Sapphire Fibres Limited ("SFL" or "the Company") was incorporated in Pakistan on June 05, 1979, as a Public Company under the Companies Act, 1913 (now the Companies Act, 2017), and its shares are quoted on the PSX.

SFL is the flagship Company of the Sapphire Group. Mr. Mian Mohammad Abdullah, the group's chairman, founded Sapphire Group in 1969, and the transition from a yarn manufacturer to one of the largest textile conglomerates reflects his vision. The group gradually expanded its footprint into multiple sectors, including power generation, dairy, and retail. Backed by 47 years of industry experience, a workforce of more than 35,000 employees, and a network of over 26 facilities, the Group continues to demonstrate operational excellence, scale, and sustained growth across its business verticals.

SFL is a vertically integrated textile enterprise engaged in the manufacturing of yarn, denim, knitted fabrics, and garments. The Company’s operations encompass eight production facilities, equipped with 104,256 spindles, 164 looms, 102 knitting machines, and 16 stitching units, enabling end-to-end value addition across its product portfolio. The Company's registered office is located at 316, Cotton Exchange Building, I.I Chundrigar Road, Karachi.

The Company’s ownership structure remains closely held, with the sponsoring family maintaining a dominant shareholding of ~90.9%, primarily through group companies (~89.6%) and individual holdings (~1.3%). The balance of ~5.8% is held by the general public, which includes institutional investors such as NIT and ICP collectively holding around ~3.0%. The concentrated ownership profile ensures strong sponsor alignment, effective oversight, and continuity in the Company’s strategic direction.

The Group’s ownership and leadership have been successfully transitioned to the four sons of the founding chairman, Mr. Mian Mohammad Abdullah — Mr. Shahid Abdullah, Mr. Nadeem Abdullah, Mr. Amer Abdullah, and Mr. Yousaf Abdullah. The second generation remains actively engaged in the strategic and operational management of the Group, ensuring continuity of vision and governance stability. Given the cohesive family shareholding and active involvement of the sponsors, no changes in the ownership structure are anticipated in the foreseeable future.

The Abdullah family brings nearly five decades of extensive experience in the textile sector. Their in-depth understanding of mill operations, complemented by strong strategic planning and policy formulation capabilities, has established them among the leading and well-recognized business groups within the industry.

The Company reflects a robust financial profile, underpinned by a sizable consolidated equity base of PKR 90.6 billion as of FY25 and a consolidated revenue stream of PKR 62.4 billion. The strong capitalization provides substantial balance sheet strength and supports the Company’s low-leverage position. At the Group level, the diversified business portfolio and consistent revenue base exceeding USD 1.3 billion collectively reinforce overall financial resilience and stability within a challenging operating environment.

The board comprises nine members (eight male directors and one female director) including the Chairman and CEO. Five members act as non-executive directors, three independent directors, and one executive director. The inclusion of independent oversight has strengthened the governance matrix of the Company.

The chairman of the board, Mr. Yousuf Abdullah, holds an MBA from the UK. He is the CEO of Sapphire Finishing Mills Limited and has also served on the boards of other group businesses since 1995. SFL's CEO, Mr. Shahid Abdullah, holds a bachelor's degree in Commerce and has been associated with the Sapphire Group since 1980. Mr. Nadeem Abdullah, CEO of Sapphire Textile Mills Limited, possesses over 17 years of experience and graduated from McGill University, Canada. Mr. Shayan Abdullah has a Bachelor of Science in Business Management from the USA and has been associated with the board since 2015. Mr. Amer Abdullah has been associated with the group since 1990 and holds an MBA from the USA. He is currently serving as the CEO of Diamond Fabrics Limited and Sapphire Dairies (Private) Limited. Mr. Abdul Sattar Arain is a Fellow Member of Institute of Chartered Accountants of Pakistan as well as he holds a Master's Degree in Commerce. He has over 40 years of experience of working in financial management, project planning, Individual and corporate taxation. Mr. Nadeem has an extensive background in operations, general management, and business development. He is amongst the co-founders of The Resource Group (TRG), a Washington-DC-based investment holding company specializing in the global business process outsourcing & IT services sector. Mr. M. Naeem Khan is an AMP from Harvard Business School, Boston, USA, a fellow member of both The Institute of Chartered Accountants of Pakistan and The Institute of Chartered Accountants in England & Wales. He has exposure in oil marketing, where he extensively developed the retail chain and nurtured commercial customers, besides looking after the treasury and accounting functions. Dr. Mariam Chughtai is an Assistant Professor and founding Associate Dean at the LUMS School of Education. She is also the Director of Pakistan Programs for the Mittal South Asia Institute at Harvard University. She has a Doctorate in Education (Ed.D.) from Harvard University, specializing in Education Policy, Leadership, and Instructional Practice.

SFL has established three board committees – Audit Committee, Human Resource & Remuneration Committee, and Risk Management Committee. During FY25, five meetings of the board of directors were held to evaluate the Company's overall performance towards its targets. The minutes of those meetings have been formally documented.

M/s. ShineWing Hameed Chaudhri & Co., a Category “B” firm on the SBP panel of auditors, serves as the external auditor of the Company. The auditor has expressed an unqualified opinion on the Company’s financial statements for the year ended June 30, 2025.

The Company has a well-structured organizational layout, with overall operations divided into eight broad functional divisions, which are further categorized into various sub-divisions to ensure a smooth flow of operations. The heads of departments report primarily to the CEO and COO, while the COO reports directly to the CEO.

