First Al-Noor Modaraba’s FY2026 result was weaker than the headline improvement in trading income suggests. For the audited year ended 30 June 2026, the Modaraba moved from a PKR 2.41 million profit to a PKR 2.80 million loss. The decisive pressures were a PKR 8.89 million decline in investment income, the near-disappearance of diminishing musharakah income, and a larger unrealised loss on investments. Better rice-trading economics and a one-off gain on disposal of fixed assets softened the damage but did not restore profitability.
This analysis uses the Modaraba’s audited, standalone financial statements in Pakistan rupees. The auditor issued an unmodified opinion dated 1 September 2026 and reported no key audit matters. The result was approved on 31 August 2026 and the annual financial statements were transmitted through PSX on 25 September 2026.
Results at a glance
- Net revenue: PKR 35.14 million, down 19.5% from PKR 43.66 million.
- Trading income: PKR 18.31 million, up 15.8%, despite gross rice sales falling 19.7%.
- Investment income: PKR 16.76 million, down 34.7%; diminishing musharakah income fell 96.5% to PKR 0.08 million.
- Loss before levies and tax: PKR 1.81 million, versus profit of PKR 5.37 million.
- Loss after tax: PKR 2.80 million, versus profit of PKR 2.41 million; loss per certificate was PKR 0.12 versus earnings of PKR 0.10.
- Net cash used in operating activities: PKR 48.75 million, versus PKR 40.12 million generated in FY2025.
- Distribution: none, unchanged from FY2025.
A necessary headline reconciliation
PSX’s company summary shows “total income” of PKR 42.21 million for FY2026. That is not the same subtotal as the audited statement’s PKR 35.14 million revenue line. The PSX figure is reproduced by adding PKR 7.07 million of other income to audited net revenue. Keeping those definitions separate matters: underlying revenue declined, while reported total income was supported by non-core other income.
What improved
Rice trading produced a better spread
Gross rice sales fell to PKR 145.81 million from PKR 181.66 million, a 19.7% decline. Cost of sales fell faster, by 23.1% to PKR 127.50 million. As a result, net trading income increased to PKR 18.31 million from PKR 15.82 million. The implied trading spread improved to 12.6% of gross sales from 8.7%.
The statements do not disclose the split between rice volumes, selling prices and procurement mix, so the safer conclusion is arithmetic rather than causal: a sharper fall in cost of sales than in sales preserved more trading income. Closing stock rose to PKR 105.82 million from PKR 68.26 million, which also means a large share of capital was tied up in inventory at year-end.
Other income cushioned the operating decline
Other income rose 168.6% to PKR 7.07 million. The largest new item was a PKR 4.25 million gain on disposal of fixed assets. Reversal of provision against a Musawamah facility increased to PKR 1.30 million from PKR 0.64 million. Profit on bank deposits declined to PKR 1.52 million from PKR 1.99 million.
The disposal gain is economically real but not a recurring operating engine. Without it, FY2026 other income would have been about PKR 2.82 million, only modestly above the prior year. That distinction is important when assessing whether the result has genuinely stabilised.
The associate contribution improved, but remained small
Share of profit from the Modaraba’s associate increased to PKR 0.51 million from PKR 0.16 million. The associate is Al-Noor Sugar Mills Limited, held at 0.54% but accounted for using the equity method because of common directorship. The contribution helped, but it was too small to offset the decline in investment returns.
What weakened / needs attention
Investment income was the main earnings drag
Investment income fell by PKR 8.89 million, or 34.7%, to PKR 16.76 million. Every disclosed component weakened: gain on sale of securities fell to PKR 9.75 million from PKR 15.42 million; dividend income declined to PKR 1.83 million from PKR 3.01 million; profit on Sukuk certificates dropped to PKR 0.59 million from PKR 1.07 million; and profit on Islamic certificates and term deposits fell to PKR 4.59 million from PKR 6.15 million.
This is a more informative explanation than attributing the result to a generic market move. The filing shows that realised gains, dividends and profit-bearing investment returns all contributed less. It does not provide enough detail to allocate those changes between portfolio size, yields and timing, so no more specific causal claim is warranted.
Financing income nearly disappeared
Income on diminishing musharakah fell to PKR 0.08 million from PKR 2.20 million, a 96.5% decline. Segment revenue from financing, which also includes the disclosed reversal against the Musawamah facility, fell to PKR 1.38 million from PKR 2.84 million. The result therefore relied much more heavily on trading and investments than on financing activity.
Market remeasurement losses grew
The unrealised loss on investments measured through profit or loss increased 48.6% to PKR 6.78 million. Of this, PKR 5.82 million related to Shariah-compliant investments and PKR 0.96 million to non-Shariah-compliant investments. Because the loss is unrealised, it may reverse with market values, but it still reduced FY2026 earnings and demonstrates the volatility embedded in the investment portfolio.
