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Kohinoor Spinning Q3 FY26: Sales Reappear, but Going-Concern Pressure Remains

Kohinoor Spinning returned to small sales in Q3 FY26 and halved its net loss, but the operating loss barely changed and liquidity still depended on director funding.

Sep 23, 2026

Verdict

Kohinoor Spinning Mills Limited’s Q3 FY26 result looks better at the bottom line than it does at the operating line. Net sales reappeared at Rs7.50 million after no sales in the comparable quarter, producing Rs1.50 million of gross profit. Yet the operating loss only narrowed 3.1% to Rs36.06 million from Rs37.23 million. The quarterly net loss nevertheless halved to Rs22.10 million from Rs44.18 million because finance cost fell to almost zero and Rs14.06 million of other operating income provided a substantial offset.

The nine-month picture makes the distinction clearer. Sales were Rs18.38 million versus nil a year earlier, but the operating loss was essentially unchanged at Rs116.16 million versus Rs116.19 million. The nine-month net loss improved 22.7% to Rs83.90 million from Rs108.48 million. That is useful progress in reported earnings, but it is not yet an operating turnaround: the recurring cost base remains far larger than the gross profit being generated.

Company and reporting basis

Company Name: Kohinoor Spinning Mills Limited

Ticker: KOSM

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

Reporting basis: unaudited company-level condensed interim financial statements prepared under IAS 34 and applicable Companies Act requirements. The Board authorized the statements on April 29, 2026, and PSX records both the financial-result announcement and transmission of the quarterly statements on that date. The comparative statement of financial position is based on the audited June 30, 2025 position, while the comparative interim performance figures are unaudited.

The operating model needs special attention. The notes say the company remains engaged in textile spinning, but management has leased out its production facilities since July 2023 to earn cash surplus and has undertaken trading activities to generate revenue. The filing does not disclose spinning production volumes or state that manufacturing restarted during Q3 FY26. The small return of sales should therefore not be interpreted as evidence of a full mill restart.

AlphaGen model outputs

Alpha QoQ Score: 84.36

TTM Performance Score: 35.98

3Y Business Perf Score: 76.56

Sector Leadership Score: 28.6973

These four scores are AlphaGen model outputs, not company-reported figures.

Results at a glance

  • Q3 net sales: Rs7.50 million versus nil in Q3 FY25; gross profit was Rs1.50 million.
  • Q3 operating loss: Rs36.06 million, only 3.1% narrower than Rs37.23 million a year earlier.
  • Q3 net loss: Rs22.10 million versus Rs44.18 million; loss per share improved to Rs0.05 from Rs0.11.
  • 9MFY26 sales: Rs18.38 million versus nil; gross profit was Rs2.69 million.
  • 9MFY26 operating loss: Rs116.16 million, virtually unchanged from Rs116.19 million.
  • 9MFY26 net loss: Rs83.90 million, 22.7% narrower than Rs108.48 million; loss per share improved to Rs0.19 from Rs0.26.
  • Net cash used in operations: Rs207.19 million versus Rs57.93 million a year earlier.
  • Current liabilities exceeded current assets by Rs2.24 billion at March 31, 2026; management explicitly says this, accumulated losses and revenue uncertainty create significant doubt over going concern.

What improved

The first improvement is the reappearance of revenue. Q3 sales of Rs7.50 million carried a gross margin of about 20.0%, while 9MFY26 sales of Rs18.38 million produced a gross margin of about 14.6%. Those figures are small in absolute terms, but they are directionally better than a comparable period with no sales. Because the company says it has leased out production facilities and undertaken trading activity, however, the filing does not support treating these margins as a normal spinning-manufacturing run rate.

The second improvement occurred below the operating line. Nine-month finance cost fell to just Rs5,074 from Rs14.51 million, while other operating income increased 44.4% to Rs32.49 million from Rs22.50 million. In Q3 alone, finance cost was only Rs2,310 and other operating income was Rs14.06 million. These movements explain why the loss before tax and the net loss narrowed even though the operating loss did not materially improve.

The Q3 loss before tax fell to Rs22.01 million from Rs44.09 million, a reduction of about 50%. For the nine months, the loss before tax improved to Rs83.67 million from Rs108.20 million. That is meaningful financial relief, but the source matters: most of the improvement came from financing and other-income lines rather than a lower recurring operating cost base.

What weakened / needs attention

The core operating result barely moved. Administrative expense for 9MFY26 rose to Rs118.85 million from Rs116.19 million, and the operating loss stayed at roughly Rs116 million despite the return of sales. Q3 administrative expense was Rs37.56 million versus Rs37.23 million. This means the small gross profit generated by trading was nowhere near large enough to absorb the standing cost structure.

The company’s own going-concern disclosure is the most important risk statement in the report. At March 31, 2026, accumulated losses stood at about Rs3.98 billion, while current liabilities exceeded current assets by Rs2.24 billion. Management says these factors, together with the sharp decline in revenue and uncertainties facing the company, create significant doubt about its ability to continue as a going concern.

The statements are nevertheless prepared on a going-concern basis because management expects continued financial support from the directors. That distinction is crucial: the accounting basis assumes support will remain available, but it does not mean the operating business has reached self-sustaining cash generation.

