Feroz1888 Mills Limited: performance and outlook

Feroz1888 Mills Limited (PSX: FML) was incorporated in Pakistan as a public limited company in 1972. The company is in the business of manufacturing and exporting specialized yarn and textile products categorized into bath, beach and kitchen products. Besides having an export market in over ten countries across the globe, FML also caters to the needs of local market. The company is partnered with 1888 Mills (USA) and has its manufacturing units in Sindh and Balochistan. Pattern of Shareholding As of June 30, 2025, FML has a total of 399. 409 million shares outstanding which are held by 1285 shareholders. Individuals have the majority stake of 35. 69 percent in FML followed by Directors, CEO and their spouse holding 32. 38 percent shares. Associated companies, undertakings and related parties account for 30. 17 percent shares of FML while joint stock companies hold 1. 66 percent of FML’s outstanding shares. The remaining shares are held by other categories of shareholders. Performance Trail (2021-2025) Except for a year-on-year downtick in 2025, FML’s topline posted growth in all the years under consideration. Conversely, its bottomline posted growth twice during the period i. e. in 2021 and 2023. FML’s margins which peaked in 2019 plunged for the next three years except for a trivial uptick in operating and net margins in 2021. In 2023, the margins staggeringly rebounded which was followed by a drastic fall in 2024 and 2025. The detailed performance review of the period under consideration is given below. 2021 was a vigorous year for FML, characterized by 36. 43 percent year-on-year topline growth coming on the back of both local and export sales. FML’s net sales clocked in at Rs. 42, 575. 47 million in 2021. The US market represented the major export destination for the company with a share of 83 percent in the net sales of FML in 2021. Increased yarn prices, Pak Rupee depreciation, hike in fuel and power cost etc took its toll on the cost of sales which grew by 36. 62 percent year-on-year in 2021. While gross profit enhanced by 35. 78 percent in 2021, GP margin dropped to 22. 43 percent. Operating expense grew mainly on account of marketing expense, freight, forwarding and insurance charges and also because of higher payroll expense as number of employees grew to 13, 354 in 2021. Other income and other expense gave some breather as the company reversed the provision for doubtful advances and also because of higher dividend income on open ended mutual fund units. Operating profit grew by 47. 29 percent year-on-year with OP margin clocking in at 12. 56 percent in 2021. Finance cost continued to grow despite slashed discount rate as the company’s long-term and short-term borrowings as well as lease liabilities enlarged during the year which also drove its gearing ratio up to 51. 33 percent in 2021. FML’s bottomline posted 46. 78 percent year-on-year growth in 2021 to clock in at Rs. 4311. 29 million with EPS of Rs. 11. 30 and NP margin of 10. 13 percent. This was against EPS of Rs. 7. 80 and NP margin of 9. 41 percent registered in 2020. 2022 was a difficult year not only for the textile sector but for the economy as a whole. Soaring inflation, sharp depreciation of Pak Rupee, multiple upward revisions in discount rate coupled with import restrictions and subdued purchasing power of consumers were the challenges that began to raise their heads in 2022 and continued even in 2023. The topline of FML grew by 15. 13 percent year-on-year to clock in at Rs. 49, 018. 46 million in 2022. The topline couldn’t sustain the rise in cost of sales due to the challenges quoted above. As a result gross profit took 20. 18 percent year-on-year plunge in 2022 with GP margin drastically falling down to 15. 55 percent. The company had never seen such a thin GP margin since 2014. Administrative and distribution expenses multiplied by 12. 50 percent and 25. 50 percent respectively in 2022. This was on the back of elevated freight charges and higher payroll expense despite the fact that FML’s workforce shrank to 12, 643 employees in 2022. Other income gave major support to the bottomline as it multiplied by 638 percent in 2022 on the back of hefty exchange gain. Other expense also slumped by 55. 