KARACHI: Exports of value-added segment in the textile sector grew by 10pc to $2.3bn in the first quarter (July-September) of this fiscal year compared with $2.1bn a year ago.

However, spinning-based exports (non-value added) declined by 15pc to $1.2bn from $1.4bn. According to the latest data released by the State Bank of Pakistan, spinning-based exports continued to dip, but were offset by higher exports of valued-added segment (bedwear, knitwear and readymade garments).

Analyst S.M. Jawad Shamim at brokerage Taurus Securities explained: “Since the provision of GSP+ status, value-added segment has outweighed the fall in the spinning sector to some extent.”

However, the analyst said the increase in the value-added segment was modest. He added that better figures could be expected in the next quarter on the back of expected hike in international demand, particularly during the Christmas season.

Meanwhile, brokerage Foundation Securities in its report said that according to numbers released by the Pakistan Bureau of StatisticS (PBS), textile exports in September 2014 stood at $1.25bn, reflecting a growth of 25.5pc over the previous month and 1.2pc year-on-year.

On a month-on-month basis, bedwear and knitwear exports surged by 34pc and 27pc in September over August. Improved demand from China was thought to be a major factor behind the increase in export volumes of basic textiles.

Analyst Fahad Irfan at Foundation Securities believed that the improvement in sector dynamics have already been priced in (the stock values), which spells limited upside for textile players.

However, the textile sector can benefit from exchange gains in the short term and the major impact of lower cotton prices could be seen in the second quarter (October-December) of FY15.

Another sector watcher, however, cautioned that the trend of diminishing growth could continue for a foreseeable future as political turmoil and floods could impinge on the export numbers in the coming months.

Going forward, the silver lining for the textile sector in the country was believed to be the plunge in cotton prices, which after topping at 91 US cents a pound during FY14, had taken a turn southwards to around 64 US cents a pound. The July-September average clocked in at 77 US cents a pound.

“Local cotton prices also reflected the downfall despite flash floods and this is expected to mark higher profit margins for the textile players from October-December quarter onwards,” observed an analyst at Taurus.

Published in Dawn, October 26th, 2014