Mahmood Textile Mills Limited ('Mahmood Textile' or 'the Company') is a public listed concern, incorporated in 1970. The Company is listed on the Pakistan Stock Exchange.

MTML is a business venture of the Mahmood Group, which was established in 1935 by entering the tannery business. The group has now evolved into a diversified business empire, with Mahmood Textile as its flagship Company.

It is engaged in the production and sale of yarn and greige fabric. Its production facilities are located in Muzaffargarh, DG Khan, and Multan. On a consolidated basis, the Company has 156,720 spindles, 228 looms and 2,300 stitching machines facilitating its production processes. With a generation capacity of 27MW on a consolidated basis, the management ensures uninterrupted operations, supplemented by a backup line from MEPCO. Notably, the Company has recently invested in solar energy, installing an infrastructure capable of generating around 17.88MW of power.

The majority of the Company’s shareholding is held by the general public (~80.3%). Directors, CEO, their spouses and minor children collectively hold ~18.48%, while the remaining stake is held by joint stock companies and other investors, reflecting a broadly diversified ownership structure.

Mahmood Group does not have a holding company structure; however, the third generation of the sponsoring family remains actively involved in the operational and strategic affairs of the Company, ensuring continuity in leadership and decision-making. Despite this active involvement, no formal succession planning framework has been announced to date, which represents an area for further governance strengthening.

With more than eight decades of experience, the sponsors possess diversified expertise across textiles, tanneries, real estate, and the food sector. This long-standing exposure has enabled them to develop strong operational capabilities and sound business acumen, which has helped the group sustain growth and maintain resilience through multiple economic cycles, even during periods of macroeconomic volatility.

The financial strength of MTML is underpinned by the strong business profile and diversified industrial presence of its sponsors. The group operates through multiple entities, including Masood Spinning Mills Limited, Multan Fabrics (Pvt.) Limited, MG Apparel, Passion Foods (Pvt.) Limited, Cotton Ginning Factories, Khawaja Tanneries (Pvt.) Limited, and MG Agri Foods (Pvt.) Limited. Collectively, these entities reflect a diversified business portfolio spanning textiles, apparel, agriculture, food processing, and allied sectors, which contributes to the group’s overall financial resilience. The group possesses a strong financial muscle to support the Company, if needed.

The overall control of the Board is vested in eight members, including the Chief Executive Officer (CEO). The presence of two male and one female independent directors on the Board reflects a strong governance framework and supports effective oversight. The Board is chaired by Mr. Khawaja Muhammad Ilyas.

Mr. Khawaja Muhammad llyas has more than five decades of textile experience. He has been a key position holder in various local corporate bodies of Pakistan. Overall, the board members possess diversified knowledge and experience, which leads to a good skill mix of their competencies.

In line with best corporate governance practices, the Board is supported by two sub-committees to assist in the oversight of relevant matters, namely the Audit Committee and the Human Resources & Remuneration Committee, along with a Nomination and Risk Management Committee. Attendance of directors in Board and committee meetings remains high, reflecting strong engagement of Board members. Meanwhile, the meeting minutes are formally documented; however, there remains room for further improvement in terms of detail and standardization.

M/s Crowe Hussain Chaudhury & Co., Chartered Accountants, serve as the external auditors of the Company and are included in Category “A” of the State Bank’s panel of auditors. The auditors have expressed an unqualified opinion on the Company’s financial statements for the periods ended June 30, 2025 and December 31, 2025. The Company also maintains an internal audit function with the Head of Internal Audit reporting directly to the Board Audit Committee.

The Company maintains a well-defined organizational structure, with its operations appropriately segregated into functional departments to ensure smooth, efficient, and coordinated execution of activities. Each department operates under a clear reporting line to senior management, primarily the Chief Executive Officer (CEO) and Chief Financial Officer (CFO), ensuring effective oversight and governance. The key functional departments include (i) Audit, (ii) Taxation, (iii) Human Resources (HR) and Administration, (iv) Information Technology (IT) (v) Export, and (vi) Finance.

The CEO, Mr. Khawaja Muhammad Anees, has been associated with the Company for a long time and brings extensive industry experience and valuable leadership to the organization. He is supported by a team of seasoned professionals, most of whom have long-standing associations with the Company.

No formal management committees are in place; however, adequate IT infrastructure and related controls are maintained to support operational efficiency and governance. The Company ensures the regular preparation of key management reports, including receivables and payables positions, procurement and purchase reports, audit findings, and other operational summaries, which are periodically submitted to senior management for review and decision-making.