Cash flow shows why sponsor support still matters

Cash conversion worsened sharply. Net cash used in operations was Rs207.19 million in 9MFY26, compared with Rs57.93 million in the prior-year period. Before working-capital movements, operations were already negative by Rs13.03 million. Working capital then absorbed about Rs205.63 million, driven principally by a Rs171.13 million reduction in trade and other payables and a Rs21.69 million increase in trade debts.

Financing support almost exactly filled that gap. The cash-flow statement shows Rs185.52 million of proceeds from an increase in long-term loans from directors and total financing cash inflow of Rs208.02 million. Ending cash and cash equivalents were only Rs1.75 million. The quarter therefore did not produce a stronger liquidity position through operations; it was largely sustained by sponsor-linked funding.

Equity also remained thin before the subsequent capital action. Total equity fell to Rs121.63 million at March 31 from Rs205.53 million at June 30, 2025 as the nine-month loss accumulated. Against a balance sheet carrying more than Rs2.7 billion of current liabilities, that left very little accounting cushion at the reporting date.

Debt-to-equity conversion changes the balance sheet, not the operating story

A material capital restructuring was already in motion when the Q3 report was signed. The directors said SECP had approved the company’s application to issue 117,142,857 ordinary shares at Rs7 per share, including a Rs2 premium, against an outstanding interest-free loan of Rs820 million owed to Mr. Naeem Yousaf.

A subsequent statutory-auditor certificate dated May 14, 2026 confirms that the shares were issued and that the subscription consideration was satisfied through conversion of the outstanding interest-free loan. Paid-up capital increased from Rs2.18 billion to Rs2.76 billion. This is an important balance-sheet repair because it replaces a large loan claim with equity, but it is not a fresh cash injection and does not by itself solve the operating cash deficit.

Recurring versus less repeatable earnings drivers

The recurring weakness is straightforward: a substantial administrative cost base remains in place while revenue is very small and the manufacturing facilities remain leased out. Until gross profit scales meaningfully, the company can continue to report an operating loss even if trading revenue grows from the current low base.

The less predictable support comes from other operating income and sponsor funding. Other operating income was large enough to offset more than a quarter of the nine-month operating loss, but the interim report does not provide enough detail to treat the whole amount as a stable recurring earnings stream. Similarly, director financing supports liquidity but is a financing source, not evidence of profitable operations.

The near-zero finance cost also needs context. The company is benefiting from interest-free or sponsor-linked funding arrangements rather than demonstrating a conventional deleveraging cycle funded by operating cash flow. The post-period loan-to-equity conversion should reduce balance-sheet pressure, but the next result will be more informative if the operating loss itself begins to narrow.

Sector and peer context

The broader textile environment was difficult but not inactive. Pakistan Bureau of Statistics data show total national exports fell 14.21% year on year in rupee terms in March 2026 and 7.14% during July–March FY26. Cotton-yarn exports, however, were 8.03% higher year on year in rupee terms in March. PBS also reported overall large-scale manufacturing growth of 6.48% during July–March FY26. Those data point to a mixed industrial backdrop rather than a sector-wide absence of textile demand.

A useful peer cross-check is Nishat Chunian Limited, which remained fully operational through the same nine-month period. Its spinning-division sales declined 6.7%, but spinning gross margin improved to 6.95% from 5.67%, while the wider company remained profitable. The businesses are not directly comparable in scale or integration, so this is not a performance ranking. It does support a narrower conclusion: KOSM’s near-absence of operating revenue is primarily company-specific, consistent with its own disclosure that production facilities have been leased out since 2023.

Management itself highlights geopolitical tension, energy prices, transportation costs, polyester and cotton-price volatility, and uncertain local and export demand as risks for the spinning sector. Those are legitimate external pressures, but the present accounts show that KOSM’s more immediate challenge is internal: rebuilding recurring revenue and cash generation from a business structure that is currently centered on leased production assets, limited trading activity and sponsor support.

A filing inconsistency worth noting

The quarterly report contains an internal inconsistency: the quarterly loss-after-tax amount shown on the statement of comprehensive income does not agree with the quarterly profit-or-loss statement. The standalone profit-or-loss statement and the separate PSX financial-result filing agree on Q3 loss after tax of Rs22.10 million and loss per share of Rs0.05, so those figures are used throughout this analysis. The nine-month loss figure is consistent across the core statements.

What to monitor next

First, revenue quality. The next result should show whether trading revenue continues to build and whether the company discloses any restart, utilization or production data for its spinning facilities. Without that evidence, small sales should remain separate from a manufacturing-recovery thesis.

Second, the operating loss before other income. This is the cleanest test of whether the underlying cost structure is becoming sustainable. A materially lower operating loss would be more important than another bottom-line improvement driven mainly by other income.

Third, operating cash flow and working capital. The Rs207.19 million nine-month operating outflow is the clearest sign that accounting improvement has not yet translated into cash self-sufficiency. Trade debts, payables and actual cash generated from operations should be watched closely.

Fourth, the post-conversion balance sheet. The Rs820 million loan-to-equity conversion should materially reshape reported equity and liabilities after March 31. The next financial statements should show how much this improves the current funding profile and whether any further director support is required.

Fifth, the going-concern language. The most meaningful sign of normalization would be a combination of higher recurring gross profit, reduced operating cash burn and less dependence on sponsor financing. Until then, the narrower net loss is progress, but the company remains in financial-repair mode rather than a demonstrated operating recovery.

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