Verdict: Reliance Weaving Mills Limited (PSX: REWM) delivered a materially stronger FY2026, and the improvement was not merely an accounting headline. Net sales rose only 3.5%, but gross margin widened by 1.47 percentage points, operating profit advanced 22.1%, finance cost declined, and the spinning segment swung from a loss to a profit. Profit after tax more than tripled. The restraint is equally important: debt remained above PKR 20 billion, cash fell, receivables and tax refunds absorbed working capital, the tax-and-levy charge consumed roughly half of profit before those charges, and shareholders received no dividend.
This analysis covers REWM’s audited, company-level financial statements for the year ended June 30, 2026, presented in Pakistani rupees. The annual report was transmitted to PSX on October 7, 2026; the board had announced the financial result on September 28, 2026. Official PSX filing | Issuer annual report | PSX company page
Results at a glance
- Net sales: PKR 41.612 billion, up 3.5% from PKR 40.220 billion.
- Gross profit: PKR 5.476 billion, up 16.4%; gross margin improved to 13.16% from 11.69%.
- Profit from operations: PKR 4.372 billion, up 22.1%; operating margin rose to 10.51% from 8.90%.
- Finance cost: PKR 2.738 billion, down 5.4% from PKR 2.895 billion.
- Profit before taxation and levies: PKR 1.634 billion, up 138.3%. After PKR 351.3 million of minimum/final tax levies, profit before tax was PKR 1.283 billion.
- Profit after taxation and levies: PKR 812.6 million, up 216.2%; EPS was PKR 26.37 versus PKR 8.34.
- Cash generated from operating activities after finance cost, taxes and other operating payments: PKR 1.867 billion, versus a PKR 706.6 million outflow in FY2025.
- Dividend: none for FY2026, unchanged from FY2025.
The audited statement of profit or loss, cash-flow statement and notes provide the reported figures above. See the FY2026 annual report
AlphaGen model scores
These are AlphaGen model outputs, not figures reported by the company:
- Alpha QoQ Score: 99.69
- TTM Performance Score: 100.00
- 3Y Business Perf Score: 45.79
- Sector Leadership Score: 63.08
The sharp gap between the near-perfect recent-performance scores and the middling three-year score is directionally sensible. FY2026 was a strong recovery year, but the longer record is cyclical: net profit was PKR 2.639 billion in FY2022, fell to PKR 203 million in FY2023 and PKR 120 million in FY2024, then recovered to PKR 257 million in FY2025 and PKR 813 million in FY2026. That history argues against treating one rebound year as a new steady-state earnings base.
What improved
The central improvement was margin, not top-line acceleration. Sales increased by PKR 1.392 billion, while gross profit increased by PKR 772.7 million. Cost of sales therefore grew only 1.7%, slower than revenue. The annual report says sales volumes were nearly consistent and attributes the earnings improvement to financial and operational management, including an 11% reduction in energy cost. The nine-month directors’ review is more specific: it says lower energy cost was primarily driven by increased reliance on solar generation. The filing does not quantify the full-year split between volume, selling price and product mix, so it would be unsafe to assign all margin expansion to one factor. FY2026 annual report | Nine-month FY2026 report
Spinning supplied the clearest operational inflection. External spinning revenue rose 11.6% to PKR 14.903 billion, and the segment result moved to a PKR 777.9 million profit from a PKR 135.7 million loss. Weaving external revenue eased 0.6% to PKR 26.709 billion, although its segment result improved 4.3% to PKR 856.4 million. In other words, the earnings step-up was not evenly distributed: spinning changed the company-level outcome, while weaving remained the larger revenue contributor and a stable profit anchor.
Production data support a real operating improvement. Output from the two disclosed weaving units increased 5.3% to 121.38 million converted metres, lifting combined utilisation to about 96.6% from 91.7%. Output from the three spinning units rose 4.0% to 28.03 million converted kilograms, with utilisation improving to roughly 94.0% from 91.3%. Management still cites electricity shutdowns, maintenance and product-count or fabric-specification changes as causes of under-utilisation. These are physical production measures, not sales volumes, but they corroborate better plant throughput. Capacity and production note
Financing pressure eased, though it did not disappear. Finance cost fell PKR 157.2 million, or 5.4%, despite the balance sheet remaining highly leveraged. The company’s directors linked the reduction to lower rates and better working-capital management; the nine-month report specifically identified a 17.8% reduction in finance cost on short-term borrowings. The policy backdrop was supportive relative to early FY2025, although the State Bank later held the policy rate at 11.5% in September 2026. Issuer discussion | SBP monetary-policy statement
The fourth quarter also ended strongly. Subtracting the official nine-month numbers from the audited full year gives implied Q4 sales of about PKR 10.806 billion and Q4 profit after tax of about PKR 301.8 million. Against the comparable implied quarter, sales grew about 20.0% and net profit about 93.8%. This is a calculation from two issuer reports, not a separately published quarterly statement, and small rounding differences may arise because the interim report is presented in thousands. Nine-month accounts | Audited full year
Cash flow and balance sheet
Cash conversion improved dramatically at the annual level. Cash generated from operations before finance cost and taxes was PKR 5.306 billion, up from PKR 3.246 billion. After finance cost, taxes, levies, gratuity and workers’ profit participation payments, net operating cash inflow was PKR 1.867 billion versus a PKR 706.6 million outflow. Capital expenditure fell to PKR 1.417 billion from PKR 1.880 billion, so operating cash exceeded fixed-asset spending by roughly PKR 450 million before investments and financing.
