Verdict
Nishat Mills Limited’s FY2026 consolidated profit rose sharply, but the quality of that increase was mixed. Revenue reached PKR 213.63 billion, up 3.1%, while gross profit fell 9.6% and profit from operations declined 23.7%. Reported profit after tax nevertheless climbed 229.6% to PKR 15.62 billion because below-the-line support was unusually strong: finance cost fell, associate profit increased substantially, the prior year’s CPPA-G adjustment did not recur, acquisition-related accounting contributed, and taxation moved from a large expense to a small credit.
The result therefore has two distinct stories. The textile and power operations still faced margin pressure, but the group’s investment and associate portfolio materially amplified earnings. The final quarter showed strong sales momentum, yet its gross margin was lower than a year earlier. Investors should treat the higher EPS as real reported profit, while recognizing that a meaningful portion is not a clean read-through to recurring textile profitability.
Results at a glance
- Consolidated revenue: PKR 213.63 billion, up 3.1% year on year.
- Gross profit: PKR 29.06 billion, down 9.6%; gross margin fell to 13.6% from 15.5%.
- Profit from operations: PKR 17.48 billion, down 23.7%; operating margin fell to 8.2% from 11.1%.
- Profit before taxation: PKR 15.56 billion, up 64.7%.
- Profit after taxation: PKR 15.62 billion, up 229.6%. Profit attributable to holding-company shareholders rose 183.0% to PKR 14.44 billion.
- Basic and diluted EPS: PKR 41.08, versus PKR 14.51 in FY2025.
- Standalone result: profit after tax was PKR 5.48 billion, down from PKR 6.01 billion. The board recommended an unchanged final cash dividend of PKR 2.00 per share, or 20%.
Reporting basis: the main analysis uses the audited consolidated statements for the year ended June 30, 2026. The dividend is declared by the holding company and therefore relates to the standalone result.
What improved
Sales grew despite a difficult textile backdrop. Consolidated revenue increased by PKR 6.45 billion. Management said the standalone company’s export sales rose by PKR 4.28 billion, or 4.5%, and export receipts increased to USD 355.1 million from USD 343.5 million. That growth is notable because Pakistan’s FY2026 textile exports were broadly flat, rising only 0.26% to USD 17.93 billion according to official data cited in the government’s sector reporting.
The portfolio mix helped. External revenue from home textile and terry rose 10.9% to PKR 66.87 billion, garments increased 6.3% to PKR 16.55 billion, and power generation rose 54.1% to PKR 11.20 billion. Denim revenue more than tripled to PKR 6.26 billion, while workwear rose 76.1% to PKR 1.90 billion, albeit from much smaller bases. Garments also moved from a gross loss to a PKR 1.36 billion gross profit.
Finance cost declined 22.1% to PKR 7.03 billion from PKR 9.03 billion. This is a meaningful recurring improvement and is consistent with the easing in borrowing costs compared with the preceding year, although leverage itself did not fall. The State Bank of Pakistan’s June 15, 2026 statement kept the policy rate at 11.5%, providing useful context for the still-elevated financing environment.
Inventory released cash rather than absorbing it. Stock-in-trade fell by PKR 3.32 billion to PKR 62.31 billion, reversing much of FY2025’s inventory build. The group also had no repeat of the PKR 3.85 billion CPPA-G balance adjustment recorded in FY2025.
What weakened / needs attention
The core margin trend deteriorated. Cost of sales increased 5.5%, faster than revenue, causing gross profit to fall by PKR 3.10 billion. Management attributes the standalone pressure to higher raw-material, energy and manufacturing costs, weak global demand and intense regional competition. The consolidated gross margin contracted by 192 basis points.
Below gross profit, distribution expense rose 6.2% and administrative expense increased 9.6%. Other expenses jumped to PKR 4.05 billion from PKR 0.28 billion, mainly because of a PKR 3.11 billion loss when Pakgen Limited ceased to be equity-accounted and became a subsidiary. These increases drove operating profit lower even before finance cost and associate income.
Segment performance was uneven. Spinning external revenue fell 6.9%, weaving declined 2.0%, and dyeing dropped 18.8%. Dyeing gross profit fell 39.8%. Home textile and terry grew sales, but gross profit fell 29.7%, showing that volume and pricing did not fully offset cost pressure. Power-generation gross profit fell 46.7% despite higher revenue. Management did not disclose a complete price-volume-mix bridge for every segment, so those commercial drivers cannot be quantified further without speculation.
Working capital remains a concern. Trade debts rose 25.8% to PKR 35.58 billion, including a rise in amounts due from CPPA-G. The receivables increase more than offset the inventory release: working-capital movements absorbed PKR 4.03 billion. Net operating cash flow fell 38.5% to PKR 1.43 billion, well below reported profit. That gap matters because the earnings uplift was partly non-cash.
Why profit rose despite weaker operations
The bridge from operating profit to net profit is essential. Share of profit from associates increased to PKR 7.50 billion from PKR 1.76 billion. The note shows PKR 5.94 billion of current-period associate profit plus PKR 1.55 billion of prior-year profit adjustments. D.G. Khan Cement was the largest contributor to the current-period associate result.