The management team comprises qualified and experienced professionals, led by the CEO. Mr. Shayan Abdullah serves in the position of director and oversees raw material procurement, accounts and marketing for the spinning divisions of SFL. Mr. Jawwad Faisal, Group CFO and COO of the Company, is a chartered accountant by profession and possesses ~25 years of experience.

The management tier ensures effective delegation of functional responsibilities across various departments, facilitating a smooth flow of operations. The system’s implementation supports the integration of business processes and optimizes resources through synchronization and planning.

The Company has implemented an Oracle-based ERP—Oracle E-business suite—to accommodate large-scale and diversified operations. Regular updates to the software aid management in timely decision-making

The Company’s monthly MIS reports, which include comprehensive segment- and unit-wise performance reports, are formally reviewed by the CEO along with monthly accounts. The Company has a co-sourced internal audit function to ensure compliance, effective internal controls, and risk management, as well as to enhance operational efficiency

During MY25, approximately 24.4 million MT of cotton was produced globally, compared to about 24.2 million MT in MY24. Throughout the year, low cotton production was observed in India and Pakistan. However, this was partly offset by increases in cotton production in China, the United States, and Brazil by roughly 9.7%, 19.4%, and 15.7%, respectively. China remains the largest producer and consumer of cotton worldwide (MY21-25). Pakistan's cotton output declined by approximately 30.7%, due to reduced cultivation area and a surge in duty-free imports of cotton and yarn, which disrupted domestic markets. Conversely, cotton imports increased by around 234.0% YoY during the same period to satisfy domestic demand (FY24: roughly 70.0% YoY decline). Cotton arrivals for FY24-25 totaled about 5.5 million bales. The target for cotton production in FY26 is set at approximately 10.2 million bales. The sector's rising dependence on imported cotton poses a supply-side risk. For FY25, imports accounted for approximately 35% of the cotton supply (-11% in FY24), adding about USD 1.27 billion (USD 448 million in FY24) to the country's import bill. 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, 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 10.2 million bales for FY26 appears challenging.

During FY25, SFL contributed a moderate share of the country’s total textile exports. It is one of the largest specialized yarn manufacturing and marketing Companies in Pakistan. The company’s total spindle count and looms stood at 102,480 and 164 respectively. The relative position of the company is considered strong. 

During FY25, the Company experienced a modest incline in revenue growth, reaching PKR 50.5bln (FY24: PKR 47.4bln, 1QFY26: PKR 11.6bln), driven by a moderate improvement in business volumes. The Company’s revenue composition exhibited a notable shift form a predominantly export oriented sales base to a more balanced mix. Local sales clocked at PKR 29.8bln, surpassing export sales of PKR 25.1 billion. This diversification reflects the Company’s strategic focus on strengthening its domestic market presence while maintaining a robust export footprint. Spinning is the top-performing segment in revenue generation, contributing PKR 27.2bln to the Company’s top line, followed by PKR 13.9bln from Denim and PKR 9.3bln from Knits. The knitting segment recorded a notable recovery during the year, supported by improved demand dynamics in key export markets and enhanced operational performance. SFL’s clientele consists of established entities across various export destinations worldwide, primarily in Asia and European markets.

The Company’s gross margin declined YoY to ~8.8% (FY24: ~11.9%), primarily due to the continued procurement of imported raw cotton and elevated input costs. This also translated into lower operating margins, which dipped to ~3.0% (FY24: ~6.9%). The finance cost reduced to PKR 2,076mln (FY24: PKR 2,784mln), in line with the downward trajectory of the policy rate. Despite pressure on core margins, the Company’s net profitability increased manifold to PKR 13,667mln (FY24: PKR 3,373mln), largely driven by dividend income of PKR 17,478mln received from related parties, resulting in a strengthened net margin of ~27.0%.

The Group maintains a diversified business portfolio with interests across power generation, dairy, and retail segments. Over time, SFL has strategically broadened its income base beyond the textile business to mitigate concentration risk, undertaking core investments in the power sector and developing an equity investment portfolio. In line with its diversification strategy, SFL has strengthened its presence in the energy domain through the acquisition of a 50% shareholding in UCH Power (Private) Limited and UCH–II Power (Private) Limited. Looking ahead, the Company does not anticipate any significant capital expenditures within the textile segment, as the existing production infrastructure is considered sufficient to meet operational requirements.

SFL meets its working capital requirements through a mix of internal generation and short-term borrowings (STBs). The net-working capital days stood at endJune’25: 145 days (end-June’24: 149days). The Company’s short-term trade leverage stood at 29.0% as of FY25, depicting sufficient room to borrow. 

A dip in free cash flows from operations (FY25: PKR 1,018mln. FY24: PKR 3,871mln) has impacted the interest coverage ratio to 0.5x in FY25 (FY24: 1.5x). The EBITDA to Finance cost ratio marginally declined to 1.7x (FY24:1.9x) on account of the surge in finance cost paid and dilution in gross profit.

The Company has a low-leveraged capital structure, with leverage increasing to 29.0% during FY25 (FY24: 27.8%) and financing mainly comprising KIBOR-based short-term borrowings (79.5%). The Company’s long-term borrowings stood at PKR 2.9bln, primarily consisting of subsidized borrowings (LTFF) from the SBP, while the equity base reached PKR 50.6bln (FY24: PKR 34.6bln), owing to the inclined profitability.