Kohat Textile Mills Limited (‘Kohat Textile’ or ‘the Company’) was incorporated in 1966 as a public limited company under the repealed Companies Ordinance, 1984 (now called the Companies Act, 2017). The Company's shares trade on the Pakistan Stock Exchange (PSX) with a symbol of KOHTM.

Kohat Textile is the first textile venture of Saif Group ('the Group'). The Group entered the construction arena in the 1900s. Later, the Group expanded into the power segment through Saif Power, textile segment through Saif Textile, Kohat Textile, and Mediterranean Textile, oil & gas exploration segment through Saif Energy, real estate segment through Elite Estate (Pvt.) Ltd., and the health segment through Saif Healthcare Ltd. Lately, the Group has tapped into IT & Communication through Softtech Systems (Pvt.) Ltd. 

The Company operates with a single spinning unit having a capacity of 44,508 spindles and manufactures specialized yarn from polyester, viscose, and acrylic. The Company caters to its power needs via in-house production. Energy requirement includes a power mix of three sources: Captive (4.5MW), PESCO (4.2MW), and Solar (2.1MW). The Company's registered office is located in Islamabad; while the manufacturing units are located in Kohat, KPK.

Kohat Textile’s majority stake (~77.98%) is owned by Saif Group through Saif Holdings. Directors hold ~0.45% stake in the Company. The remaining shareholding vests with financial institutions (~9.91%). The General Public holds the stake of ~12.11%. 

The representation of Saif Group’s textile ventures in Pakistan’s spinning industry remains critical. The Group has a holding company in place, portraying a structured line of succession. However, the succession planning is not documented yet.

Saif Group is one of the oldest medium-sized business conglomerates in Pakistan with considerable interests in textiles. The sponsors have a presence of five decades in the local spinning industry, eventually developing expertise. This bodes well for the overall decision-making process for the Company.

The Group holds an interest in oil and gas exploration, power generation, textiles manufacturing, real estate development, and health care services, through companies operating across different sectors. The Group holds stable financial muscle, along with the Sponsors willingness to support the Company, if needed.

The Board comprises eight members with a major concentration of Saif family members. The Board comprises five Non-Executive Directors, one Executive Director, and two I ndependent Directors.The Board holds independence that benefits the decision making process.

Mr. Javed Saifullah Khan, the Chairman, has an overall experience of over five decades in the textile industry. He is chairs the Board of Saif Power Ltd., Saif Textile Mills Ltd., and Saif Energy Ltd. Mr. Sardar Aminullah Khan is an Independent Director with more than four decades of professional experience. Overall, the Board holds diversified knowledge and expertise ensuring a requisite skill mix for strategic planning.

For effective management, the Board has formed two committees (Audit and HR) to assist the Board on relevant matters. During FY24, 4 Board meetings were held with a majority attendance to discuss pertinent matters. All meetings were held with a majority attendance.

The External Auditors of the Company, M/s Shinewing Hameed Chaudri & Co., Chartered Accountants, have expressed an unqualified opinion on a financial statement for the period ended Jun-24. The firm is ranked in Category "B" among the SBP's Panel of Auditors.

The Company is managed through Operations, Sales, After Sales, Production, Production Planning and Control, Supply Chain, Commercial and Planning, Engineering and Projects, Accounts, Finance, Information Technology, and HR & Administration. All departmental Heads reports to the CEO, who then reports to the Board, and makes pertinent decisions in concent with the BoD. However, the Heads of Internal Audit and HR report functionally to the respective BoD committee and administratively to the CEO.

Mr. Assad Saifullah Khan, the CEO, has been associated with the Company since 2007. The CFO, Mr. Abid, has over two decades of professional experience and has been associated with the Company for more than a decade. They are supported by a team of experienced professionals.

Management's decision-making process is managed through monthly meetings of all departmental Heads. Though no formal meeting schedule exists at Kohat Textile, daily and weekly meetings are held to manage affairs. The daily and weekly reports are generated for top management with a main focus on production and liquidity position, whereas P&L is discussed on a need basis in the meetings. Performance reviews of all units are conducted during these discussions. However. there is no formal management committee in place.

Kohat Textile has in place a Microsoft Dynamics-based Enterprise Resource Planning (ERP) system that provides comprehensive MIS reporting. The Company has a formal reporting mechanism to address management’s needs, comprising daily, weekly monthly reports through data analytics & dashboard.

