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Idrees Textile Q3 FY26: Losses Narrow as Funding Costs Fall, but Demand Remains the Constraint

Idrees Textile’s 9MFY26 loss narrowed as finance costs eased and margins improved, but Q3 sales weakened sharply and cotton-related production risk rose after period-end.

Sep 22, 2026

Verdict

Idrees Textile Mills Limited’s Q3 FY26 result shows a narrower reported loss, but the improvement is less clean than the headline suggests. For the quarter ended March 31, 2026, standalone revenue fell 33.2% year on year to Rs930.12 million, gross profit declined 44.2% to Rs66.64 million, and gross margin slipped to 7.2% from 8.6%. The quarterly loss nevertheless narrowed 27.1% to Rs35.77 million because finance cost eased and other income rose sharply.

The quality of that bottom-line improvement matters. Q3 other income included a Rs31.43 million gain on disposal of property, plant and equipment. Mechanically excluding that one-off, while leaving the other disclosed income items unchanged, would move the pre-levy loss from the reported Rs25.40 million to roughly Rs56.83 million. That is an analytical normalization rather than a company-defined adjusted result, but it makes the core message clear: demand and operating profitability were still under pressure even as financing conditions became less punitive.

The nine-month picture is better than the quarter alone. 9MFY26 revenue fell 20.3% to Rs3.08 billion, yet gross profit declined only 8.5%, lifting gross margin to 9.3% from 8.1%. Finance cost dropped 24.0% to Rs286.15 million and the loss for the period narrowed 65.6% to Rs78.49 million. The company therefore entered the final quarter with a meaningfully smaller earnings deficit, but post-period production curtailment linked to cotton availability makes the next result cycle unusually important.

Company and reporting basis

Company Name: Idrees Textile Mills Limited

Ticker: IDRT

Reporting period: Third quarter and nine months ended March 31, 2026

Reporting basis: This analysis uses the company’s unconsolidated, unaudited condensed interim financial statements prepared under IAS 34 and presented in Pakistani rupees. The statement of financial position compares March 31, 2026 with audited June 30, 2025 balances. The Board authorized the interim financial information on May 14, 2026, and PSX records both the financial result and transmission of the quarterly report on May 15, 2026.

The company also publishes consolidated accounts because it owns 100% of ORA Home LLC, a New Jersey-based home-textile trading subsidiary. Consolidated Q3 sales were Rs938.95 million versus Rs930.12 million on the standalone basis, so the subsidiary does not change the central operating narrative. The standalone series is used consistently below, while the existence and basis of consolidation have been cross-checked.

AlphaGen model outputs

Alpha QoQ Score: 59.26

TTM Performance Score: 60.96

3Y Business Perf Score: 24.26

Sector Leadership Score: 32.1085

These four scores are AlphaGen model outputs, not figures reported by Idrees Textile Mills Limited.

Results at a glance

  • Q3 revenue fell 33.2% to Rs930.12 million; gross profit fell 44.2% to Rs66.64 million and gross margin compressed to 7.2% from 8.6%.
  • Q3 operating profit before finance cost, other operating expenses and other income fell 52.1% to Rs36.97 million.
  • Q3 finance cost declined 9.4% to Rs94.81 million, but remained larger than gross profit and more than twice the operating profit subtotal.
  • Q3 reported loss narrowed to Rs35.77 million from Rs49.08 million, helped materially by a Rs31.43 million gain on disposal of PPE.
  • 9MFY26 revenue fell 20.3% to Rs3.08 billion, while gross margin improved to 9.3% from 8.1% and the nine-month loss narrowed to Rs78.49 million from Rs227.99 million.
  • The March balance sheet still had Rs4.80 billion of current liabilities against Rs4.61 billion of current assets, although the working-capital deficit improved to about Rs199 million from Rs301 million at June 2025.
  • After the reporting date, management reduced production capacity from May 18 for approximately four weeks, citing high raw-material costs, limited local cotton and delayed imported cotton shipments.

What improved

The strongest improvement is visible in the nine-month gross margin rather than the March quarter. 9MFY26 sales were down Rs786.96 million year on year, but cost of goods sold fell by a larger proportion, allowing gross margin to rise by about 1.2 percentage points. The detailed cost schedule shows raw material consumed falling 17.8% over nine months and fuel and power falling 14.7%. This helped cushion the impact of weaker revenue, although the filing does not provide enough unit-volume and selling-price detail to separate procurement, product mix, utilization and pricing effects.

