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Colony Textile Mills Q3 FY26: Spinning Improves, but Weaving Losses and Debt Pressure Persist

Colony Textile Mills narrowed its 9MFY26 loss as spinning recovered, but Q3 weaving losses, heavy finance costs and tight liquidity keep the turnaround fragile.

Sep 20, 2026

Verdict

Colony Textile Mills’ nine-month FY26 numbers show meaningful recovery from a very weak prior-year base, but the March quarter itself warns that the turnaround is not yet stable. For 9MFY26, sales rose 22.9% to Rs15.23 billion, gross profit swung to Rs98.5 million from a Rs291.4 million gross loss, operating loss narrowed 60.7% to Rs289.6 million, and net loss narrowed 25.5% to Rs1.34 billion. Yet Q3 moved the other way at the gross-profit line: sales fell 5.6% year on year to Rs4.90 billion and gross loss widened to Rs77.0 million from Rs62.9 million. Lower distribution and administrative costs helped the operating loss narrow slightly, but finance cost remained roughly Rs350 million for the quarter and the company still lost Rs597.0 million after tax.

The most important detail is inside the segment data. Spinning moved from a Q3 gross loss of Rs90.1 million to a gross profit of Rs204.1 million, while weaving swung from a Rs27.2 million gross profit to a Rs281.1 million gross loss. The filing does not disclose enough operational detail to identify whether utilization, pricing, product mix, production disruption or another factor caused the weaving deterioration, so stronger causal claims would be speculative. For readers tracking business quality rather than just the headline loss, the next result needs to show whether the spinning recovery can persist and whether weaving can stop consuming it.

Results at a glance

  • Company Name: Colony Textile Mills Limited
  • Ticker: CTM
  • Reporting period: Nine months and third quarter ended March 31, 2026.
  • Reporting basis: Company-level unaudited condensed interim financial information prepared under IAS 34 and the Companies Act, 2017; figures are reported in thousands of rupees. The Board authorized the financial information on April 30, 2026.
  • Q3 FY26: sales Rs4.90 billion, down 5.6% year on year; gross loss Rs77.0 million versus Rs62.9 million; operating loss Rs213.6 million versus Rs230.1 million; net loss Rs597.0 million versus Rs609.9 million.
  • 9MFY26: sales Rs15.23 billion, up 22.9%; gross profit Rs98.5 million versus a Rs291.4 million gross loss; operating loss Rs289.6 million versus Rs737.6 million; net loss Rs1.34 billion versus Rs1.80 billion.
  • At March 31, current assets were Rs5.86 billion versus current liabilities of Rs11.70 billion, leaving a Rs5.84 billion working-capital deficit and a current ratio of about 0.50x.

AlphaGen model outputs — these are AlphaGen model outputs, not company-reported figures.

  • Alpha QoQ Score: 30.75
  • TTM Performance Score: 90.3
  • 3Y Business Perf Score: 34.62
  • Sector Leadership Score: 29.0194

What improved

The nine-month comparison is substantially better than FY25. Revenue increased by Rs2.84 billion, or 22.9%, while the cost base grew more slowly, allowing the company to move from a 2.35% gross loss margin to a 0.65% gross profit margin. Distribution and administrative expenses together declined 13.0% to Rs388.1 million. The operating loss consequently narrowed from Rs737.6 million to Rs289.6 million.

The segment bridge shows where that improvement came from. Spinning external sales increased 30.9% to Rs14.26 billion and the segment moved from a Rs230.8 million gross loss to a Rs341.4 million gross profit. Its nine-month gross margin improved from negative 2.1% to positive 2.4%. Spinning therefore generated more than the entire company-level gross profit because weaving remained loss-making.

Finance cost also eased modestly over nine months, down 2.2% to Rs1.07 billion even as sales expanded. Relative to revenue, finance cost fell to about 7.0% from 8.8%. Other income rose 12.2% to Rs217.7 million. Together with the operating improvement, this reduced the loss before tax to Rs1.15 billion from Rs1.64 billion and the net loss to Rs1.34 billion from Rs1.80 billion.

