Verdict
Ahmad Hassan Textile Mills Limited’s FY2026 result was resilient below the operating line, but weaker where the business itself mattered most. Net sales declined 3.7%, gross margin compressed by 72 basis points and operating profit fell 16.7%. A 35.3% reduction in finance cost prevented a larger deterioration and lifted profit before levy and taxation by 4.4%, yet a higher levy/final-tax burden pulled net profit down 9.1% to PKR85.67 million.
The result is therefore mixed rather than contradictory. Lower borrowing costs worked exactly as a leveraged textile manufacturer would hope, but they masked softer exports, weaker operating margins and a sharp reversal in operating cash flow. The final dividend was halved to PKR0.75 per share from PKR1.50.
The audited, standalone financial statements cover the year ended 30 June 2026 and are presented in Pakistani rupees. The auditor issued an unmodified opinion.
Results at a glance
Net sales: PKR5.419 billion, down 3.7% from PKR5.626 billion.
Gross profit: PKR375.05 million, down 12.7%; gross margin narrowed to 6.92% from 7.64%.
Operating profit: PKR266.18 million, down 16.7%; operating margin fell to 4.91% from 5.68%.
Finance cost: PKR104.47 million, down 35.3% from PKR161.37 million.
Profit before levy and taxation: PKR155.76 million, up 4.4% from PKR149.19 million.
Levy/final taxation: PKR65.64 million versus PKR44.71 million. After this levy, profit before ordinary taxation was PKR90.11 million versus PKR104.49 million.
Net profit: PKR85.67 million, down 9.1%; EPS was PKR10.11 versus PKR11.12.
Final cash dividend: PKR0.75 per share, or 7.5%, compared with PKR1.50 for FY2025.
What improved
Finance cost was the clearest improvement. It declined by PKR56.90 million to PKR104.47 million. Mark-up on short-term borrowings fell to PKR70.72 million from PKR114.91 million, while long-term financing cost declined to PKR23.94 million from PKR29.99 million. Management attributed the reduction to lower policy rates and better management of customer credit periods.
That saving almost completely offset the PKR53.43 million decline in operating profit. The arithmetic explains why profit before levy and taxation increased even though the core business weakened: operating profit fell, but the finance-cost saving was slightly larger, and other income also rose to PKR8.45 million from PKR2.78 million.
Domestic sales provided some stability. Net local sales increased 2.7% to PKR5.206 billion from PKR5.070 billion. Trade receivables fell 13.5% to PKR382.88 million, which is consistent with tighter customer-credit management and supports management’s explanation for lower finance costs.
The company also commissioned 2.776 MW of solar capacity and established letters of credit for 12 Toyota air-jet looms under its capital-expenditure and balancing, modernization and replacement plan. The looms and allied equipment were expected to be completed by the end of October 2026. These investments could improve energy efficiency, productivity or product mix, but the filing does not quantify their expected savings or incremental output, so those benefits remain prospective.
What weakened / needs attention
Export sales were the main revenue weakness. Net exports fell 61.7% to PKR213.07 million from PKR556.63 million, while local sales grew. Export contribution to net sales therefore dropped to about 3.9% from 9.9%. Management said exports were under pressure, particularly in the first two quarters, amid weaker demand, regional competition and pricing pressure.
The filing does not disclose a complete volume, price and product-mix bridge. It is therefore not possible to say how much of the export decline came from fewer metres sold, lower prices, customer mix or timing. The defensible conclusion is narrower: export revenue contracted sharply and domestic growth was not enough to keep total sales from falling.
Gross profit declined faster than sales. Gross margin narrowed to 6.92% from 7.64%, a 72-basis-point contraction. Power and fuel cost fell 22.5% to PKR366.34 million and raw-material consumption declined 1.3%, but wages rose 8.8%, production depreciation increased 26.6%, and stores consumed almost doubled to PKR149.24 million. These offsetting movements help explain why lower energy cost did not translate into a wider gross margin.
Administrative expenses increased 11.2% to PKR93.51 million. Management attributed the rise mainly to inflationary pressure. Distribution cost declined 41.1% to PKR15.36 million, but this was not necessarily a sign of stronger efficiency: freight and export-related expenses fell alongside the much lower export sales base.
Tax and levy reconciliation
AHTM’s reported subtotals require care. The income statement first reports PKR155.76 million as profit before levy and taxation. It then deducts PKR65.64 million of levy/final taxation, leaving PKR90.11 million as profit before ordinary taxation. A further PKR4.44 million ordinary tax charge produces net profit of PKR85.67 million.
On a like-for-like basis, the levy/final-tax charge increased by PKR20.94 million, or 46.8%. Combined levy and ordinary taxation were PKR70.09 million versus PKR54.99 million in FY2025. That larger burden explains why the improved pre-levy result did not reach shareholders as higher net profit.
Management also disclosed that FY2025 profit benefited from a PKR15.89 million reversal of deferred tax liability. For FY2026, a potential PKR200.48 million deferred-tax reversal was not recognized in profit or loss, because management wished to avoid reporting what it described as an abnormal profit. This is a non-cash accounting matter, not recurring operating earnings, and the published PKR85.67 million profit remains the correct reported result.
