CRTM FY2026: margins recover as finance costs ease

Verdict

The Crescent Textile Mills Limited (CRTM) returned to profit in the audited standalone year ended June 30, 2026, but the quality of the recovery is mixed. Revenue was almost flat at Rs19.11 billion, yet gross margin widened and finance costs fell sharply enough to reverse the prior year’s loss. Profit after tax was Rs52.7 million, or Rs0.53 per share, compared with a Rs287.4 million loss and negative Rs2.87 per share in FY2025.

The positive turn is real, but it is still thin relative to the size of the business and its financing burden. A Rs173.8 million gain on disposal of property, plant and equipment materially supported other income, while the levy absorbed Rs226.8 million. Excluding that disposal gain mechanically—not as an audited alternative-profit measure—profit before levy and tax would have been about Rs131.8 million rather than Rs305.7 million. That makes the lower interest bill and better gross margin the more important recurring signals.

Results at a glance

Reporting basis: audited standalone financial statements for the year ended June 30, 2026; figures below are in Pakistani rupees and generally rounded to millions.

Revenue: Rs19,111.7 million, up 0.6% from Rs19,003.7 million.

Gross profit: Rs1,984.1 million, up 16.4%; gross margin improved to 10.38% from 8.97%, a gain of about 1.42 percentage points.

Profit from operations: Rs1,085.8 million, up 31.3%, including Rs375.5 million of other income.

Finance cost: Rs780.1 million, down 33.1% from Rs1,165.4 million.

Profit after tax: Rs52.7 million versus a Rs287.4 million loss; EPS was Rs0.53 versus negative Rs2.87.

Dividend: the board did not recommend a dividend.

Cash flow from operating activities: Rs928.1 million inflow versus an Rs857.4 million outflow.

AlphaGen model scores

These are AlphaGen model outputs, not figures reported by the company:

Alpha QoQ Score: 45.84

TTM Performance Score: 83.58

3Y Business Perf Score: 45.51

Sector Leadership Score: 37.49

What improved

Margin recovery did more work than topline growth

Sales increased by only Rs108.0 million, but cost of sales fell by Rs172.1 million. Gross profit therefore rose by Rs280.1 million. Raw-material cost declined to Rs6.30 billion from Rs6.92 billion, and fuel and power cost fell to Rs3.31 billion from Rs3.64 billion. Those benefits outweighed an increase in wages to Rs1.87 billion from Rs1.58 billion and a much less favorable inventory adjustment: FY2026 included Rs257.6 million of cost against a Rs700.6 million credit in FY2025.

Management attributes part of the improvement to resetting the export product mix, focusing target markets and obtaining better selling prices. The volume-and-price disclosures support that account, especially in export fabric. Export fabric volume fell 27.9% to 13.24 million metres, while the average rate rose 31.5% to Rs726 per metre. Export fabric sales still declined to Rs9.61 billion from Rs10.14 billion, but the pricing shift helps explain why profitability improved even as export volume weakened.

The domestic book provided more volume support. Local yarn volume increased 1.6% to 7.22 million kilograms and its average rate edged up 1.0%. Local fabric volume grew 14.3% to 6.38 million metres, although the average rate fell 8.9%. Processing income almost doubled to Rs979 million, and weaving income increased to Rs681 million. Overall local sales rose 10% to about Rs9.47 billion, cushioning a 7% fall in exports to about Rs9.64 billion.

Finance costs finally moved in the right direction

The Rs385.3 million reduction in finance cost was the clearest bridge from operating recovery to positive earnings. Mark-up on short-term borrowings fell to Rs652.0 million from Rs940.0 million, while long-term borrowing cost declined to Rs94.8 million from Rs169.5 million. The directors cite lower policy and ERF-II rates, refinancing from KIBOR-linked borrowing into cheaper ERF-II and FE-25 foreign-currency export facilities, and repayment of long-term debt.

Total interest-bearing borrowings, combining long-term financing, its current maturity and short-term borrowings, fell to roughly Rs9.15 billion from Rs9.70 billion. That is progress, though the absolute burden remains high: finance cost still consumed about 72% of profit from operations.

Energy procurement became cheaper and less gas-dependent

The company reported total energy cost of Rs2.96 billion, down 3%, and an average electricity cost of Rs33.70 per kWh versus Rs36.16. Its mix changed sharply: grid electricity supplied 91% of consumption, compared with 23% in FY2025, while RLNG and gas fell to 2% from 68%. Solar contributed 6.2%, and solar generation rose 21% to 5.46 million kWh. CRTM capitalized a 7 MW solar installation during the year. These disclosures establish the direction of energy cost and sourcing; they do not isolate the exact amount of gross-margin improvement attributable to each source.