The Company maintains an in-house internal audit function, which enhances risk management, control, and governance processes. Additionally, the Company's plant is connected to the head office through VPN, thereby reporting on a real-time basis. The Company has placed an in-house internal audit function to monitor the policy formation and implementation process. This bodes well for the Company.

Pakistan's spinning industry is highly fragmented and consists of ~368 dedicated spinning units with an estimated size of ~PKR 895bln and ~13.4mln spindles installed as of FY24. The projected cotton production estimate is revised and forecasted to be ~10.9mln bales, and as of 3MFY25, the production has reached up to ~1.4mln bales, which is ~12.8% of the projected production. During FY24, better local raw cotton yield supplemented the industry for import substitution, with domestic production of ~8.4mln bales constituting ~75.5% of the total supply. In comparison, imports shrank to ~10.8% of the total supply (~1.2mln bales). In FY25, the transition from the final tax regime to the normal tax regime is set to impact the profitability matrix of export-oriented units, with a 29% tax on profits and a super tax of up to 10%. The consistent decline in policy rates over the last two quarters, along with the anticipation of further reductions, is expected to provide a cushion in the financial metrics of the industry.

The Company's maintains an adequate position in terms of the spindles installed. The installed capacity stands at 44,508 spindles.

The Company is primarily generating revenue from local sales. During FY24, the revenue of the Company witnessed a substantial uptake of ~33.8%, reported at ~PKR 7,964mln (FY23: ~PKR 5,952mln); improvement in revenue was attributed to an increase in demand coupled with price change. During 9MFY25, the revenue of the Company surged to ~PKR 6,109mln. Going forward, revenue is expected to remain stable.

During FY24, overall margins of the Company witnessed an increasing trend owing to optimal procurement costs. The gross profit margin increased to ~15.3% in FY24 (FY23: ~14.2%), backed by increase in yarn prices. Similarly, the operating profit margin increased to ~11.8% in FY24 (FY23: ~10.2%) due to trickl down effect. The net profit margins also increased to ~2.7% during FY24 (FY23: ~1.4%). During 9MFY25, the gross margin stood at ~14.3%, while operating and net margins stood at ~10.6% and ~3.8%, respectively. Margins are expected to remain at an adequate level.

Going forward, the Company is planning to acquire debt to finance the CAPEX. Material improvement in cash flows in line with upcoming debt obligations remains imperative. Additionally, the Company has initiated projects to enhance energy efficiency. As policy rates have reduced along with controlled inflation, the Company's business risk profile, including margins, may gradually pick up.

As of FY24, the Company's net working capital days reduced to 106 days (FY23: 110 days). This decrease was primarily due to a decline in inventory days, which stood at 59 days in FY24 (FY23: 73 days). Similarly, the Company's receivable days saw a downturn, reaching around 72 days in FY24 (FY23: 75 days). This decrease was a result of better credit control policies during the period, leading to a lower receivable amount for the Company. The same was observed in the case of trade payable days of the Company decreased to ~26 days in FY24 (FY23: ~38 days). The Company reported a short-term trade leverage of ~19% (FY23: 8%). As of 9MFY25, the net working capital days of the Company surged to 111 days. These metrics reflect the Company’s prudent and effective management of working capital and trade assets, ensuring continued operational efficiency and financial resilience.

The liquidity positioning of the Company remains adequate. As of FY24, the Company reported FCFO of ~PKR 965mln (FY23: ~1,703mln); a decrease in FCFO was attributed to low profitability. Whereas, finance cost also witnessed a substantial increase reported at ~PKR 582mln in FY24 (FY23: ~461mln). Interest coverage ratio (FCFO/Finance Cost) of the Company decreased to 1.8x as of FY24 (FY23: 3.9x). However, the Company maintains sufficient amounts to meet its obligations. As of 9MFY25, the interest coverage ratio of the Company stands at 2.3x. Sustaining adequate coverage levels will be critical moving forward to ensure financial flexibility.

The Company maintains an adequately leveraged capital structure with a (D/E ratio) of ~40.9% as of FY24 (FY23: 43%). The equity base stands at ~PKR 3,910mln as of FY24 (FY23: ~PKR 3,709mln). Total borrowings of the Company stand at ~PKR 2,702mln in FY24 (FY23: ~PKR 2,794mln). The Company majorly relies on STBs to manage the working capital cycle, which stood at ~PKR 1,919mln as of FY24 (FY23: ~PKR 1,941mln). As of 9MFY25, the equity of the Company stands at ~PKR 4,120mln. Going forward, the Company will sustain an adequate leveraging.