Zephyr Textiles Limited

Zephyr Textiles Limited (PSX: ZTL) was incorporated in Pakistan as a private limited company in 1999 and was converted into a public limited company in 2004. The principal activity of the company is manufacturing, dyeing and trading of woven clothes including towels. Pattern of Shareholding As of June 30, 2025, ZTL has a total of 59. 43 million shares outstanding which are held by 465 employees. Directors, CEO, their spouse and minor children have the majority stake of 72. 27 percent in the company followed by local general public holding 19. 80 percent shares. Banks, DFIs and NBFIs account for 7. 42 percent shares of the company. The remaining shares are held by other categories of shareholders. Historical Performance (2021-25) Except for a year-on-year decline in 2025, ZTL’s topline posted year-on-year growth during the period under consideration. Conversely, its bottomline grew only in 2021 and 2023. ZTL’s margins which descended until 2020 rebounded in 2021. In 2022, the margins contracted followed by a recovery posted in 2023. In 2024 and 2025, ZTL’s margins considerably dropped. The detailed performance review of the period under consideration is given below. In 2021, ZTL registered staggering 41. 67 percent year-on-year growth in its topline which clocked in at Rs. 6128. 89 million. This was due to vigorous flows of orders for basic textiles both from both local and export markets. The capacity utilization of all three units of ZTL increased in 2021. The company also started commercial dyeing of knit fabric for garment exporters during last year which started monetizing in 2021 as textile demand began to resume. ZTL also started exporting knitted fabrics which also added to the sales volume. Increased volumes, cost control measures such as installing solar power plant coupled with upward revision in pricing resulted in 101. 02 percent taller gross profit recorded by the company in 2021 with GP margin attaining its highest value of 13. 2 percent versus 9. 30 percent recorded in 2020. Increased sales volume and ultimately higher freight charges drove distribution expense up by 60. 60 percent in 2021. Administrative expense also ticked up by 5. 98 percent in 2021 due to higher payroll expense and utility charges. Number of employees was reduced to 1068 in 2021. No exchange gain recorded by the company during the year pushed down its other income by 60. 74 percent in 2021. Conversely, other expense mounted by 113 percent in 2021 on the back of higher profit related provisioning and exchange loss due to fluctuations of exchange rate and surge in the global prices of commodities. ZTL’s operating profit built up by 138. 85 percent in 2021 with OP margin climbing up to 7. 72 percent – the highest level during the period under consideration. This was against the OP margin of 4. 60 percent recorded in 2020. Monetary easing as well as efficient utilization of financing lines resulted in 7. 92 percent lower finance cost incurred by the company in 2021. ZTL’s gearing ratio also improved from 50. 77 percent in 2020 to 46. 94 percent in 2021. Net profit strengthened by 448. 5 percent in 2021 to clock in at Rs. 302. 076 million with EPS of Rs. 5. 08 and NP margin of 4. 93 percent. This was against the EPS of Rs. 0. 93 and NP margin of 1. 27 percent registered in 2020. The uphill journey of ZTL’s topline continued in 2022 with year-on-year growth recorded at 20. 48 percent. ZTL’s net sales were recorded at Rs. 7384. 16 million in 2022. This was on account of improved performance of both local and export sales. Hike in the prices of basic raw materials such as cotton, dyes, chemicals and packaging materials coupled with Pak Rupee depreciation as well as spike in energy tariff pushed gross profit down by 8. 47 percent in 2022. GP margin slipped to 10 percent in 2022. Exorbitant prices of petroleum products inflated ocean freight charges resulting in 58. 60 percent surge in distribution expense in 2022. Administrative expense also escalated by 9. 87 percent in 2022 due to increase in number of employees to 1085 coupled with the adjustment of minimum wages in line with inflation. Other income multiplied by 633. 