A.J. Textile Mills Limited ('A.J. Textile' or 'the Company') was incorporated in 1992 as a private limited company under the repealed Companies Act, 1913.

A.J. Textile was the first initiative of the Aziz Group of Industries (the Group) in the spinning sector. The Group has a diversified presence across textiles, FMCG, real estate, and laminated board and particle/chipboard manufacturing. The Group's business interests include yarn production, match manufacturing through Mohsin Match and AJ Match, premium Formica manufacturing, and real estate developments. The Group's real estate portfolio includes AJ Tower, which is substantially completed and has commenced generating rental income, while further projects are being developed through AJ Developers.

The Company specializes in the manufacturing and sale of different varieties of yarn and operates through two manufacturing units with an effective capacity of ~115,000 spindles. The Company maintains a diversified product mix across various yarn counts and manufactures against customer orders, providing flexibility in production planning. The Company's energy requirements are met through a diversified power mix, including a 11MW solar power facility, hydropower obtained through the Pakhtunkhwa Energy Development Organization (PEDO) arrangement, grid electricity through PESCO, and gensets as backup. The Company is currently progressing with a Battery Energy Storage System (BESS), with implementation planned during the current year. The Company continues to invest in automation and energy-efficient machinery as part of its Balancing, Modernization and Replacement (BMR) program. The Company's registered office is located at Industrial Estate, Peshawar, while its manufacturing units are located at Industrial Estate, Gadoon Amazai, Swabi.

AJ Textile's ownership remains vested with the sponsoring family, with Mr. Afan Aziz holding ~65%, followed by Mr. Mohsin Aziz (~34%), Ms. Sahiba Imtiaz (~0.7%), and Ms. Huma Mohsin (~0.03%).

Ownership stability is supported by the majority stake being held by the sponsoring family. However, there is no formally documented succession plan, which remains a governance consideration.

The Aziz Group has been operating since the 1940s and has developed diversified business interests across textiles and allied sectors, FMCG, real estate, and board manufacturing. The sponsors possess extensive industry experience, with the Group having a longstanding presence across its operating businesses.

AJ Textile remains a key cash-generating entity within the Group. The Group also holds interests in Mohsin Match Factory (Pvt.) Limited, AJ Match (Pvt.) Limited, Premier Formica Industries Limited, Mohsin Enterprise (Pvt.) Limited, Aziz Ice Factory and Cold Storage, alongside its growing real estate operations. The Group's diversified business base provides financial flexibility, while management has indicated its willingness to provide support to AJ Textile, if required.

Overall control of the Board remains with the sponsoring family. The Board comprises one Executive Director and three Non-Executive Directors. Greater independent oversight could further strengthen the governance framework.

Mr. Mohsin Aziz, Chairman of the Board, brings over four decades of industrial experience and has previously served as a member of Pakistan's Senate. Mr. Afan Aziz contributes over two decades of industrial experience and is involved in the strategic management of the Group. Their experience supports the Company's strategic direction and oversight.

The Board has constituted Audit and HR Committees to assist in overseeing relevant matters. The Company has also enhanced the frequency of its audit-related oversight, with management indicating that Audit Committee meetings are now conducted on a monthly basis. However, the governance framework can be further strengthened through a structured mechanism for documenting and maintaining Board meeting minutes.

The Company's external auditor is M/s RSM Avais Hyder Liaquat Nauman, Chartered Accountants, which is QCR rated and falls within the 'A' category of auditors. The audit of FY26 financial statements has been completed, with finalization of the Company's accounts pending incorporation of certain information relating to the Group's other entities.

The Company follows a horizontal organizational structure, with functional departments headed by respective department heads reporting to the CEO. Key functions include Marketing, Finance, Legal, HR & IT, Corporate Finance & Treasury, Purchase, Internal Audit, Sales, and Projects.

The management team is led by Mr. Afan Aziz, CEO, who holds a bachelor's degree from the London School of Economics and has been associated with the Company since 2002. He brings over two decades of industrial experience and provides strategic direction to the Company. Mr. Syed Irfan Shah, Group CFO since 2019, provides financial leadership and oversight, while Mr. Zahid Ali Kakar, COO since 2017, oversees the Company's operational functions. The management team is supported by qualified professionals across key functional areas.

Management meetings are held regularly, with follow-up on operational matters. The Company has also strengthened its internal control and monitoring framework through an increased frequency of internal audit activities.

AJ Textile has been using SAP Business One version 10.0 (10.260). The system covers key operating modules including Financials, Sales and Accounts Receivable, Purchasing and Accounts Payable, Business Partners, Banking, Inventory, Production, Human Resources, and Project Management.

The Company maintains an in-house internal audit function covering key operational and control areas. Management indicated that the internal audit function has been strengthened, with Mr. Rao Saqib as Chief Internal Auditor, supported by seven personnel, including dedicated resources for the textile and real estate operations. The audit frequency has also been increased, with monthly internal audit activities now being undertaken. The Company maintains certifications relating to quality, sustainability and compliance, including OEKO-TEX Standard 100, Global Organic Textile Standards (GOTS), Organic Content Standard, and Sustainable/Primark requirements.

