The verdict
Saritow Spinning Mills Limited’s FY2026 result is best understood as the first audited year of a business-model reset, not a recovery in yarn manufacturing. Spinning had already stopped in June 2024; during FY2026 the company formally closed that business, classified it as discontinued, began selling the machinery and repositioned the remaining property for leasing and warehousing.
The headline loss improved sharply: loss after tax narrowed to Rs69.33 million from Rs598.20 million, and loss per share improved to Rs2.32 from Rs20.05. Yet most of that improvement came from the absence of the prior year’s very large impairment and from a smaller discontinued-operation cost base. The new continuing business generated Rs26.47 million of rental income but still posted a Rs3.63 million operating loss.
The balance sheet also moved in the right direction in some respects. Sponsor and director borrowings fell by Rs275.60 million, cash rose to Rs33.36 million, and the first lease created contracted future rent. Those gains do not remove the central risk: current liabilities exceeded current assets by Rs729.46 million, the Rs541.98 million of sponsor/director loans remained repayable on demand, and the auditor drew attention to a material uncertainty over going concern while leaving the audit opinion unmodified.
Results at a glance
Reporting basis: audited standalone financial statements for the year ended June 30, 2026, with the former spinning activity presented as discontinued operations and the property-leasing activity as continuing operations. Figures below are from the company’s annual report and are in Pakistani rupees.
• Rental income from continuing operations: Rs26.47 million, versus nil in FY2025.
• Continuing operating loss: Rs3.63 million, versus Rs24.90 million.
• Continuing loss after tax: Rs4.33 million, versus Rs24.90 million.
• Discontinued-operation loss after tax: Rs65.00 million, versus Rs573.30 million.
• Total loss after tax: Rs69.33 million, versus Rs598.20 million.
• Total loss per share: Rs2.32, versus Rs20.05; no dividend was recommended.
• Net cash generated from operating activities: Rs70.88 million, versus Rs37.10 million.
• Cash and bank balances: Rs33.36 million, versus Rs5.94 million.
• Short-term borrowings: Rs541.98 million, versus Rs817.59 million.
AlphaGen model scores
The four approved AlphaGen model readings are: Alpha QoQ Score 99.81; TTM Performance Score 89.63; 3Y Business Perf Score 85.25; and Sector Leadership Score 76.3967. These are model outputs, not figures reported by SSML. They capture the scale of improvement against a very depressed base, so they should be read alongside the discontinued-business accounting and going-concern warning rather than as evidence that the legacy textile operation has recovered.
What improved
The most visible improvement was the collapse in the loss from discontinued operations. FY2025 included a Rs459.48 million impairment of property, plant and equipment, Rs52.02 million of depreciation and other closure-related costs. In FY2026 there was no comparable impairment charge. The discontinued operation recorded no revenue, a Rs62.32 million cost of sales, Rs17.26 million of depreciation within that cost base and a Rs0.38 million loss on machinery disposal. Its after-tax loss therefore fell to Rs65.00 million from Rs573.30 million.
That distinction matters. The Rs528.88 million reduction in the total annual loss is real, but it primarily reflects the removal of a prior-year write-down and the run-off of a closed operation. It is not evidence of higher yarn volumes, stronger pricing or better textile margins: the annual report says there was no production in FY2026 and the company had disposed of all spindles.
The emerging rental business provided the first recurring income under the new strategy. SSML leased 175,000 square feet of its 412,538 square feet of covered area to Pak Elektron Limited, a related party. That represents about 42% occupancy, leaving 237,538 square feet—about 58%—available for additional tenants. The lease generated Rs26.47 million during part of the year. Contracted minimum lease receipts were Rs151.28 million at June 30, including Rs54.75 million due within twelve months.
On a simple earnings bridge, Rs26.47 million of rental income was absorbed by Rs30.10 million of continuing operating expenses, leaving the Rs3.63 million operating loss. Management notes that the result includes Rs1.83 million of depreciation and Rs1.32 million of retirement-benefit expense, and that the existing lease contributed for only part of the year. This makes a full-year improvement plausible if the tenant remains and costs are controlled, but it remains a forecast rather than a reported outcome.
Cash and debt movements were also constructive. SSML sold held-for-sale machinery with a carrying value of Rs232.48 million for Rs232.10 million, a modest Rs0.38 million loss. Net investing cash inflow was Rs232.14 million, while Rs275.60 million of borrowings were repaid. Cash still increased by Rs27.42 million to Rs33.36 million because operating cash flow was positive.
