Kohat Textile Mills’ audited FY26 result was operationally better than the modest 4% rise in net profit suggests. Sales grew 4.6%, but cost of sales increased only 2.7%, lifting gross profit 15.5% and expanding gross margin by 1.52 percentage points. The caveat is that the implied June quarter weakened below the operating line, while receivables and borrowings remained heavy. The result is therefore constructive on manufacturing economics, but not yet a clean cash-and-balance-sheet story.
Results at a glance
Reporting basis: audited financial statements of Kohat Textile Mills Limited for the year ended June 30, 2026; amounts below are in Pakistani rupees. The company reports a single yarn-manufacturing business and says all customer contracts were local.
- Net sales: Rs8.633 billion, up 4.6% from Rs8.253 billion. Gross profit: Rs1.391 billion, up 15.5%. Gross margin: 16.11%, versus 14.59%.
- Operating profit: Rs1.002 billion, up 8.1%. Operating margin: 11.61%, versus 11.23%.
- Profit before taxation and minimum-tax levies: Rs530.7 million, up 11.5%. After minimum-tax levies, profit before taxation was Rs414.7 million.
- Profit after tax: Rs291.9 million, up 4.0%. EPS: Rs14.04, versus Rs13.50.
- Operating cash flow: Rs577.4 million, up from Rs326.0 million. Year-end bank balances were Rs25.2 million.
- Final cash dividend recommended: Rs1.50 per share. FY25’s total cash dividend was Rs2.00 per share, split between interim and final payments.
AlphaGen model scores
These are AlphaGen model outputs, not figures reported by the company: Alpha QoQ Score 33.91; TTM Performance Score 47.46; 3Y Business Perf Score 76.77; Sector Leadership Score 36.67.
What improved
The clearest improvement was at gross-profit level. Revenue increased by Rs379.3 million, while cost of sales rose by Rs192.5 million. That left Rs186.8 million of incremental gross profit and pushed gross margin to 16.11%. The spread matters: a 4.6% sales increase translated into 15.5% gross-profit growth.
The cost note helps explain the arithmetic, although it does not provide a complete price-volume-mix bridge. Raw materials consumed were almost flat at Rs4.774 billion, versus Rs4.752 billion, and power and fuel fell 6.2% to Rs1.024 billion. Those savings absorbed higher salaries and wages, packing costs, repairs and depreciation. The company expanded solar capacity to 5.1MW during FY26; lower power-and-fuel expense is consistent with that investment, but the filing does not quantify how much of the saving came from solar, tariffs, gas usage or production mix.
Revenue composition also shifted. Before sales tax, yarn sales increased 1.5% to Rs9.571 billion, waste sales rose to Rs62.8 million, and sales from raw-material trading more than doubled to Rs552.7 million from Rs254.9 million. That trading increase accounts for much of the change in gross billings, but the filing does not disclose the activity’s stand-alone margin. It would therefore be unsafe to attribute the entire gross-margin expansion to yarn pricing.
Operating profit rose more slowly than gross profit because distribution costs increased 12.8% and administrative expenses rose 25.5%. Other income also fell to Rs12.2 million from Rs57.5 million. Even so, operating profit reached Rs1.002 billion and the operating margin improved by about 0.38 percentage point.
Cash generation also improved on a full-year basis. Cash generated before taxes rose to Rs738.1 million from Rs451.0 million, and net operating cash flow reached Rs577.4 million from Rs326.0 million. Capital expenditure fell sharply to Rs272.2 million from Rs931.1 million, so operating cash flow exceeded the year’s additions to property, plant and equipment. That is a much less demanding cash-investment profile than FY25.
What weakened / needs attention
The annual headline masks a soft finish. Subtracting the published nine-month accounts from the audited full year gives an implied fourth quarter: sales of Rs2.320 billion, gross profit of Rs376.6 million and profit after tax of only Rs33.9 million. Against the same calculation for Q4 FY25, sales rose about 8.1% and gross profit about 14.0%, but net profit fell roughly 33%.
The bridge is visible below gross profit. Implied Q4 operating profit was Rs256.3 million, up just 3.1%, while finance cost rose about 38% to Rs136.2 million. Profit before tax and minimum-tax levies consequently fell about 20%. The calculation uses audited FY26 and FY25 totals less the respective published nine-month figures; it is reproducible, but it remains an implied quarter rather than a separately audited quarterly statement.