85 percent in 2022 due to no exchange losses incurred during the year coupled with lower profit related provisioning done in 2022. Operating profit eroded by 10. 50 percent year-on-year in 2022 with OP margin clocking in at 9. 76 percent. Finance cost grew by 19. 17 percent year-on-year in 2022 on the back of multiple rate hikes during the year as well as increased borrowings. However, increased share capital due to issue of right shares resulted in a lower gearing ratio of 43 percent in 2022. FML’s bottomline dropped by 20. 94 percent year-on-year in 2022 to clock in at Rs. 3408. 45 million with EPS of Rs. 8. 76 and NP margin of 6. 95 percent. During 2023, FML’s topline registered 16. 39 percent year-on-year growth to clock in at Rs. 57, 051. 83 million. The main reason behind higher net sales was 45 percent depreciation of Pak Rupee resulting in tremendous exchange gain. Elevated proportion of export sales in the total sales mix of FML coupled with Pak Rupee depreciation conveniently absorbed the cost of sales, resulting in 69. 94 percent higher gross profit recorded by the company in 2023. GP margin climbed up to 22. 71 percent in 2023. Administrative expense hiked by 50. 63 percent year-on-year in 2023 on account of higher payroll expense as FML hired additional resources to take its workforce up to 13, 127 employees in 2023. Higher travelling & conveyance charges also contributed towards elevated administrative expense recorded by the company in 2023. Distribution expense also grew by 3. 90 percent in 2023 due to higher marketing and other related expenses incurred during the year. 107. 55 percent spike in other expense in 2023 was the result of higher provisioning for WWF, WPPF and ECL. However, it was nullified by a tremendous other income of Rs. 4721. 34 million recorded by FML in 2023 due to robust exchange gain and dividend income. Operating profit mounted by 145. 85 percent year-on-year in 2023 with OP margin of 20. 62 percent. Finance cost magnified by 199. 23 percent in 2023 due to unprecedented level of discount rate coupled with increased short-term borrowings. Gearing ratio also picked up to 52. 19 percent in 2023. FML posted 163. 15 percent taller net profit to the tune of Rs. 8969. 46 million in 2023 with EPS of Rs. 22. 46 and NP margin of 15. 72 percent. In 2024, FML’s topline picked up by 22. 27 percent to clock in at Rs. 69, 757. 60 million. As of June 30, 2024, export sales comprised of 96. 62 percent of FML’s net sales. Export sales showed great resilience and mounted by 21. 83 percent in 2024. This mainly encompassed sales to America and European region. Cost of sales surged by 31. 36 percent in 2024 due to elevated energy and gas prices. This coupled with the stability portrayed by Pak Rupee during the year, squeezed the margins on export sales. This resulted in 8. 67 percent downtick recorded in gross profit in 2024. GP margin also fell to 16. 96 percent in 2024. Administrative expense surged by 14. 79 percent in 2024 on the back of higher payroll expense, elevated utility charges as well as greater conveyance & travelling charges incurred during the year. FML expanded its workforce from 10, 908 employees in 2023 to 12, 483 employees in 2024. Distribution expense mounted by 22. 21 percent in 2024 due to higher marketing budget as well as freight & insurance charges incurred during the year. Other expense ticked down by 0. 60 percent in 2024 as considerably lesser profit related provisioning done during the year was greatly offset by hefty net exchange loss. Other income also fell by 88. 24 percent in 2024 as FML didn’t record any exchange gain. Operating profit tapered off by 54. 25 percent in 2024 with OP margin registering its lowest level of 7. 72 percent. Finance cost escalated by 92. 65 percent in 2024 due to higher discount rate and increased short-term borrowings. This resulted in a gearing ratio of 57. 84 percent in 2024. FML’s net profit eroded by 93. 62 percent to clock in at Rs. 572. 341 million in 2024. This translated into EPS of Rs. 1. 43 and NP margin of 0. 82 percent in 2024. In 2025, FML’s net sales narrowed down by 5. 23 percent to clock in at Rs. 66, 110. 