Sapphire Finishing Mills Limited ("SFML" or "the Company") is an unlisted public limited Company incorporated in July 2000.

SFML, one of the leading ventures of the Sapphire Group, commenced commercial operations in November 2003 with state-of-the-art production facilities. The Company, as part of a group expansion strategy, was initially established to cater to the apparel-dyed fabric market. Over time, SFML gradually transitioned into manufacturing work wear and casual wear apparel.

The Company specializes in fabric processing, dyeing, and finishing, as well as garment stitching for workwear and casual wear apparel. The head office is located on the 2nd Floor, Tricon Corporate Centre, 73-E Main Jail Road, Gulberg II, Lahore. The Company operates three production facilities situated at 3.5 km Manga Road, Raiwind, Lahore. Unit 1 is dedicated to fabric dyeing and finishing, with an annual production capacity of approximately 42.4mln meters of fabric. Units 2 and 3 are focused on garment stitching, with production capacities of around 4.0mln and 6.0mln pieces per annum, respectively. The Company also operates a captive power generation boiler with a capacity of approximately 5.5 megawatts, supporting uninterrupted operations.

SFML's entire stake is owned by the Sapphire Group, holding approximately 92% of its shares through group companies. The remaining 8% stake is directly owned by members of the Abdullah family.

The group was succeeded by Mr. Mian Mohammad Abdullah's four sons: Mr. Shahid Abdullah, Mr. Nadeem Abdullah, Mr. Amer Abdullah, and Mr. Yousaf Abdullah. No changes in the ownership structure are anticipated in the foreseeable future.

Since its inception in 1970, the Sapphire Group has gone through multiple economic cycles but the growth remained intact. With more than five decades of extensive experience in the textile, energy, retail, and dairy industries, the sponsors possess exceptional business acumen and strategic insight. Their diverse expertise underscores their capability to drive growth and innovation within the organization.

The Company’s financial strength is reinforced by its association with the Sapphire Group, which reported annual revenues of approximately USD 1.35 billion in FY24. Of this, nearly USD 1.15 billion was contributed by the Group’s textile division, reflecting the sponsors’ substantial financial capacity and their ability to support the Company if required. Additionally, the Company operates three international subsidiaries; Sapphire Europe BV, Daletec AS, and Sapphire Finishing Mills USA Inc indicative of its global presence.

The seven-member board, chaired by Mr. Mohammad Abdullah, comprises five non-executive directors and two executive directors (the Chairman and CEO) from the Sapphire Group. The inclusion of independent oversight would further enhance the corporate governance framework.

Mr. Mian Mohammad Abdullah, the Chairman of Sapphire Group possesses extensive experience of over 50 years in the local industry. He has been bestowed with Pakistan’s top civilian award, the Sitara-e-Imtiaz, twice. Mr. Shahid Abdullah, the CEO of Sapphire Fibres Limited and Sapphire Electric Company Limited, holds a bachelor’s degree in commerce from the University of Karachi. Mr. Nadeem Abdullah earned his degree from McGill University in Canada and serves as the CEO of Sapphire Textile Mills Limited. Mr. Amer Abdullah is a key decision-maker in Diamond Fabrics Limited and Sapphire Dairies (Pvt). Limited. He holds a Master’s degree in Business Administration from the United States. Mr. Ismael Abdullah graduated from the University of Pennsylvania and has been associated with SFML for over 3 years.

BOD meetings are held regularly to review the Company's performance and track progress toward targets. The BOD members ensure their availability, as shown by their strong attendance in meetings, where all relevant information is provided to them in advance for discussion.

To uphold high standards of transparency and financial governance, M/s. Shinewing Hameed Chaudhri & Co. have been appointed as the external auditors of SFML. The firm is classified in Category ‘B’ on the SBP panel of auditors. They issued an unqualified opinion on the Company’s financial statements for the year ended June 30, 2025. Additionally, the Company has been outsourced its internal audit function to KPMG Taseer Hadi & Company. 

The Company has a well-structured organizational framework; the operations are categorized into eight functional departments, each further divided into specialized sub-divisions to optimize workflow. This structure ensures efficient management, with many senior executives reporting directly to the CEO.

Mr. Yousuf Abdullah, the CEO, is an accomplished leader with over 25 years of experience in the textile industry. He is a graduate of the Wharton Business School at the University of Pennsylvania and holds an MBA degree from Cambridge University. He is supported by a team of qualified and experienced professionals, most of whom have been associated with the Sapphire Group for a reasonable time period.

To facilitate a smooth flow of operations, two formal management committees are in place. MIS reports related to daily operations are generated and submitted to senior management for regular discussions, along with need-based meetings to address any arising issues.