Cash generation improved as well. Operating cash flow before working-capital movements rose to Rs487.0 million from Rs122.5 million, and net cash from operating activities increased to Rs357.5 million from Rs108.0 million. That is a real improvement in pre-working-capital cash economics, although final cash conversion still needs to be read alongside the movements in inventory, receivables and payables.

What weakened / needs attention

Q3 is the main caution. Revenue fell 5.6% year on year. Gross margin deteriorated to negative 1.57% from negative 1.21%, and the absolute gross loss widened 22.4% to Rs77.0 million. Distribution expense fell 27.0% and administrative expense 10.2%, allowing the operating loss to improve modestly to Rs213.6 million from Rs230.1 million. But finance cost rose 2.3% to Rs349.5 million, leaving the quarterly loss before tax almost unchanged at Rs535.4 million and net loss only 2.1% narrower at Rs597.0 million.

The Q3 segment split is particularly important. Spinning sales fell 5.3%, yet gross profit improved dramatically to Rs204.1 million from a Rs90.1 million loss, giving spinning a positive gross margin of about 4.4%. Weaving sales fell 9.1% to Rs307.3 million, but cost of sales reached Rs588.5 million; weaving therefore recorded a Rs281.1 million gross loss, equivalent to a deeply negative gross margin. Because the filing does not provide production volumes, utilization or a detailed cost bridge, the correct conclusion is simply that Q3 margin weakness was concentrated in weaving. The cause is not established in the public disclosure.

The nine-month weaving picture is also weak. External sales fell 35.1% to Rs967.8 million and gross loss widened to Rs242.9 million from Rs60.7 million. The company’s overall improvement is therefore not broad-based. It is primarily a spinning recovery being diluted by a much smaller but loss-heavy weaving operation.

Balance sheet and liquidity

Liquidity remains the biggest financial risk. At March 31, current assets were Rs5.86 billion against current liabilities of Rs11.70 billion, producing a working-capital deficit of Rs5.84 billion and a current ratio of about 0.50x. At June 2025, the deficit was already Rs4.90 billion and the current ratio about 0.57x, so the short-term liquidity position weakened further during the nine months.

The debt structure also matters. Long-term financing fell to Rs5.07 billion from Rs5.69 billion, but the current portion of long-term liabilities rose to Rs2.51 billion from Rs1.98 billion. Short-term borrowings were broadly stable at Rs1.48 billion, while accrued markup increased to Rs791.5 million from Rs684.9 million. In economic terms, some debt moved closer to the current-liability bucket while interest obligations continued to accumulate.

Management explicitly states that the loss, accumulated losses of Rs4.52 billion and the working-capital deficit create significant doubt over the company’s ability to continue as a going concern. The accounts nevertheless remain prepared on a going-concern basis because management expects approval of a proposed debt-to-asset swap with lenders, continued sponsor support and operating improvement. As of the March filing, the arrangement was still subject to formal approval. It should therefore be treated as a proposed restructuring, not a completed balance-sheet repair.

Cash-flow quality

The cash-flow statement is better than the income statement, but not clean enough to remove liquidity concerns. Operating cash flow before working capital increased by about Rs364.5 million to Rs487.0 million. Inventory released Rs473.8 million of cash and trade debtors released Rs5.0 million. However, trade and other payables absorbed Rs380.3 million of cash in the period. After finance cost, gratuity and taxes actually paid, net operating cash flow was Rs357.5 million.

Investment spending also rose. Property, plant and equipment additions consumed Rs222.8 million versus Rs43.7 million a year earlier. Financing activities used Rs118.0 million, including long-term financing repayments and a small reduction in short-term borrowings. Closing cash was only Rs66.0 million. The company therefore generated positive operating cash but retained very little cash buffer relative to its current liabilities and financing burden.

Stock-in-trade fell to Rs2.45 billion from Rs2.92 billion at June, which helps liquidity. Trade debts were roughly flat at Rs144.1 million. The much larger concern is not receivables collection but the scale and maturity of liabilities relative to liquid assets.