41 percent in 2022 due to hefty exchange gain, profit on investments as well as gain on disposal of fixed assets. Other expense ticked down by 3. 47 percent in 2022 due to lower profit related provisioning and no exchange loss incurred during the year due to superior export sales. ZTL recorded 24 percent slimmer operating profit in 2022 with OP margin of 4. 87 percent. Consistent with previous years, finance cost kept dipping despite unprecedented level of discount rate. This was due to massive decline in long-term financing as the company paid long-term loans worth Rs. 258. 56 million during the year. Gearing ratio also marched down to 42. 01 percent in 2022. Despite relentless efforts to restrain its expenses, ZTL’s net profit contracted by 39. 69 percent year-on-year to clock in at Rs. 182. 17 million in 2022 with EPS of Rs. 3. 07 and NP margin of 2. 5 percent. ZTL’s net sales posted 9. 74 percent year-on-year uptick to clock in at Rs. 8103. 08 million in 2023. This was due to weak performance in the local market on account of prevailing political and economic uncertainty in the country. Conversely, export sales strengthened during the year particularly to the US and European market. The company has been gradually shifting its focus from greige fabric to value-added textile exports which enabled it to secure order with higher margins. As a result, ZTL’s gross profit enhanced by 65. 28 percent in 2023 with GP margin attaining its highest level of 15. 08 percent. Distribution expense mounted by 31. 37 percent in 2023 due to higher export sales. Administrative expense mounted by 17. 66 percent in 2023 due to higher inflation as well as workforce expansion to 1218 employees. Other income posted 64. 90 percent growth in 2023 on account of sizeable growth in exchange gain. However, the growth in other income was reversed by 485. 98 percent higher other expense incurred by ZTL in 2023 due to higher profit related provisioning, provision for sales tax refund, provision for ECL as well as exchange loss & discounting factor. ZTL posted 55. 84 percent higher operating profit in 2023 with OP margin flying up to 6. 91 percent. Unlike previous years, where ZTL was able to keep a check on its finance cost, in 2023, finance cost soared by 92. 93 percent. As per the directions of IMF, subsidized loans to export sector were withdrawn with discount rate clocking it at its historic high level. Gearing ratio, however, continued to slide in 2023 and stood at 36 percent as the company repaid its long-term loans worth Rs. 183. 30 million during the year. Net profit grew by 30. 62 percent in 2023 to clock in at Rs. 237. 958 million with EPS of Rs. 4 and NP margin of 3 percent. In 2024, ZTL’s topline ticked up by 3. 59 percent to clock in at Rs. 8393. 88 million. This came on the back of increased sales volume and value. As of June 30, 2024, 68. 75 percent of the company’s net sales comprised of export sales which showed great resilience during the year. Conversely, local sales suffered due to poor politico-economic backdrop. Cost of sales mounted by 8. 95 percent in 2024 on the back of a drastic spike in energy tariff. This resulted in 26. 60 percent plunge recorded in the company’s gross profit with GP margin falling down to 10. 68 percent. Greater export sales volume resulted in 11. 22 percent growth recorded in distribution expense in 2024. Administrative expense also surged by 13. 37 percent in 2024 on account of higher payroll expense due to inflationary pressure while workforce was streamlined from 1218 employees in 2023 to 1103 employees in 2024. Other income strengthened by 54. 12 percent in 2024 due to gain recognized on the sale of fixed assets particularly air jet looms. Other expense plummeted by 68. 70 percent in 2024 due to lower profit related provisioning, lesser provisioning done for ECL and sales tax refund and thinner exchange loss incurred during the year. ZTL recorded 20. 67 percent decline in its operating profit in 2024 with OP margin dropping to 5. 29 percent. Finance cost surged by 54. 55 percent in 2024 due to higher discount rate and increased borrowings. Net profit dwindled by 80. 81 percent to clock in at Rs. 45. 65 million in 2024. This translated into EPS of Rs. 0. 77 and NP margin of 0. 