KARACHI: Kohinoor Spinning Mills Ltd said on Wednesday it’s temporarily shutting down production owing to multiple reasons, including the “prevailing global and economic downturn,” high production cost and low demand.

It told shareholders that the situation is likely to improve in the first quarter of next year and that may enable the company to resume operations.

Many textile makers are facing a liquidity crunch amid unfavourable conditions in the global market. The trend is reflected in foreign trade numbers as textiles constitute the main source of export proceeds.

Speaking to Dawn, Pak-Kuwait Investment Company Ltd Head of Research Samiullah Tariq said the downswing is sector-wide and not limited to a few players.

“The textile industry is battling major challenges in the shape of a bad cotton crop, rising utility rates, low international demand and high interest rates that’ve increased the overall cost of doing business,” he said.

According to analyst Ali Asif of Insight Securities, textile exports have started to show signs of a slowdown amid weak demand. “We expect the country’s textile export to remain muted in coming months amid inflationary pressure and higher inventory pileup in exporting countries, followed by expected gas shortages in the winter season,” he said in a recent research note.

Proceeds of textile exports dropped 15.2 per cent to $1.3 billion in October on an annual basis. The volumetric decline in exports was 20.6pc over the same period.

The slowdown in the textile sector is also reflected in private-sector credit, which recorded only a “moderate” increase in the first quarter of 2022-23. According to the commentary provided by the central bank in its latest monetary policy announcement, the “deceleration” in private-sector credit was mainly because of a “significant decline in working capital loans to… the textile sector in the wake of lower domestic cotton output”.

Earnings of the listed textile companies have already begun to stagnate. Data compiled by Topline Securities showed that the quarterly profits of listed textile firms decreased 2pc year-on-year to Rs12.4bn in the latest three-month period.

Officials of Kohinoor Spinning told an analysts’ briefing last week that the company was taking an “extra-cautious” approach to business and would try to save accumulated profits instead of “being speculative in trying to make money”.

Published in Dawn, December 15th, 2022