Profits reduce as cost of production goes overboard

15 Mar '08

2 min read

Profits of the Pakistani textile sector have been reduced considerably in the first half of 2008 and this is largely because of rising cost of inputs.

The textile industry and its exports are facing severe competition from its international rivals especially from the neighboring countries and the situation has been intensified due to reduced margins.

Despite Government incentives and subsidies worth billion of rupees, exports saw a drop of 3.44 percent in the first seven months of the current fiscal.

The sector did garner a growth of 10 percent in the first half of 2007-08 but the impact of high cost of inputs and energy nullified the positive effect of the growth.

An ever mounting cost of cotton production and consumption of energy has burdened the industry as profits are getting substantially reduced and importers look for better alternatives.

Experts believe that on an average there has been around 25-30 percent increase in the cost of production during this year mainly due to rising prices of cotton and gas.

During the same period, profits of the spinning sector reduced by 40 percent. Although, net sales surged by 11 percent, a significant decline of 200bps over first half of previous year was evident. Moreover, financial charges also went up by 3 percent.

On the other hand, weaving sector also recorded a net loss of around 25 percent in profits reducing revenues by 5 percent while financial charges rose by 8 percent.

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