Segment performance was uneven but spinning rebounded

Spinning’s gross profit rose to Rs473.3 million from Rs152.5 million, and its segment result before unallocated items turned to a Rs215.5 million profit from a Rs57.0 million loss. Weaving improved more moderately, with gross profit of Rs310.1 million and segment profit of Rs204.8 million. The processing and home-textile segment remained the largest contributor, but its segment profit fell to Rs287.5 million from Rs430.4 million. Power segment profit also declined to Rs25.9 million from Rs43.8 million.

The product mix tells a similar story. Yarn revenue increased 6.4% and fabric revenue 9.8%, while made-up revenue fell 10.2%. Processing and weaving income rose 42.7%. That supports a conclusion of improved upstream economics, but a weaker made-ups business limited the overall advance.

What weakened / needs attention

The profit buffer is narrow and one-off income mattered

Other income increased 53.7% to Rs375.5 million, with the disposal gain rising to Rs173.8 million from Rs18.2 million. Exchange gains, dividends, deposits and scrap income also contributed. The disposal gain does not invalidate the result, but it is not a dependable annual earnings source. Distribution and administrative expenses each rose about 13%, faster than revenue. Without continued gross-margin discipline and lower funding costs, the bottom line could remain volatile.

The levy is economically material

Profit before levy and income tax was Rs305.7 million, but the Rs226.8 million levy reduced reported profit before taxation to Rs78.8 million. Income tax then absorbed a further Rs26.1 million. Investors comparing CRTM with other textile companies should keep this presentation distinction in view: the filing separately identifies the levy before arriving at profit before taxation.

Liquidity remains tight despite better cash generation

Operating cash flow improved decisively to Rs928.1 million, helped by Rs2.06 billion of cash generated from operations and a favorable Rs685.8 million working-capital movement. Inventory reduction was important: stock-in-trade fell to Rs4.12 billion from Rs4.93 billion. However, trade debts rose 29.5% to Rs3.25 billion despite nearly flat revenue, a development that deserves close monitoring.

Current assets of Rs10.07 billion were below current liabilities of Rs12.89 billion, producing a current ratio of about 0.78 versus 0.81 a year earlier. Year-end cash was only Rs8.2 million. The balance sheet therefore still depends heavily on working-capital facilities even after debt reduction.

Capital expenditure increased to Rs696.8 million, including the solar investment, while net operating cash flow covered that spending. Financing cash outflow was Rs590.3 million, consistent with net debt repayment. This is a healthier cash-flow pattern than FY2025, but one year does not establish durable cash conversion.

Capacity data show only modest operating leverage

Spinning output was 20.17 million kilograms against capacity of 27.92 million kilograms, about 72% utilization and little changed proportionally from FY2025. Weaving output rose to 62.11 million square metres, lifting utilization to about 75.9% from 74.5%. The filing attributes under-use mainly to raw-material constraints, shutdowns and maintenance. The improvement was therefore driven more by mix, pricing, costs and financing than by a broad utilization surge.

Longer-run context

FY2026 marks a recovery from FY2025 rather than a fully restored earnings base. Total assets rose 9.7% to Rs28.81 billion and equity increased 21.2% to Rs15.44 billion, but much of the equity increase came through other comprehensive income rather than retained profit. Total comprehensive income was Rs2.71 billion, including about Rs1.69 billion of net revaluation surplus and Rs960.9 million of net fair-value gains on equity investments. These gains strengthened reported equity but did not pass through operating profit or cash flow.

The clean audit opinion is reassuring on presentation, while the auditor identified inventory existence and valuation, and equity-investment valuation, as key audit matters. Those areas matter because inventories remain substantial and listed equity investments contributed significantly to the balance-sheet uplift.

What to monitor next

Gross margin durability: whether the 10.38% margin holds when cotton, energy, wage and inventory effects change.

Export mix: whether higher pricing can stabilize export revenue without another large decline in metres sold, especially in the UK and Germany.

Made-ups and processing: whether the weaker segment profit reverses, since it remains central to value-added textile earnings.

Finance cost and leverage: whether cheaper facilities and debt repayment can push finance cost materially below FY2026’s Rs780 million.

Receivables and liquidity: whether trade debts normalize and the current ratio moves back toward 1.0 while operating cash flow stays positive.

Solar economics: whether the 7 MW investment produces measurable savings as generation ramps up.

Overall assessment

CRTM’s FY2026 result is a credible first step out of loss: gross profit improved despite flat revenue, spinning recovered, operating cash flow turned positive and finance cost fell by one-third. The result is not yet robust. Net profit was only Rs52.7 million, leverage and liquidity remain demanding, receivables rose sharply, and a sizeable asset-disposal gain supported earnings. The next result needs to show that margin recovery and financing relief can persist without relying on one-off income.

Sources

Primary filing: CRTM audited annual report for the year ended June 30, 2026 (Pakistan Stock Exchange PDF).

Issuer archive: The Crescent Textile Mills — financial reports.

Exchange company page: Pakistan Stock Exchange — CRTM.

All percentage changes and margin calculations in this analysis are derived from the audited figures above. AlphaGen scores are model outputs and are not company-reported financial measures.