The Company has successfully transitioned its core ERP system from Oracle E-Business Suite to Oracle Fusion Cloud, marking a significant enhancement in its IT infrastructure. The cloud-based platform facilitates real-time data processing, improved integration across finance, supply chain, and manufacturing functions, strengthened internal controls, and enhanced scalability. It also improves data security and accessibility while enabling advanced MIS dashboards, supporting more timely and informed decision-making by management.

The Company has obtained several key export-related certifications, including ISO 9001 (Quality Management System), ISO 14001 (Environmental Management System), ISO 45001 (Occupational Health and Safety), OEKO-TEX Standard 100 (Product Safety Certification), Global Organic Textile Standard (GOTS) for organic textile compliance, Recycled Claim Standard (RCS) for recycled material traceability, and Better Cotton Initiative (BCI) for sustainable cotton sourcing.

Textile exports reached USD 17.9 billion in FY25, a modest rise from USD 16.7 billion the previous year, reflecting a 7.2% year-over-year growth. The largest contribution came from the composite and garments segment, at USD 14 billion, which included the weaving segment at USD 1.8 billion and the spinning segment at USD 0.7 billion. The production of cotton cloth in FY25 declined by approximately 0.7% year over year, reaching around 877.1 million 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 10.2 million bales for FY26 appears challenging.

With an overall production capacity of 156,720 spindles, 228 looms and 2,300 stitching machines, MTML falls in the mid-tier of the respective industry.

The Company's 3-year CAGR from 2023 to 2025 exhibited a considerable growth of 13.6%, following a 14.3% year-on-year decrease. During FY25, the Company's topline experienced a dip at PKR 57.0bln (FY24: PKR 66.5bln), attributed to a change in the revenue mix. The Company's sales mix tilted towards the international market primarily due to improved demand patterns and consumption trends for yarn and apparel. Direct export constitutes approximately 27.8% of the total revenue. The export destinations of the Company are Europe, United States, China, Turkey and others accompanied by optimal risk diversification. In terms of product-wise revenue contribution, yarn is the Company's top-selling product, followed by cloth, apparel and others. During 1HFY26, the Company's topline exhibited the same trend falling at PKR 24.2bln (1HFY25: PKR 27.7bln). This was driven by a strategic adjustment of the product portfolio aimed at improving business from core operations.

During FY25, the Company's gross profit inched up to 14.0% (FY24: 14.6%) primarily due to a rise in the production cost. However, the income from the related parties has bolstered the bottom line (FY25: PKR 250mln; FY24: PKR 437mln). The Company's finance cost witnessed a notable reduction at PKR 4.1bln (FY24: PKR 5.6bln) following the rationalization of interest rates. The Company's bottom line reflected a sizeable improvement (FY25: PKR 978mln; FY24: PKR 250mln), with a net profit margin of 1.7% (FY24: 0.4%). During 1HFY26, the Company's gross profit margin and net profit margin reflected a slight improvement clocking at 14.3% (1HFY25: 13.6%) and 1.8% (1HFY25: 1.2%).

To mitigate the adverse impact of elevated energy cost, the management has already installed a 17.88MW solar which is fully operational. Additionally, the Company plans to invest in a BMR alongside battery storage system to support solar project, thereby enhancing its overall sustainability profile.

The Company’s working capital requirements are driven by inventory and receivables, which are funded through internally generated cash and short-term borrowings. The extended receivables cycle resulted in a stretched net working capital cycle (1HFY26: 165 days; FY25: 140 days). Additionally, the inventory cycle lengthened to 137 days compared to 114 days as of FY25. However, the Company retains adequate borrowing capacity, as short-term trade leverage improved to 27.5% (FY25: 25.7%). The Company maintains a strong liquidity profile with the current ratio of 4.0x (FY25: 3.7x).

As of 1HFY26, the Company's free cash flows from operations (FCFO) clocked at PKR 2.9bln (FY25: PKR 6.1bln), indicative of an adequate financial management. The Company’s EBITDA/Finance cost and core operating coverage stood at 1.8x (FY25: 1.0x) and 1.0x (FY25: 0.9x). Going forward, the improvement in the coverage ratios remains essential for the assigned ratings.

The Company has maintained a moderately leveraged capital structure. As of 1HFY26, the Company’s total borrowings exhibited an increase to stand at PKR 27.4bln (FY25: PKR 29.6bln). The debt book is predominantly vested with the short-term conventional borrowings (STBs) to fuel the extensive working capital requirements of the Company. Resultantly, the leveraging ratio remains elevated at 60.8% (FY25: 61.7%) during the period under review. The Company’s equity base clocked at PKR 17.6bln (FY25: PKR 18.4bln).