Net cash generated from operating activities was Rs70.88 million. However, the annual report’s attribution shows that discontinued operations generated Rs88.72 million of operating cash flow, while the asset-sale programme generated the investment inflow. The cash improvement therefore depended substantially on legacy-asset monetisation and working-capital movements, not solely on the new rent stream. Investors should avoid treating FY2026 cash generation as a clean, repeatable measure of the property business.
What weakened / needs attention
The new continuing business was not yet profitable. Rental income covered most, but not all, of operating expenses, and the company also recorded Rs0.37 million of finance cost and Rs0.33 million of levies. Continuing loss after tax was Rs4.33 million, equivalent to Rs0.15 per share. The remaining Rs2.18 per-share loss came from discontinued operations, producing the total Rs2.32 loss.
Liquidity is the largest financial constraint. Current assets were Rs228.41 million against current liabilities of Rs957.86 million. The current-asset figure included Rs170.87 million of machinery held for sale and only Rs33.36 million of cash. On the liability side, Rs541.98 million consisted of unsecured, interest-free loans from directors and sponsors that were repayable on demand.
There is useful nuance in the working-capital deficit. Current liabilities included Rs188.20 million received in advance against asset disposals and Rs101.47 million received against stores and spares; management says these Rs289.67 million obligations are expected to be settled by delivering the assets rather than paying cash. Even after recognizing that distinction, the company remains reliant on sponsor support and successful completion of disposals.
The auditor gave an unmodified opinion but separately highlighted a material uncertainty related to going concern. The underlying facts were the cessation and closure of spinning, the continuing operating loss, accumulated losses of Rs868.49 million, the Rs729.46 million current-liability excess and expired banking facilities that had not been renewed. This is a prominent risk disclosure, not a technical footnote.
Management’s going-concern case rests on four main assumptions: the existing related-party lease continues; more of the remaining property is leased; costs from the discontinued spinning activity fall away as disposals finish; and director and sponsor funding remains available. Positive equity and the non-cash nature of part of the current liabilities provide support, but the plan has limited room for execution delays.
The related-party nature of the first lease deserves monitoring. The annual report identifies Pak Elektron Limited as an associated company through common directorship and reports the full Rs26.47 million of FY2026 rental income from associated companies. The report says related-party transactions are conducted on commercial terms, but occupancy, collection and renewal should still be assessed with the same discipline as third-party rental income.
PSX currently marks SSML as non-compliant. The company profile does not state the cause on the result page, so it would be inappropriate to infer one. The flag nevertheless adds a governance and listing-status item to the risk checklist.
What to monitor next
First, watch occupancy and rental conversion. The existing 175,000-square-foot lease is the only demonstrated recurring revenue base. Leasing the remaining 237,538 square feet would materially change fixed-cost absorption; failure to do so would keep earnings dependent on one related-party tenant.
Second, separate recurring property cash flow from the final machinery and inventory run-off. FY2026 benefited from Rs232.10 million of machinery-sale proceeds and operating cash attributed to the discontinued activity. The cleaner test will be whether rent collections alone can cover operating costs, levies, maintenance and any cash interest once the disposal programme is complete.
Third, track the Rs170.87 million of machinery still classified as held for sale and the related customer advances. Timely delivery and disposal would reduce execution risk and should help clarify how much of the current-liability gap is genuinely cash-settled.
Fourth, monitor sponsor loans and the going-concern disclosure. The reduction from Rs817.59 million to Rs541.98 million was substantial, but the remaining balance is still repayable on demand. Continued support—or a formal restructuring of maturities—would matter more to solvency than another year-on-year percentage improvement from the depressed FY2025 base.
Finally, compare the next reported period with the audited FY2026 continuing-operation baseline: Rs26.47 million of rent, a Rs3.63 million operating loss and a Rs4.33 million after-tax loss. That basis avoids mixing the property business with the closed textile operation and is the most useful way to judge whether SSML’s transformation is becoming self-sustaining.
Evidence and limitations
The annual report provides sufficient audited evidence for the core verdict, balance-sheet analysis and cash-flow bridge. It does not disclose a detailed tenant-by-tenant leasing pipeline or a sensitivity analysis for management’s forecasts, so no claim is made about the timing or economics of leasing the remaining area. No textile demand or yarn-price recovery thesis is relevant to the continuing business because spinning was formally discontinued.
Primary source: SSML FY2026 annual-report page.
Official filing: PSX financial result dated October 6, 2026.
Official company profile and filing index: Pakistan Stock Exchange SSML page.