The cost base did not adjust to lower revenue
Administrative and operating expenses increased 3.3% to PKR 37.72 million even as net revenue fell 19.5%. Staff costs were broadly stable at PKR 22.67 million, while depreciation increased to PKR 2.04 million from PKR 0.55 million following additions to fixed assets. The result was a PKR 1.81 million loss before levies and tax, a PKR 7.18 million negative swing from the prior year.
Levies kept the pre-tax result under pressure
Final-tax levies were PKR 1.93 million, down from PKR 2.78 million. A PKR 0.94 million tax credit—principally prior-year and deferred-tax effects—partly offset those levies, leaving the PKR 2.80 million net loss. The tax credit improved the bottom line, but it should not be mistaken for operating recovery.
Cash flow and balance sheet
Cash flow was the clearest warning signal. Net cash used in operating activities was PKR 48.75 million, compared with PKR 40.12 million generated in FY2025. The largest working-capital movement was a PKR 37.44 million increase in stock in trade. A further PKR 4.14 million was absorbed by net investment movements. In the prior year, inventory and investment movements had released PKR 10.40 million and PKR 29.48 million respectively.
Cash and bank balances consequently fell 47.8% to PKR 69.96 million. Short-term investments rose 19.7% to PKR 50.70 million and stock rose 55.0%, so liquidity was not simply destroyed; it shifted into inventory and investments. Even so, the conversion of reported activity into cash weakened materially.
The Modaraba spent PKR 21.34 million on fixed assets and received PKR 4.61 million from disposals. Fixed assets in use rose to PKR 20.20 million from PKR 1.26 million. Total assets remained broadly flat at PKR 274.58 million, while total liabilities increased 9.4% to PKR 18.38 million. There was no reported debt, and current assets of PKR 231.25 million remained well above current liabilities of PKR 8.49 million.
Legacy credit risk remains fully provided
A Musawamah exposure to Quetta Textile Mills remained in default and in litigation. The gross facility was PKR 18.68 million and was fully provided, leaving no net carrying amount. The gross exposure declined from PKR 19.98 million, and the provision reversal contributed to other income. Recovery would be upside, but the litigation and full provision mean it should not be treated as a normal source of earnings.
Longer-run context
The annual report’s multi-year summary shows a business whose earnings mix can change sharply between trading, financing and investments. FY2026 trading economics improved, but investment income and portfolio remeasurement dominated the consolidated result. Profitability has therefore been episodic rather than steadily compounding: a modest FY2025 profit followed thin profits in several earlier years, and FY2026 returned to loss.
Pakistan’s Economic Survey provisionally estimated FY2026 GDP growth at 3.7%, while the State Bank’s policy rate stood at 11.5% in June 2026. Those conditions provided a firmer macro backdrop, but the company-specific numbers show that macro recovery did not translate into stronger total revenue for FANM. This is an inference from the official macro context; the filing does not quantify the effect of GDP growth or interest rates on its own portfolio.
AlphaGen model scores
The following are AlphaGen model outputs, not figures reported by First Al-Noor Modaraba:
- Alpha QoQ Score: 81.89
- TTM Performance Score: 23.04
- 3Y Business Perf Score: 57.95
- Sector Leadership Score: 37.92
The contrast between the strong quarter score and weak TTM score is consistent with a volatile intra-year path rather than a uniformly strong full year. The scores should be read as model signals alongside—not instead of—the audited statements.
What to monitor next
- Inventory conversion: whether the PKR 105.82 million stock balance turns into cash without sacrificing the improved trading spread.
- Investment income quality: whether realised gains, dividends, Sukuk income and term-deposit returns recover without a repeat of the larger fair-value loss.
- Financing activity: whether diminishing musharakah income rebuilds from its near-zero FY2026 level.
- Cost absorption: whether administrative expenses grow more slowly than revenue and fixed-asset additions begin supporting operating income.
- Cash generation: whether the next reporting periods reverse the working-capital outflow rather than merely reporting accounting gains.
Bottom line
FY2026 was a weak result despite a genuine improvement in rice-trading spread. The company’s earnings base narrowed as investment and financing income fell, while market remeasurement losses and a largely fixed administrative cost base pushed the Modaraba into loss. The balance sheet remains liquid and debt-free, which limits immediate financial risk, but liquidity quality weakened because cash moved heavily into stock and investments. A durable recovery now requires more than another disposal gain: FANM needs recurring investment and financing income, controlled costs, and demonstrably better cash conversion.
Primary sources
Pakistan Stock Exchange — FANM company page and official announcements
Pakistan Stock Exchange — First Al-Noor Modaraba Annual Report 2026
First Al-Noor Modaraba — financial statements archive