53 million. This was due to increased competition and high recession in the international market. In 2025, export sales comprised of 96. 63 percent of FML’s topline – almost similar to previous year. Higher cost of sales due to elevated energy tariff resulted in 23. 60 percent decline in gross profit in 2025. GP margin also fell to 13. 67 percent in 2025. Administrative expense ticked up by 2 percent in 2025 due to inflationary pressure which pushed up the payroll expense. This was despite the fact that the company streamlined its workforce from 12, 483 employees in 2024 to 11, 432 employees in 2025. Tighter export sales resulted in 8. 81 percent downtick recorded in distribution expense in 2025. No exchange loss recorded during the year and lesser provisioning done for WWF and WPPF resulted in 64. 13 percent decline in other expense in 2025. Other expense was offset by 59. 19 percent growth recorded in other income in 2025 which came on the back of hefty exchange gain recognized during the year. FML’s operating profit slumped by 31. 27 percent in 2025 with OP margin dipping to 5. 60 percent. Finance cost thinned down by 20 percent in 2025 due to lower discount rate while borrowings continued to escalate. FML recorded 82. 70 percent weaker net profit to the tune of Rs. 99. 023 million in 2025. This culminated into EPS of Rs. 0. 25 and NP margin of 0. 15 percent in 2025. Recent Performance (9MFY26) During the nine-month period of the ongoing fiscal year, FML recorded 4. 97 percent uptick in its net sales which clocked in at Rs. 49, 682. 217 million. Amid ongoing geopolitical tensions in the Middle East region and evolution of trade policies in the major export markets, FML focused on diversifying its customer base and enhance the share of value-added products in its sales mix. Despite concerted efforts, higher cost of sales due to elevated energy cost didn’t allow the company to record any improvement in its gross profit which ticked down by 14. 17 percent in 9MFY26. GP margin clocked in at 11. 31 percent in 9MFY26 versus GP margin of 13. 83 percent recorded in 9MFY25. Administrative expense tumbled by 17. 24 percent in 9MFY26 due to streamlined operations amid weaker demand. Conversely, distribution expense surged by 14. 67 percent in 9MFY26 likely due to increased petroleum prices and supply chain impediments in executing export orders on the back of geopolitical tensions. Greater provisioning done for WWF and WPPF appears to be the cause of 18. 10 percent higher other expense recorded in 9MFY26. Other expense was wiped off by 123. 29 percent higher other income recognized during the period which appears to be the result of exchange gain. FML recorded net other income of Rs. 1541. 63 million in 9MFY26, up 133. 19 percent year-on-year. Operating profit diminished by 11. 50 percent in 9MFY26 with OP margin clocking in at 5. 14 percent versus OP margin of 6. 10 percent recorded in 9MFY25. Finance cost tumbled by 22. 69 percent in 9MFY26 due to monetary easing. Net profit rebounded by 620. 31 percent to clock in at Rs. 98. 575 million in 9MFY26. This translated into EPS of Rs. 0. 25 and NP margin of 0. 20 percent in 9MFY26 versus EPS of Rs. 0. 03 and NP margin of 0. 03 percent recorded in 9MFY25. Future Outlook The company is aggressively looking to expand in the international market. To enhance its export sales, the company has recently announced the formation of wholly owned subsidiaries in UK and UAE. FML is also actively seeking for ways to reduce its energy cost by installing a solar unit and also by enhancing its capacity. With high receivables and inventory (collectively exceeding Rs. 37 billion) and low cash (Rs. 536 million to be exact), FML’s has a heavy debt load (total liabilities of Rs. 53. 54 billion) as of March 31, 2026. Borrowings will continue to surge in order to scale its operations. In this regard, reduction in Export Refinance Scheme (EFS) rates is an encouraging development for the company as well as for the export oriented sector in general. On 31 March 2026, Liberty Mills Limited acquired 37. 40 million shares of FML which took its total shareholding in the company to 74. 188 million shares (or 18. 57 percent of the total outstanding shares).

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