Finance cost also moved in the right direction. Nine-month finance cost declined by roughly Rs90.53 million, or 24.0%, while the quarterly decline was 9.4%. Aggregate short- and long-term borrowings were only modestly lower than June 2025, so the reduction cannot be attributed to deleveraging alone. It is reasonable to infer that Pakistan’s lower interest-rate environment contributed: the SBP policy rate was reduced to 10.5% effective December 16, 2025. That tailwind became less favorable after period-end: SBP raised the policy rate by 100 bps to 11.5% effective April 28, 2026 amid intensified macroeconomic risks from the Middle East conflict. Borrowing mix and timing also matter, so rates should not be treated as the sole cause of the 9M decline.

Other operating expenses were another source of relief. They fell to Rs2.12 million in Q3 from Rs8.41 million and to Rs8.29 million in 9MFY26 from Rs33.98 million. The note shows lower exchange losses and, over nine months, a much smaller infrastructure-cess charge. These are real improvements, but they are secondary to the much larger revenue, gross-profit and financing lines.

What weakened / needs attention

The March quarter itself weakened at the operating level. Revenue fell 33.2%, while gross profit fell 44.2%, so gross margin compressed rather than expanded. Raw-material consumption dropped 26.5% and fuel-and-power cost dropped 37.2% in absolute terms, but the sales contraction was severe enough that those cost reductions did not protect gross profitability. Management explicitly attributes the broader sales decline to dampened market demand.

That demand explanation is plausible, but sector evidence argues against treating the entire decline as a simple industry-wide collapse. Pakistan Bureau of Statistics data show total national exports down 14.0% year on year in March 2026, while the rupee value of cotton-yarn exports was actually 8.0% higher than March 2025. Because Idrees Textile also has local sales and home-textile activity, the datasets are not directly comparable. Still, the contrast suggests company-specific volume, mix, customer or utilization factors may also have mattered; the public filings do not disclose enough detail to quantify them.

The second weakness is earnings quality. Q3 other income rose to Rs34.56 million from Rs2.49 million, almost entirely because of the Rs31.43 million gain on disposal of PPE. The gain on disposal was Rs34.56 million over nine months. It should not be annualized. Excluding it mechanically, the nine-month pre-levy loss would have been about Rs95.23 million instead of Rs60.67 million, although that would still be a substantial improvement from the Rs200.44 million pre-levy loss a year earlier.

Levies also remained meaningful. Final-tax and minimum-tax levies totaled Rs10.37 million in Q3 and Rs36.15 million over nine months. For 9MFY26, deferred and prior-period tax credits partly offset those levies, bringing the final loss to Rs78.49 million. This means improvement in the reported bottom line came from several layers—lower finance cost, lower other operating expenses, a disposal gain and tax effects—not simply a return to strong core margins.

Cash flow and working capital

Cash generation was positive but weaker than the comparable period. The cash-flow statement shows a positive operating cash figure of Rs96.94 million for 9MFY26 versus Rs167.66 million a year earlier. Before finance cost and tax payments, cash generated from operations was Rs475.45 million. A major support was the Rs324.81 million increase in trade and other payables, while other receivables absorbed Rs129.65 million, trade debts absorbed Rs29.27 million and stock absorbed Rs13.22 million.

That mix matters. The company generated cash despite the accounting loss, but a large part of the working-capital support came from higher payables rather than a broad release of receivables and inventory. Finance cost paid remained heavy at Rs266.33 million and income tax paid was Rs104.85 million. Cash and bank balances rose to Rs150.61 million from Rs88.97 million at June 2025, but the cash-equivalent position remained negative once running-finance facilities were included.

Liquidity improved at the margin. Current assets increased 6.0% to Rs4.61 billion, while current liabilities rose 3.4% to Rs4.80 billion. The current ratio improved to about 0.96 times from 0.94 times, and negative net current assets narrowed to roughly Rs199 million from Rs301 million. That is progress, but it still leaves very little working-capital cushion if raw-material procurement or shipment disruptions intensify.

The debt profile was mixed. Short-term borrowings increased slightly to Rs2.11 billion from Rs2.06 billion, long-term finance rose to Rs650.04 million from Rs571.96 million, while the current portion of long-term finance fell sharply to Rs151.59 million from Rs340.97 million. On those three disclosed borrowing lines combined, borrowings were about Rs2.91 billion, only around 2.2% below June 2025. The much larger fall in finance cost therefore reflects more than balance reduction alone.