The Company operates on a modern, secure, and integrated IT ecosystem supported by key enterprise applications, including SAP (ERP) for procurement, inventory management, sales, plant maintenance, production, and financial reporting; Testa for improved cutting efficiency and reduced material waste; BMS (Manufacturing Execution System) for real-time shop-floor monitoring and performance tracking; Fast React for detailed production planning and scheduling; and HubSpot (CRM) for managing customer relationships, sales pipelines, communication, and customer data. The Company’s monthly MIS includes comprehensive performance reports that are frequently reviewed by senior management. 

The IT infrastructure is designed for high availability, reliability, and security, supported by Cisco network equipment and Sophos next-generation firewalls to ensure secure perimeter defense, traffic filtering, and intrusion prevention across all business locations. Sophos endpoint protection is deployed on all Company devices, providing real-time threat detection, anti-malware protection, and centralized security management. Additionally, access control policies, user authentication mechanisms, and network monitoring tools are implemented to safeguard internal systems and prevent unauthorized access.

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, international 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.

The Company operates in a highly fragmented market, maintaining a mid-tier position in the value-added segment, with a focus on specialized workwear. It faces competition from peers such as Sarena Textile Industries (Pvt.) Limited, Beacon Impex (Pvt.) Limited, and a few others.

The Company’s revenue is predominantly driven by export sales. Over the years, the top line has recorded a strong 3-year CAGR of 14.9% from 2023 to 2025. The 16.9% year-on-year growth was primarily supported by significant volumetric expansion in the apparel (garments) segment in international markets. Within exports, fashion wear and casual/fashion wear continue to be the leading categories, followed by a notable contribution from fabric. In FY25, the Company reported a topline of PKR 51.5bln, compared to PKR 44.1bln in FY24. The Company has a diversified customer base in the global market. Although the Company’s top ten clients concentration remained moderate with long-standing relationships with major international brands, including Weenas, Swedol, and Helly Hansen provide comfort. During 1QFY26, the Company posted revenues of PKR 11.0bln.

In FY25, the Company’s gross profit margin declined to 8.0% (FY24: 9.0%), mainly due to expensive fabric procurement costs and an increase in salaries and wages. The same trend extended to the operating margin. During the year, the Company earned dividend income of PKR 242mln (FY24: PKR 425mln). Income from TFC investments and savings accounts provided some support to overall profitability. Despite the rationalization of interest rates, finance cost remained largely unchanged. However, a higher tax burden weighed on the bottom line, resulting in a net loss of PKR 1.2bln (FY24: PKR 714mln). Consequently, the Company’s net profit margin stood at -2.4% (FY24: -1.6%). In 1QFY26, strategic adjustments contributed to improved profitability, with the gross profit margin rising to 11.0% and the net profit margin recovering to 0.3%.

The management continues to focus on enhancing operational efficiency and implementing cost-reduction measures. Additionally, the Company is transitioning from rice husk to alternative sources in its biomass plant, demonstrating its commitment to environmental stewardship and strengthening its overall ESG framework.

The Company fulfills its working capital requirements through a mix of internal cash generation and short-term borrowings (STBs). In 1QFY26, the net working capital cycle lengthened to 117 days, compared to 100 days in FY25. This increase was primarily driven by a prolonged inventory holding period of 109 days (FY25: 93 days), as the Company strategically maintained higher inventory levels to ensure uninterrupted production and timely fulfillment of export orders. The Company’s borrowing headroom improved during the period, evidenced by the rise in short-term trade leverage. The Company’s largely maintained its liquidity position experienced a mild weakening. The current ratio declined to 2.9x from 3.7x, indicating reduced short-term liquidity cushion, though the ratio remains adequate relative to industry norms.

In 1QFY26, the Company reported free cash flows from operations (FCFO) of PKR 687mln, compared to PKR 1.2bln in FY25. Despite the Company’s continued dependence on external financing to support its working capital needs, its cash flow–based coverage indicators exhibited a meaningful recovery. The interest coverage ratio improved significantly to 2.4x (FY25: 1.0x), reflecting both better operating profitability and a slight reduction in finance costs, driven by the rationalization of interest rates.

The Company’s debt structure continues to be heavily skewed toward short-term conventional borrowings, primarily utilized to finance elevated working capital requirements in line with topline growth. Short-term borrowings (STBs) accounted for approximately 55.8% of total debt. The Company’s equity base registered a marginal improvement, rising to PKR 14.1bln in 1QFY26 from PKR 13.9bln in FY25. Total leveraging improved to 60.9% in 1QFY26, slightly lower than 62.9% in FY25, reflecting a moderately leveraged capital structure.