The working-capital detail explains much of the swing. Stock-in-trade fell PKR 1.461 billion, reversing part of FY2025’s large inventory build. Yet this was not a clean release of cash everywhere: trade debts rose PKR 707.5 million, and tax refunds due from the government increased PKR 744.0 million to PKR 1.489 billion. Cash and bank balances consequently ended at PKR 482.2 million, down 34.4%, after investing outflows and a PKR 621.8 million financing outflow. Audited cash-flow and working-capital notes
Balance-sheet leverage improved only modestly. Total interest-bearing debt was about PKR 20.390 billion, down 2.7%, while equity rose to PKR 12.074 billion. Part of the equity increase came from a PKR 1.254 billion revaluation surplus on freehold land, which is non-cash and did not pass through profit. Current assets of PKR 19.837 billion remained below current liabilities of PKR 20.374 billion; the current ratio improved to roughly 0.97x from 0.94x but stayed below one.
What weakened / needs attention
The largest constraint on the earnings recovery is the amount absorbed below operating profit. Finance cost still consumed about 62.6% of operating profit. The annual report’s interest-coverage ratio improved to 1.60x from 1.24x, but that remains a narrow cushion for a cyclical textile manufacturer. A sustained fall in borrowing cost or a material reduction in short-term financing would make the recovery more robust; a reversal in rates, cotton costs or energy tariffs would quickly test it.
Taxation also deserves a separate reading. REWM reported PKR 351.3 million of minimum and final tax levies before ordinary tax, then a further PKR 470.4 million tax charge. Together they absorbed PKR 821.7 million, just over half of profit before taxation and levies. The tax charge included PKR 382.7 million of deferred tax. This is why a 138% rise in pre-levy profit translated into a still-impressive but less explosive net result.
Liquidity is better than FY2025’s cash-flow statement suggests, but not comfortable. Receivables increased 15.6%, cash fell, the quick ratio remained low, and substantial inventories are pledged to banks as security for short-term finance facilities. Total debt declined, but the current portion of non-current liabilities nearly doubled to PKR 1.755 billion. Investors should distinguish the improvement in annual operating cash from a fully repaired balance sheet.
There was also no cash dividend despite EPS of PKR 26.37. Retention is understandable given leverage, capital expenditure and working-capital needs, but it means the earnings rebound did not translate into a direct payout. Total comprehensive income of PKR 1.764 billion exceeded net profit because of the land revaluation, partly offset by a PKR 332.5 million unrealised loss on investments measured through other comprehensive income. Neither item should be confused with recurring operating earnings.
What to monitor next
- Spinning durability: whether the segment can preserve its FY2026 profit after moving from a loss, especially if cotton procurement advantages fade.
- Finance-cost transmission: lower debt and refinancing rates need to bring the PKR 2.738 billion annual burden down further.
- Working capital: receivables, tax refunds and cash balances matter as much as the reported inventory reduction.
- Margin versus volume: the filing does not disclose a complete sales-volume, pricing and mix bridge. Future reports should be checked for whether gross-margin gains survive without favourable cost timing.
- Home-textile expansion: management plans to install 250 sewing machines to enter a more value-added segment. Execution, customer acquisition and incremental capital requirements are the key variables.
- Energy and utilisation: solar savings and higher plant throughput were helpful, but electricity shutdowns and energy tariffs remain disclosed operating risks.
Bottom line
REWM’s FY2026 result is a credible recovery: gross margin widened, spinning turned profitable, finance cost eased and operating cash flow moved decisively positive. The quality of the improvement is stronger than the modest sales growth alone suggests. Still, the balance sheet and below-the-line charges prevent an unqualified verdict. Debt remains large, liquidity is tight, the tax-and-levy burden is heavy, and no dividend was declared. The next test is whether management can convert higher utilisation and the spinning turnaround into repeatable cash earnings while reducing financing dependence—not merely preserve accounting profit.
Primary sources: PSX announcement and company profile; PSX-hosted FY2026 annual report; issuer FY2026 annual report; issuer nine-month FY2026 report; issuer financial-reports archive; State Bank of Pakistan policy statement.