Post-quarter developments change the next-cycle risk

The most important development after March 31 came on May 18. In an official PSX material-information notice, Idrees Textile said production activity would slow and operating capacity would remain reduced for approximately four weeks, or until imported cotton consignments arrived and the new cotton crop season began. Management cited unfavourable market conditions, high raw-material costs, shortage of local cotton and delays in imported cotton shipments associated with the Middle East crisis.

This disclosure is more important for the next result than for Q3 itself because it occurred after the reporting period. It creates a clear risk that Q4 volumes and fixed-cost absorption could be weaker unless the production slowdown was brief and raw-material availability normalized quickly. It also validates management’s earlier concern that low domestic cotton availability and dependence on imports were not merely generic industry talking points.

Management has also moved beyond short-term cost control. On June 1, the Board disclosed plans to replace certain machinery to shift toward value-added products and to use surplus space for additional income streams such as warehousing, logistics and supply-chain management. Shareholders approved those strategic directions at the June 27 extraordinary general meeting. These initiatives are potentially important, but they are future execution items; they should not be treated as contributors to the March-quarter earnings.

Historical pattern and sector context

Idrees Textile entered FY26 from a weak base. PSX financial history shows FY2025 sales of about Rs5.20 billion versus Rs6.45 billion in FY2024, while the annual loss widened to roughly Rs394.8 million from Rs194.4 million. Against that backdrop, the 9MFY26 loss of Rs78.49 million represents a clear reduction in the rate of losses, even though it does not yet establish sustainable profitability.

The broader textile environment is mixed rather than uniformly negative. PBS reported that Pakistan’s total exports declined 8.0% in US-dollar terms over July–March FY26, while March alone was down 14.0% year on year. Cotton-yarn export value in rupees was 8.0% higher year on year in March but 16.9% lower than February. This volatility fits management’s description of unstable demand and trading conditions, while also reinforcing the need to distinguish industry pressure from company-specific execution.

Recurring versus non-recurring drivers

  • Recurring / operational: demand, production volumes, yarn and home-textile mix, cotton procurement, energy cost and manufacturing utilization.
  • Recurring financing factor: interest expense remains a major burden; lower benchmark rates helped the period, but borrowing levels remain high.
  • Non-recurring: the Rs31.43 million Q3 gain on disposal of PPE materially improved other income and should not be annualized.
  • Working-capital factor: higher trade and other payables supported cash generation; sustainable cash conversion would be stronger if receivables and inventory contributed more.
  • Post-period execution risk: the temporary production slowdown can affect the next quarter’s volumes and fixed-cost absorption.
  • Strategic optionality: machinery replacement, value-added products and warehousing/logistics are approved directions, but financial benefits remain unproven.

What to monitor next

  • Production normalization: whether capacity returned to normal after the May slowdown and whether imported/local cotton availability improved.
  • Revenue and gross margin: whether the sharp Q3 sales decline stabilizes without another margin compression.
  • Finance cost: whether the 9MFY26 improvement holds after SBP’s post-quarter policy-rate increase to 11.5%, especially with borrowings still elevated.
  • One-off dependence: whether the next result can improve without material asset-disposal gains.
  • Working capital: whether payables stop doing most of the work and receivables, inventory and other receivables convert into cash.
  • Strategic projects: concrete capex, timelines and revenue contribution from value-added machinery and warehousing/logistics initiatives.

Bottom line

Q3 FY26 was not a clean operating turnaround for Idrees Textile. Sales and gross profit fell sharply, gross margin weakened, and the reported loss benefited materially from an asset-disposal gain. The more encouraging evidence sits in the nine-month trend: gross margin improved, finance cost fell substantially, other operating expenses normalized and the cumulative loss narrowed by almost two thirds.

The next result will test whether that improvement is durable. The company needs to restore volumes after the post-quarter cotton-related slowdown, protect gross margin, keep financing costs moving lower and produce cash without leaning heavily on payables or one-off asset gains. The approved move toward value-added products and alternative use of surplus space could reshape the earnings mix over time, but the immediate test remains simpler: stabilize core textile operations and convert the better nine-month economics into recurring profit and cash.

Sources

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