Gul Ahmed Textiles Mills LTD

One of the oldest textile groups in the country, Gul Ahmed Textile Mills Limited (PSX: GATM)
was established in 1953. It was subsequently listed on the Karachi Stock Exchange in 1970 and
has since been a leading player in the textile sector of Pakistan. Gul Ahmed has also built up
strong presence in the retail business with its flagship store Ideas, catapulting the company into
the retail sphere. Starting from Karachi, Gul Ahmed now has an extensive chain of more than 40
retail stores across the country, offering a diverse range of products from home accessories to
fashion clothing. The shareholding pattern indicates that Gul Ahmed Textile Mills Limited is a
subsidiary of Gul Ahmed Holdings (Private) Limited, which owns over 67 percent of the
company. Another associated company is one Swisstex Chemicals (Private) Limited, with a three
percent share. Therefore, the stock is majorly held within the family.
GUL AHMED TEXTILES MILLS LTD

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The upward pattern in July of year 2016 shows that the financial year 2015-16 proved to be a
great year for Gul Ahmed since the company successfully achieved its growth target. 2016 was a
tempestuous year for Pakistan’s economy. Although the economy witnessed highest GDP growth
in the last eight years mainly due to low inflation, reduced fiscal deficit, improved tax collection
and reduced oil prices, but economic growth fell short of its target. The year was disappointing
for the textile sector because of the setback in agriculture sector that resulted in decline in cotton
production and reduction in export due to weaker demand in export markets, falling commodity
prices and relative strengthening of Pakistani rupee. “The outgoing financial year was very
difficult for the spinning business due to lower demand, both in local and international markets.
Yarn sales declined by 12 percent as lower yarn demand from China severely affected the
exports of yarn. This was further affected by artificial rupee-dollar parity”[ CITATION Gul16 \l 1033
]
But despite all this, Gul Ahmed managed to achieve its growth target by two of its core
businesses home textile and apparel. Company maintained its market share in the export market
by reducing its cost in manufacturing – by replacing old manufacturing set-up with latest
machinery and process reengineering. Keeping in view the trends of export market, it played
smart by improving its local shares through extensive marketing and ensuring its present across
the board [CITATION Gul161 \l 1033 ].
By September 30, 2016, the Company achieved net sales of Rs. 8,191 million recording a growth
of 38%, resultantly gross profit has increased by Rs. 198 million over the corresponding period.
However, Gross Profit (GP) margin has decreased by 3% due to lower productivity because of
highest number of holidays in quarter as compared to all the quarters in the last year. But the
Company was unable to gain full benefit from increased sales due to delayed debottlenecking of
some of its major manufacturing plants that was complete in November against the target date of
August. The main reasons for delays were late shipments by machinery suppliers [ CITATION Gul \l
1033 ].
Major decrease in pattern of share price by December, 2016 was mainly due to increase in the
input costs. Input cost increased due to increase in raw materials costs, disallowing of sales tax
input on packaging material, increase in gas tariff. Due to all this, Pakistan’s textile exports
suffered a decline of 5.96% over the corresponding period. Steep depreciation of the euro against
dollar in the third quarter slowed down the company’s export sales to Europe (news). Lower
cotton production led to hike in cotton prices. Due to increase cost, company’s profit before tax
declined [ CITATION Gul1 \l 1033 ].
By March 2017, Gul Ahmed improved its share price despite of all the issues discussed above,
by adopting lean management practices and controlling production and operational costs.
According to The News Gul Ahmed planned to carve out its business segments for better
functioning. “At a meeting, the Board of Directors of Gul Ahmed Textile Mills Limited
authorized the company to explore the feasibility-viability of a potential carve-out of its local
business segments including retail business”[ CITATION Gul16 \l 1033 ]. The result of these efforts
can be seen in improved performance by March, 2017. The company opened several retail shops
and fabric shops to increase its local footprint in Pakistan.
However, company’s shares price decreased by the beginning of the fiscal year 2017-18 due to
decrease in gross profit margins. Increase in sales was offset because production cost increased
tremendously due to government’s inconsistent policies. However, remaining of the year 2017-
18, the company performed well and maintained its share price in the market. One reason is the
overall increase in export activities of the country, especially textile sector, something that has
been missing for years. Another reason is the investments made by the company in previous
years in cost rationalization and BMR activities [ CITATION Gul2 \l 1033 ].. The policies of newly
elected Government also played significant role. The new government has a very clear agenda of
supporting the exporters. The government has already revoked duties on 82 tariff lines relating to
raw materials and inputs for export oriented sectors while relaxation has been given on the
import of textile machinery in order to enhance the capacity of the sector. Further, textile
industry will continue to receive gas supply on existing rates and would also obtain gas on
priority during winters [ CITATION Gul3 \l 1033 ].
The company has continued to reap significant benefits by investments in most modern
technology, focusing on economically beneficial markets, products and customers, efficient
process management, cost rationalization efforts, change in PKR/US$ parity, strategic and timely
procurement of raw material while taking full advantage of available credit lines etc. The
combined results of all such measures have enabled the company to fully utilize its capabilities
and improve both the top and bottom line [ CITATION Gul4 \l 1033 ]. The company has also
recently invested in UK-funded renewable energy plant in partnership with Dossa family.
Therefore, the probability for the pattern seen in 2018 to occur again throughout 2019 is high.
Works Cited
Gul Ahmed plans to carve out business segments. (2016, october 3). Retrieved from International The
News: https://www.thenews.com.pk/print/154614-Gul-Ahmed-plans-to-carve-out-business-
segments
(n.d.). Gul Ahmed Annual report 2016.
Gul Ahmed Annual Report 2018. (n.d.). Retrieved from https://gulahmed.com/wp/wp-

content/uploads/2018/10/Annual-Report-2018.pdf
Gul Ahmed Half yearly report for the month ended December31st. (n.d.). Retrieved from
https://gulahmed.com/wp/wp-content/uploads/2016/04/Gul-Ahmed-Half-Yearly-Accounts-Dec-
2016.compressed.pdf
Gul Ahmed Quarterly Report 2019 for the month ended March 31st. (n.d.). Retrieved from
https://gulahmed.com/wp/wp-
content/uploads/2019/04/Gul_Ahmed_March_2019_Accounts.pdf
Gul Ahmed Quarterly Report for the month ended March 31st. (n.d.). Retrieved from
https://gulahmed.com/wp/wp-content/uploads/2016/04/Quarterly_Report_Mar_2016-
NEW.pdf
Gul Ahmed Quarterly Report for the month ended March 31st. (n.d.). Retrieved from
https://gulahmed.com/wp/wp-content/uploads/2018/04/March-2018-Accounts.pdf

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One of the oldest textile groups in the country, Gul Ahmed Textile Mills Limited (PSX: GATM)

GUL AHMED TEXTILES MILLS LTD

(n.d.). Gul Ahmed Annual report 2016.

Gul Ahmed Annual Report 2018. (n.d.). Retrieved from https://gulahmed.com/wp/wp-

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