54 percent. In 2025, ZTL’s net sales ticked down by 1. 36 percent to clock in at Rs. 8279. 47 million. Export sales grew during the year, however, couldn’t offset the negative variance created by local sales. Italy, Germany and Sri-lanka were the top three export destinations of ZTL. In 2025, export revenue from Italy and Germany receded, while revenue from Sri-lanka considerably improved. Other export destinations which propelled ZTL’s export sales in 2025 were Portugal, Greece and the UAE. Cost of sales slid by a lower magnitude of 0. 44 percent in 2025 due to higher input cost and energy constraitns. Gross profit dipped by 9 percent in 2025 with GP margin falling down to 9. 85 percent. Lower local sales volume during the year resulted in 17. 77 percent decline recorded in distribution expense in 2025. Administrative expense also ticked down by 6. 31 percent in 2025 due to lower payroll expense. Lower exchange gain, dividend income and thinner gain on the sale of fixed assets resulted in 61. 93 percent plunge in other income in 2025. Other expense also tumbled by 46. 98 percent in 2025 due to lesser provisioning done for WWF and WPPF, lower ECL and a dip in exchange loss and discounting factor. ZTL’s operating profit slumped by 23. 14 percent in 2025 with OP margin sliding down to 4. 13 percent. Lower discount rate translated into 10. 82 percent diminution recorded in finance cost in 2025. This was despite an increase in short-term borrowings during the year which pushed up ZTL’s gearing ratio from 33 percent in 2024 to 44 percent in 2025. ZTL’s recorded 96 percent thinner net profit to the tune of Rs. 1. 82 million in 2025. This translated into EPS of Rs. 0. 03 and NP margin of 0. 02 percent in 2025. Recent Performance (9MFY26) During the nine-month period of the ongoing fiscal year, ZTL posted 11. 95 percent decline in its net sales which clocked in at Rs. 5681. 47 million. This was due to reduced export orders on account of geopolitical tensions and competitive pressures in the global market. Gross profit diluted by 2. 52 percent in 9MFY26, however, the company’s increased inclination towards value-added products pushed up its GP margin from 9. 39 percent in 9MFY25 to 10. 39 percent in 9MFY26. Distribution expense escalated by 10. 40 percent in 9MFY26 due to inflationary pressure and increased freight charges. Administrative expense ticked down by 2. 84 percent during the period under review likely due to lower payroll expense. Lower exchange gain, thinner gain on the revaluation and sale of investments resulted in 43. 72 percent lower other income in 9MFY26. Other expense also fell by 41. 47 percent in 9MFY26 due to lower provisioning done for WWF, WPPF and ECL which offset the greater loss recorded on the sale of property, plant & equipment during the period. ZTL’s operating profit deteriorated by 25. 57 percent in 9MFY26 with OP margin clocking in at 3. 24 percent versus OP margin of 3. 83 percent recorded in 9MFY25. Finance cost shrank by 31. 58 percent in 9MFY26 due to monetary easing. This was despite an increase in both short-term and long-term loans during the period under review. While profit before tax increased by 10. 86 percent to clock in at Rs. 38. 798 million in 9MFY26, the imposition of levy charges of Rs. 70. 32 million marred the financial performance of ZTL and resulted in net loss of Rs. 39. 97 million in 9MFY26. This was against the net profit of Rs. 10. 47 million recorded in 9MFY25. ZTL registered loss per share of Rs. 0. 67 in 9MFY26 versus EPS of Rs. 0. 18 posted in 9MFY25. Future Outlook ZTL is aggressively targeting diverse export destinations through its value-added textile products. To minimize the impact of hiking energy tariff, the company increased the capacity of its solar power unit from 450 kwh to 950 kwh at its towel manufacturing unit with the installation of another solar power plant of 358 kwh at its weaving unit under process. Efficient inventory procurement, strategic financial management and proactive measures to boost operational efficiency will enable it to sustain in the face of resurgence of inflationary pressure and the onset of monetary tightening cycle.

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