The spinning sector continues to face structural pressure from elevated energy costs, dependence on imported cotton, climatic risks to domestic cotton, and regional competition. Despite these challenges, the cotton yarn segment showed relative stability during FY26, with production increasing marginally by 1.0% YoY to 2.69mln MT from 2.67mln MT. Meanwhile, cotton yarn exports increased 12.4% to US$765mln, indicating sustained external demand despite limited growth in domestic production. The non-cotton yarn segment remains relatively small, with exports declining 13.8% YoY to US$14.4mln during H1FY26. The segment primarily caters to specialized and blended-yarn requirements and has comparatively greater reliance on imported inputs. At the broader sector level, profitability remains sensitive to raw-material prices, energy costs, financing conditions and working-capital requirements. Management highlighted that individual player performance remains differentiated based on the ability to manage procurement, energy costs, inventory, labour and automation. Recent easing in financing costs and measures supporting raw-material availability provide some relief, while sustained yarn demand and energy-cost efficiency will remain important for sector performance. Overall, the sector continues to operate under challenging conditions, with demand and export performance providing support while cost pressures remain a key constraint.

The Company maintains an adequate market position in the spinning sector, supported by an effective capacity of ~115,000 spindles. The Company's operating scale has also been supported by continued investment in automation and energy-efficient machinery, with management indicating that equivalent spindle capacity has increased through modernization without a proportionate increase in workforce.

AJ Textile generates revenue predominantly from the domestic market, with around 95% of sales generated locally and approximately 5% through exports. During FY26, revenue remained broadly stable at ~PKR 15.2bn (FY25: ~PKR 15.3bn) despite challenging operating conditions in the spinning sector. The stable topline reflects the Company's ability to maintain volumes and customer orders amid sector-wide pressure. The Company maintains a diversified yarn portfolio across various counts and follows an order-driven production approach, enabling it to adjust its product mix according to customer requirements. Management also indicated that, during periods of logistical disruption affecting imported raw materials, the Company increased its reliance on locally available inputs and adjusted its product mix to manage supply-chain constraints. Going forward, the Company intends to sustain its revenue base through customer diversification, flexible production and continued focus on cost competitiveness.

During FY26, the Company's gross margin improved to ~9.0% (FY25: ~6.0%), while net margin increased to ~4.0% (FY25: ~1.8%). The improvement was supported by better gross profitability and effective management of operating costs. Management attributed the improvement to better procurement and inventory management, automation, and energy-cost management. The Company's increasing reliance on solar energy and relatively cost-competitive hydropower through the PEDO arrangement has supported energy-cost efficiency, while investment in energy-efficient machinery has further contributed to operating efficiency. Finance costs increased to ~PKR 359mln (FY25: ~PKR 238mln) and remain a consideration for profitability. Going forward, margin sustainability will remain dependent on raw-material prices, yarn pricing, energy costs, and the Company's ability to maintain operating efficiencies. The FY26 management accounts confirm the improvement in gross profit to ~PKR 1.36bn from ~PKR 912mln and PAT to ~PKR 601mln from ~PKR 272mln.

The Company continues to focus on energy efficiency, automation and operational cost management to sustain its competitive position. Solar capacity has been increased to approximately 11MW, while a Battery Energy Storage System (BESS) has progressed to the order-placement stage, with implementation planned during the current year. Management expects the combined use of solar, hydropower and battery storage to improve energy-cost efficiency and reliability. The Company also continues to undertake BMR and automation initiatives. During FY26, capital expenditure stood at approximately PKR 1.2bn, primarily reflecting investment in operating infrastructure. The Company intends to maintain its focus on modernization and energy efficiency to support margin sustainability.

As of FY26, the Company's net working capital days improved, supported primarily by a significant reduction in inventory levels, while trade receivables increased. Management indicated that the increase in receivables was partly attributable to delayed customer payments amid liquidity pressure within the industry. However, the Company is actively monitoring collections, with management indicating that the current receivable cycle is expected to improve further. Inventory management remains linked to the Company's procurement cycle, with cotton typically maintained for around ~90 days, while man-made fibres are maintained for a shorter period of around 30 days. The Company also benefits from its ability to adjust procurement and product mix according to market conditions. Trade payables increased to ~PKR 1.8bn (FY25: ~PKR 1.3bn), providing some offset against the increase in receivables. Overall, the Company's working capital cycle remains manageable, supported by improved inventory efficiency and active receivable monitoring. The FY26 cash flow statement further shows a ~PKR 1.0bn reduction in stock-in-trade, while the increase in trade debts absorbed approximately PKR 576mln of operating cash.

During FY26, the Company generated FCFO of approximately PKR 1.4bn, compared with ~PKR 1.1bn in FY25. CFO improved to approximately PKR 1.7bn from ~PKR 529mln, supported by higher profitability and favorable working-capital movements. The EBITDA/finance cost coverage remained broadly consistent, while slight decline reflects the increase in finance costs during the year. The Company's FCFO/(finance cost + CMLTB + excess STB) also improved, indicating adequate debt-servicing capacity. Going forward, coverage metrics will remain sensitive to finance costs, borrowing levels and the sustainability of operating cash generation.

As of FY26, the Company's total borrowings declined, while equity increased to ~PKR 8.3bn from ~PKR 7.6bn. Consequently, borrowings-to-total capital improved to ~32.1% from ~35.4%. The reduction in borrowings was supported by internally generated cash, with short-term borrowings declining to ~PKR 1.3bn from ~PKR 1.5bn, while long-term financing stood at approximately ~PKR 2.0bn. The Company's capitalization therefore remains moderate, providing some financial flexibility to absorb working-capital requirements and fund ongoing BMR and energy-efficiency investments.