Pakgen’s share buyback increased Nishat Mills’ holding from 30.25% to 58.57% without Nishat Mills purchasing additional shares, giving the group control. The change generated a PKR 5.45 billion bargain-purchase gain in other income, partly offset by the PKR 3.11 billion de-recognition loss in other expenses. Pakgen’s results were consolidated from the date control was obtained, reducing direct comparability with FY2025.
Taxation then produced another large swing. After a PKR 2.39 billion levy, the income-tax line was a PKR 62 million credit, compared with a PKR 4.71 billion expense in FY2025. Together with lower finance cost and the absence of the prior CPPA-G charge, this explains why net profit expanded while operating profit declined. It would be misleading to label the entire EPS increase as operating growth.
No single adjusted-profit figure is presented here because removing acquisition accounting, associate adjustments and tax effects consistently would require assumptions beyond the issuer’s disclosed reconciliation. The defensible conclusion is qualitative: recurring operating earnings weakened, while investment, associate, financing and tax items more than compensated.
Final-quarter momentum
The discrete June quarter was stronger on revenue. Sales rose 17.9% year on year to PKR 60.41 billion, and profit after tax increased 40.3% to PKR 8.31 billion. Profit attributable to holding-company shareholders rose 51.3% to PKR 7.95 billion.
However, quarterly gross profit was almost flat at PKR 7.88 billion, and gross margin fell to 13.05% from 15.53%. The quarter therefore reinforces the full-year message: demand and revenue improved, but cost recovery lagged. Quarterly cash-flow data were not available, so no claim is made about cash conversion for the final quarter.
Balance sheet and cash flow
Total assets rose 14.8% to PKR 344.64 billion, partly reflecting Pakgen’s consolidation and higher long-term investments. Equity increased 22.2% to PKR 208.10 billion, supported by profit and PKR 16.10 billion of other comprehensive income, mainly fair-value gains on investments.
Total debt increased 7.1% to approximately PKR 102.05 billion. Cash and bank balances fell 9.6% to PKR 2.85 billion. The current ratio remained above one at roughly 1.4 times, but short-term borrowings of PKR 65.80 billion remained substantial. Management’s standalone gearing ratio improved because equity expanded relative to debt; this should not be confused with absolute debt reduction.
Operating cash flow of PKR 1.43 billion, capital expenditure of PKR 9.22 billion and investment activity left the group reliant on financing. Net financing cash inflow was PKR 4.49 billion, including PKR 4.70 billion of net short-term borrowing. The group paid PKR 6.99 billion of finance cost and PKR 5.73 billion of income tax in cash.
On the operating side, management invested in modernization and renewable energy. Installed solar capacity reached 41.61 MW, with another 4.21 MW under installation, and the company is planning a 20 MWp solar plant paired with a 35 MWp battery-energy-storage system. These projects could reduce exposure to peak tariffs, but they also require disciplined capital allocation while cash conversion is weak.
AlphaGen model scores
The following are AlphaGen model outputs, not figures reported by Nishat Mills:
- Alpha QoQ Score: 85.24
- TTM Performance Score: 66.00
- 3Y Business Perf Score: 39.90
- Sector Leadership Score: 58.68
The strong quarterly score is consistent with the June-quarter sales and earnings acceleration. The weaker three-year score is consistent with the longer decline in consolidated gross and operating margins. These scores are analytical indicators; they do not replace the audited statements or constitute investment advice.
What to monitor next
- Gross-margin recovery: watch whether export pricing and a more favorable product mix can offset cotton, energy and manufacturing costs.
- Receivables and CPPA-G collections: trade debts rose materially and are a key constraint on operating cash conversion.
- Associate earnings quality: separate current-period operating contributions from prior-year adjustments and valuation-related gains.
- Pakgen integration and comparability: future periods will include more of Pakgen as a subsidiary, while its power assets are being repositioned under an investment-focused business plan.
- Debt and finance cost: lower rates helped, but borrowings increased. Sustainable improvement requires stronger operating cash flow, not only cheaper funding.
- Capital spending and energy projects: execution of solar and storage investments should be assessed against realized savings and balance-sheet demands.
Sources and evidence limitations
Primary evidence: Nishat Mills Limited Annual Report 2026, including the unmodified consolidated audit opinion, financial statements, notes and segment disclosures.
Announcement and issuer identity check: Pakistan Stock Exchange company page for NML.
Sector context: Pakistan Economic Survey 2025-26 and Pakistan Bureau of Statistics trade data referenced there.
Interest-rate context: State Bank of Pakistan Monetary Policy Statement dated June 15, 2026.
The article uses audited consolidated figures for the group and labels standalone figures separately. Management disclosed directional segment commentary but not a complete quantified volume-price-mix bridge. Unsupported causal detail has therefore been omitted. No quarterly cash-flow series was available; balance-sheet and cash-flow conclusions use the audited June 30, 2026 annual statements.