Fazal Cloth Mills : Financial Results for 3rd Quarter ended on 31-03-2024

Nine Months Ended Mar 31, 2024

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DIRECTORS' REVIEW

On behalf of the Board of Directors of Fazal Cloth Mills Ltd. (the Company), we would like to present the un-audited financial information of the Company for the nine monthsperiod ended March 31, 2024.

FINANCIAL PERFORMANCE

A comparison of the key financial results of the Company for the nine months period ended March 31, 2024with same period last year (SPLY), is as follows:

The sales revenue surged by an impressive 27.35% primarily due to a twofold effect, higher prices for finished products and an upswing in yarn sales volume.

The Cost of Sales has experienced a significant increase of 31.30%, mainly due to increased raw-material costs, higher energy tariffs and an increase in minimum wages.The finance cost during the period also experienced a significant increase of 109.77%, totaling Rs. 6,650 million. This surge can be attributed to various factors, including higher policy rate of 22%, higher working capital requirements owing to inflationary impact / rupee devaluation and the non-availability of cheaper source of financing.

FUTURE OUTLOOK

Pakistan's economic and financial position continues to improve with each passing month of the current fiscal year, attributed to prudent policy management and the resumption of inflows from multilateral and bilateral partners. Pakistan has reached a Staff-Level Agreement in its final review successfully concluding the IMF's Stand-By Arrangement (SBA) program and securing a disbursement of $1.1 billion. The ongoing efforts in policy and reform are easing out pressures on the gross financing needs, which has been intensified by increased external and domestic financing demands and an uncertain external environment. These positive developments have led to a sustained economic recovery and an uplift in the country's overall economic confidence.

Headline inflation is on a downward trajectory; it dropped to 20.7 percent in March 2024 from 35.4 percent in March 2023.To reduce the inflationary impact, the Federal government has provided the Ramadan Relief Package of Rs 12.5 billion, targeting low-income groups with food subsidies through various measures. However, the SBP has maintained the policy rate at 22 percent on 18th March, 2024 - due to susceptible inflation outlook to risks amidst elevated inflation expectations.

Current Account posted a deficit of $1.0 billion for Jul-Feb FY2024 as against a deficit of $ 3.9 billion last year, with largely reflecting an improvement in trade balance. Owing to ease in imports restriction and exchange rate stability which resulted in smooth supply of raw material for export-oriented industries. However, one major issue affecting the sector is the burden of cross subsidies on energy costs imposed by the regulator. While regional competitors have seen their exports flourish, Pakistan has struggled to increase its exports during fiscal year 2024.

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The Company's new value-addedopen-end unit is fully operational and it is expected that this will positively contribute to the Company's bottom line. However, the overall margins of the Company will remain under pressure in the short term due to high finance costs and energy tariffs. The cotton production in Pakistan which has seen an impressive increase in the 2023-24 season also offered relief to the foreign exchange reserves.

The management expects the sales revenue to grow during the year ending June 30, 2024 and the liquidity position will further strengthen to run the operations of the Company in a sustainable manner. Going forward, we remain committed to improve our operations, to be more innovative, efficient and profitable to deliver sustainable returns to our shareholders.

THANKS AND APPRECIATION

We would like to place on record deep appreciation for the efforts of the executives, officers and other staff members and workers for their hard work, co-operation and sincerity to the Company in achieving the best possible results. The Board also wishes to place on record the appreciations to all banks, customers and suppliers for continued support to the Company with zeal and dedication. The Management is quite confident that these relations and co-operation will continue in the years to come.

(Amir Naseem Sheikh)

Director

Dated: April 29, 2024

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Fazal Cloth Mills Limited

Condensed Interim Financial Statements (Un-audited)

For the Nine Months Ended 31 March 2024

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