KARACHI: The recently released financial figures by the textile companies are unimpressive. Yet, going forward, investors in stocks of listed textile companies expect stellar growth in earnings as they start to realise and incorporate the benefits of the GSP+ status.
The development has given a new lease of life to the sector, which lists the largest number of companies and an aggregate market capitalisation of Rs274 billion. After remaining listless for years, the companies on the spinning, weaving and composite segments, stirred to show signs of life a year ago.
At first the investors were caught by surprise as the share prices not just of companies under the fold of bigger groups started to climb by leaps and bounds, but even those of the 'third tier' stock started to multiply. The aggregate market capitalisation of the sector has surged to Rs368 billion by this week, from Rs274 billion less than four months ago.
The companies are focusing on the high value added apparel segment, from which they hope to enrich their revenue mix as the ongoing shift in demand from China to South Asia accelerates.
The Managing Director and CEO of Nagina Group, Shaukat Ellahi Shaikh, was optimistic over the companies’ prospects ahead. He said ‘inquires’ were already lining up from EU countries. “The textile sector has started to divert its exports from the Far East to Europe as the unit value is higher in the European markets.”
He said the management of Prosperity Mills, a group company, planned to add another 52 looms to meet the expected higher demand going forward. He also affirmed that the GSP+ approval had opened a window of opportunity for the textile sector, and stressed the need to shift focus on value-added garments.
“Apart from fetching better prices in the overseas market, the value-added sector is labour intensive and can generate enormous employment opportunities,” Mr Ellahi observed.
Analyst Mohammad Salman guesstimated that the country could earn an additional $1 billion per year through the GSP+ status. Muhammad Zubair Motiwala, known industrialist and former chairman of the Sindh Board of Investment (SBI), said a short time back that if the facility had been granted earlier, the country would have been better off, with more foreign exchange reserves in the kitty; a narrower trade deficit, and a boom in exports.
Another textile magnate asserted that the EU would derive greater benefit from grant of this facility. He explained that with textile being a highly labour intensive industry, and given Europe’s ageing population and its focus shifting to hi-tech industries, the EU needs to import textile products from countries such as Pakistan, which are blessed with cheap labour.
The textile industry contributed 53 per cent to total exports of $24.6 billion in financial year 2013. Sector watchers expect a booming export market. There is, however, a caveat. Several industry stalwarts suspect that the textile mills may not be able to boost production to full capacity to meet demand from the EU. “It will be an uphill task, mainly due to the non-availability of basic inputs — gas and electricity,” lamented one industrialist.