Finance cost for the full year increased 4.5% to Rs471.3 million. Short-term borrowing cost fell, but mark-up on long-term financing rose to Rs129.5 million from Rs88.0 million. Total long- and short-term financing at June 30 was about Rs3.976 billion, up from Rs3.799 billion. Finance cost absorbed 47% of operating profit, leaving leverage as a material constraint even after the gross-margin recovery.
Tax and minimum-tax levies were another drag. Combined charges rose to Rs238.7 million from Rs195.2 million, a 22.3% increase, compared with 11.5% growth in profit before those charges. This explains why net profit increased only 4.0% despite the stronger gross and operating result.
Working capital requires even closer scrutiny. Trade debts rose 29.9% to Rs2.646 billion while sales grew 4.6%. Of the receivable balance, Rs1.604 billion was more than 30 days past due, versus Rs952.5 million a year earlier. The past-due share increased to about 61% from 47%. Management says it performs customer credit reviews and normally sets a maximum 30-day credit period, but the year-end ageing shows collection pressure well beyond that policy.
The cash-flow timing tells the same story. Nine-month operating cash flow was Rs690.7 million, but the full-year figure was Rs577.4 million, implying a fourth-quarter outflow of about Rs113.3 million. That reversal coincided with a large full-year cash outflow into receivables. The full-year result still represents an improvement over FY25, but the June-quarter working-capital movement weakens the quality of the year-end earnings.
Operations, capacity and longer-run context
Installed spindles increased to 46,908 from 44,508 and the mills worked all 365 days. Yet reported production declined 2.2% to 9.439 million kilograms from 9.650 million kilograms, while average yarn count moved to 32.95 from 31.53. Because yarn count affects output weight and value, fewer kilograms do not automatically indicate weaker utilization or demand. The company itself cautions that spinning capacity varies with count, spindle speed and other technical factors.
The six-year record shows meaningful scale growth but also a structurally thinner margin than the company once earned. Sales have risen from Rs3.620 billion in FY21 to Rs8.633 billion in FY26. Gross margin, however, was 20.57% in FY21, fell to 14.59% in FY25 and recovered only to 16.11% in FY26. FY26 profit after tax of Rs291.9 million was still below FY21’s Rs312.2 million despite the much larger revenue base. That contrast is why the margin improvement is encouraging but not conclusive.
Liquidity improved mathematically: current assets of Rs4.344 billion slightly exceeded current liabilities of Rs3.990 billion, versus a current ratio below one in FY25. The composition is less comfortable. Receivables made up 61% of current assets, inventories were Rs1.384 billion, and bank balances only Rs25.2 million. The balance sheet therefore remains dependent on collections and bank funding rather than surplus cash.
Dividend and capital allocation
The board recommended a final cash dividend of Rs1.50 per share, equal to Rs31.2 million. That is about 11% of FY26 profit after tax and below FY25’s Rs2.00 total distribution. The lower cash payout is understandable given expansion spending, debt service and the receivables build, but shareholders should distinguish the improved accounting profit from immediately distributable cash.
What to monitor next
- Receivable conversion: whether the Rs1.604 billion past-due balance normalizes and whether operating cash flow again exceeds profit after tax.
- Gross-margin durability: whether power-and-fuel savings persist and whether yarn, trading activity, pricing or product mix is actually responsible for the improvement.
- Fourth-quarter weakness: whether finance cost and taxes remain elevated relative to operating profit in FY27.
- Capacity economics: whether the higher spindle base and 5.1MW solar setup lift output value and margins without another heavy borrowing cycle.
- Domestic demand and sector risks: the company identifies cotton availability as improved, while energy cost, regional competition and liquidity remain key risks. Since all disclosed customer contracts are local, domestic demand and collections matter directly.
Evidence limits
The audited statements establish the result, balance sheet, production data and full-year cash flow. The company does not disclose a complete price/volume/mix bridge, yarn-sales volume, product-level margins or a quantified solar saving. Those gaps do not prevent an earnings assessment, but they do limit causal precision. Accordingly, this analysis attributes changes only where the filing supports them and treats the solar-cost link as an inference, not a reported fact.