Recurring versus exceptional items

The operating improvement should be separated from the large revaluation movement in equity. During 9MFY26, the company recorded a Rs6.28 billion surplus on revaluation of property, plant and equipment before deferred tax, producing a net Rs5.06 billion increase in the revaluation surplus through other comprehensive income. This lifted the revaluation reserve to about Rs5.08 billion and helped total equity rise to Rs8.82 billion from Rs5.10 billion despite the Rs1.34 billion net loss.

That revaluation is non-cash and does not improve recurring earnings, operating cash flow or debt-servicing capacity by itself. It also should not be confused with the Rs217.7 million of other income reported in profit or loss. The recurring earnings question remains whether spinning margins can stay positive, whether weaving can return toward breakeven, and whether finance cost can fall enough to stop absorbing the operating recovery.

Historically, the company is still far from normalized profitability. PSX data show full-year losses after tax of Rs3.64 billion in FY2024 and Rs2.23 billion in FY2025 after a profit in FY2023. The 9MFY26 loss is smaller than the comparable-period loss, but the company has not yet crossed into sustained profitability.

Industry and peer context

Management attributes the difficult operating environment to high energy costs, taxation, exchange-rate volatility, tight liquidity, expensive borrowing, weaker demand, imported-cotton dependence and geopolitical disruption to fuel, freight and supply chains. Those explanations are company management’s assessment. Public data support a pressured but mixed sector backdrop rather than a uniform textile collapse.

The Pakistan Economic Survey 2025-26 reported textile-sector growth of only 0.7% in July-March, with yarn up 1.8% and cloth up 0.2%. PBS reported total Pakistani exports in US-dollar terms down 8.0% in July-March and down 14.0% year on year in March. Yet March cotton-yarn export value was 8.0% higher year on year while cotton cloth was only 1.7% lower. That mix matters: external conditions were challenging, but spinning demand was not uniformly collapsing.

A peer check reinforces the need to separate industry pressure from company-specific execution. Shahzad Textile Mills, also classified by PSX in textile spinning, reported a positive Rs82.7 million profit after tax in Q3 FY26 on Rs3.25 billion of sales. The businesses differ in scale, customer mix and financial structure, so this is not a like-for-like profitability benchmark. It does show, however, that losses were not inevitable across every spinner in the same quarter.

Financing conditions also remained restrictive. SBP kept its policy rate at 10.5% on March 9, 2026 and highlighted the rise in global fuel, freight and insurance costs following Middle East conflict. For Colony Textile Mills, the policy backdrop matters because finance cost exceeded Rs1.07 billion in nine months. But the company’s exact borrowing-rate sensitivity is not disclosed, so the effect should not be quantified beyond what the accounts show.

What to monitor next

  • Debt-to-asset swap: whether lenders formally approve and execute the proposed arrangement, which management expects would reduce financing facilities and accrued markup. Until execution is publicly confirmed, it remains a proposal.
  • Weaving economics: whether Q3’s Rs281.1 million segment gross loss reverses. Because spinning was profitable at the gross level, weaving is now the clearest operating swing factor.
  • Spinning margin durability: Q3 spinning gross margin improved to about 4.4% despite lower sales. Sustaining that improvement would make the nine-month recovery more credible.
  • Finance cost and accrued markup: finance cost still consumed more than Rs1.07 billion in 9MFY26, and accrued markup rose at the balance-sheet date. A lower operating loss alone is insufficient if financing charges remain near current levels.
  • Working-capital deficit and debt maturity: current liabilities exceeded current assets by Rs5.84 billion, with a larger current portion of long-term obligations. The next report needs to show whether this gap narrows rather than simply rolls forward.
  • Cash generation versus capex and debt service: positive operating cash flow is encouraging, but closing cash was only Rs66 million. The quality of the turnaround depends on turning operating improvement into a more durable liquidity buffer.

Overall, Colony Textile Mills is no longer deteriorating at the same pace seen in the prior year, and the spinning business has clearly improved. But the March quarter shows why the story remains fragile: weaving erased the gross profit generated by spinning, finance costs remained heavy, and the balance sheet still carries explicit going-concern risk. The next result cycle is less about another percentage reduction in net loss and more about whether the business can translate spinning recovery and any debt restructuring into a structurally lower cash burden.

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