Cash flow and working capital
Cash generation deteriorated materially. Net cash from operations swung to an outflow of PKR44.74 million from an inflow of PKR524.80 million. Before tax, finance cost, gratuity and statutory-fund payments, operations generated PKR203.30 million, down from PKR792.63 million.
Working capital absorbed PKR218.57 million, compared with a PKR341.34 million release in FY2025. Inventory increased by PKR184.30 million and trade and other payables fell by PKR80.88 million; the decline in receivables provided only a partial offset. This is the most important balance-sheet warning in the result: earnings remained positive, but cash was tied up in stock while supplier funding reduced.
Inventory ended the year at PKR1.309 billion, up 16.4%, while net sales declined. Inventory turnover weakened to roughly 3.7 times from 4.2 times. The report does not disclose enough detail to determine whether the build reflects raw-material security, slower finished-goods movement, planned loom commissioning or another factor, so the direction is clear but the cause should not be guessed.
Capital spending and investing activities used PKR59.57 million. Financing activities contributed PKR9.68 million as new and repaid long-term financing, lease payments, dividends and increased short-term borrowing broadly offset each other. Cash and cash equivalents, after netting running finance, deteriorated to negative PKR136.57 million from negative PKR41.93 million.
Balance sheet and leverage
Current assets rose 9.8% to PKR2.250 billion and current liabilities increased at a similar rate to PKR1.617 billion, leaving the current ratio broadly stable near 1.39 times. Cash and bank balances increased to PKR95.06 million, but this should not be read in isolation from short-term borrowings and the negative cash-equivalent position.
Total interest-bearing debt, including current maturities and leases, increased to about PKR823.45 million from roughly PKR632.07 million. The rise was concentrated in short-term borrowings, which increased to PKR524.30 million from PKR282.22 million. Long-term financing and lease liabilities declined, but the funding mix became more reliant on short-duration borrowing.
Shareholders’ equity increased 3.0% to PKR2.466 billion. The company still had a moderate debt-to-equity profile, but the combination of higher short-term borrowing, weaker operating cash flow and greater inventory deserves more attention than the year-end cash balance alone.
Sector and demand context
Pakistan’s textile and apparel exports were broadly flat in FY2026, rising only 0.26% to about USD17.93 billion according to official trade data cited in the annual report. Cotton-cloth exports fell 7.6%, while cotton-yarn exports rose 12.4%. AHTM’s much larger export-sales decline therefore cannot be explained by an industry-wide collapse alone; company-specific customer, product or timing factors likely also mattered, although the filing does not provide enough evidence to allocate the shortfall.
Management highlighted high energy tariffs, rising labour costs, cotton shortages and delays in expanding the Export Refinance Scheme. These are genuine sector constraints. The company’s solar project and loom modernization directly target energy efficiency and competitiveness, but execution, utilization and order conversion will determine whether they improve margins.
AlphaGen model view
The following are AlphaGen model outputs, not figures reported by the company:
Alpha QoQ Score: 8.02.
TTM Performance Score: 20.52.
3Y Business Perf Score: 35.59.
Sector Leadership Score: 39.51.
The low quarterly and trailing scores align with weaker recent operating momentum and cash conversion. The three-year and sector-relative readings are less weak but still do not signal leadership. These scores should be read alongside the audited accounts, not as substitutes for them.
What to monitor next
Export recovery: whether net export sales rebound from PKR213 million and whether the company discloses a clearer volume, price and customer-mix bridge.
Gross margin: whether solar generation, procurement and new looms can reverse the 72-basis-point contraction.
Inventory: whether the PKR1.309 billion stock position converts into sales and cash rather than remaining tied up.
Short-term borrowing: whether higher working-capital debt falls as inventory normalizes.
Cash conversion: whether operating cash flow returns to positive territory after the PKR44.74 million outflow.
Levy burden: whether final taxation continues to absorb the benefit of lower finance costs.
Capital execution: completion, commissioning and utilization of the 12 air-jet looms and associated machinery.
Bottom line
FY2026 demonstrated AHTM’s sensitivity to financing conditions. Lower finance costs were powerful enough to improve profit before levy and taxation despite weaker sales and operating profit. That is useful resilience, but it is not the same as an operating improvement.
The next result needs to show a better combination: export recovery, restored gross margin and normalized working capital. Without those changes, lower interest expense may continue to defend reported profit while inventory, short-term borrowing and cash absorption limit the quality of earnings. The reduced dividend appropriately reflects that more cautious picture.
Sources
Primary sources: AHTM FY2026 audited annual report; Pakistan Stock Exchange company record; Pakistan Bureau of Statistics trade portal; Pakistan Economic Survey 2025–26; and State Bank of Pakistan policy-rate data.
All financial figures are from the audited standalone statements unless otherwise stated. The filing does not provide a complete FY2026 volume, pricing and product-mix bridge, so causal claims have been limited to management’s disclosures and reproducible financial-statement arithmetic.