity to support the Company, if required.

The overall control of the board lies with six members from the sponsoring family. The inclusion of an independent director on the Company's board will strengthen the governance framework of the Company.

Mr. Khawaja Muhammad Ilyas, Chief Executive Officer, brings over four decades of experience in the textile industry and has held key positions in various local corporate bodies in Pakistan. The other directors possess expertise across multiple stages of the textile value chain, reflecting a well-balanced skill mix on the Board.

In FY25, four BOD meetings were held with high attendance from the members. Meeting minutes are formally documented; however, there remains room for further improvement in this area. To support the Board in its oversight responsibilities, two sub-committees have been constituted: the Audit Committee and the Human Resource Committee.

In line with high standards of transparency, M/s Shinewing Hameed Chaudhri & Co., Chartered Accountants, have been appointed as the Company’s external auditors. The firm is rated in Category “B” by the State Bank’s panel of auditors. The auditors have expressed an unqualified audit opinion on the financial statements for the year ended June 30, 2025. The Company has an in-house internal audit department, consisting of one manager and four auditors (two auditors at the head office and two at manufacturing facilities). The department reports on a monthly and ad-hoc basis.

The Company operates primarily in two distinct divisions before delegating strategic decisions to a single overseeing body. At this highest level, the departments are as follows: (i) Audit, (ii) Taxation, (iii) HR and Administration, (iv) IT and ERP, (v) Export and Import, (vi) Purchase and Production, (vii) Corporate Affairs, (viii) Marketing, and (ix) Finance.

The CEO, Mr. Khawaja Muhammad Ilyas has over four decades of experience in the textile sector. He holds a directorship position on the board of various group companies. He is supported by a team of seasoned professionals. Mr. Muhammad Anees s/o Mr. Khawaja Muhammad Younus and Mr. Khawaja Muhammad Mehr s/o Mr. Khawaja Muhammad Ilyas look after the day-to-day operations of Kabirwala (Unit I & II) and Phool Nagar (Unit III) facilities respectively.

The management's responsibilities are clearly delineated. While the Company does not have formal management committees, it possesses a strong IT infrastructure and controls to support seamless operations.

For comprehensive reporting, the Company has embraced digitalization and the principles of Industry 4.0 through the implementation of Oracle Fusion across all operational segments. This strategic initiative leverages cutting-edge technology to enhance efficiency, streamline processes, and improve overall productivity.

The Company adheres to the latest quality assurance standards for the production and trade of yarn. On an operational level, samples of cotton and yarn are tested in the laboratories of each manufacturing unit.

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. Currently, internat ional cotton prices are higher than the price of locally produced cotton. The gap has widened to approximately 9.8 cents per pound (as of July 18, 2025), resulting in an average increase of about USD 36.8 per bale of imported cotton. A greater reliance on imported cotton could Lead to higher raw material costs, ultimately impacting yarn prices and profit margins for the sector. Conversely, energy and finance costs are expected to stay within a range, given the projected reduction in interest rates and the absence of any major energy tariff increases. Considering the current climate change, flooding in major cotton regions, and shifting crop patterns, the target of approximately 10.2mln bales for FY26 appears challenging.

With an overall production capacity of 103,845 spindles and 322 knitting machines, MSML falls in the mid-tier of the respective universe.

A predominant portion of the Company's revenue is generated from local sales. In FY25, the Company's topline registered a year-on-year decline to PKR 31.2bln (FY24: PKR 36.2bln), primarily attributable to a strategic change amid unfavorable yarn pricing in the international market. The local sales were reported at PKR 22.3bln (FY24: PKR 24.9bln). The same trend extended to the exports (FY25: PKR 8.9bln; FY24: PKR 11.3bln), primarily due to intense competition from regional players. In 1QFY26, the Company's topline illustrated an improvement at PKR 8.1bln (1QFY25: PKR 6.7bln). The Company’s revenue concentration is diversified, indicating a low geographic concentration risk. China and Bangladesh are the leading export destinations of the Company, followed by Turkiye, Portugal, Germany, and a few others. Locally, the Company mostly sells to several big players in the respective industry. The top five local customers of the Company are well-established and stable entities: Azgard Nine Limited, Gul Ahmed Textile Mills Limited, Nishat Mills Limited, Al Rahim Textile Industries Limited and Kohinoor Textile Mills Limited

The Company's gross profit margin inched up (FY25: 14.0%; FY24: 13.8%). This was driven by the strategic investment in a solar project to curb the impact of higher energy tariffs. The gradual decrease in the interest rate provided a cushion to the bottom line alongside a reduction in taxation expense. The Company's bottom line posted a notable increase at PKR 352mln (FY24: PKR 148mln), with the net profit margin rising to 1.1% (FY24: 0.4%). In 1QFY26, the Company's topline illustrated an improvement at PKR 8.1bln (1QFY25: PKR 6.7bln). The Company's gross profit margin and net profit margin stood at 13.8% (1QFY25: 14.0%) and 1.2% (1QFY25: 0.8%).

The management plans to operate under a disciplined leverage management framework, anchored in cash generation through improved profitability, asset sales from the liquidation of group companies, and efficient working capital management. These measures are expected to support the deleveraging, liquidity enhancement, and long-term financial stability.

The Company finances its working capital requirements through a combination of internal cash generation and short-term borrowings. In 1QFY26, the net working capital cycle stretched to 167 days (FY25: 159 days), following the optimization of the inventory levels. The liquidity of the Company remained a key strength, with a current ratio of 5.4x (FY25: 6.1x).

In 1QFY26, the Company's free cash flows from operations were recorded at PKR 993mln (FY25: PKR 4.1bln), demonstrating an adequate operational performance. However, the Company’s interest coverage and core operating coverage ratios remained within a moderate range at 1.7x (FY25: 1.4x) and 1.0x (FY25:0.9x). Going forward, the improvement in the coverage metrics remains critical. The Company’s debt payback period improved to 4.5 years.

In 1QFY26, the capital structure continues to be highly leveraged, with total leverage marginally declining to 78.1% (FY25: 78.4%) following a slight reduction in total debt. The Company’s borrowing book remained unchanged at PKR 23.7bln, dominated by the short-term conventional borrowings. The management is actively pursuing a prudent approach to reducing leverage, while the equity base strengthened to PKR 6.6bln (FY25: 6.5bln), supported by a positive bottom line.