Spinning Sector Overview

SPINNING | SALES RISK • Over the years, production level and local demand have remained stable except in FY20, where there was significant decline due to COVID-19 lockdown. Spinning | Local Demand 4,000 3,500 . The prices of local yarn increased on average by ~70-80% since FY16. However, this was partially 3,000 countered by higher cotton prices, which increased by ~12% since FY 16. 2,500 2,000 . The gross and operating margins have shown an increasing trend in last few years on the back of improving yarn prices due to robust local demand and significant rupee depreciation. However, the margins remain relatively low. 1,500 1,000 500 . . The sales risk of exports is high on the back of low value addition, declining unit prices and increasing international competition. Further, the sales risk of local demand is moderate due to stable demand, partially countered by improving output prices. 19 FY 16 FY17 FY18 FY19 PACRA FY20 Cotton Yarn Prices (PKR per 10 lb.) ■Production of Yarn (000 MT) Local Demand (000 MT) Historic Margins 2,500 10% 8% 2,000 6% 1,500 4% 2% 1,000 0% 500 FY16 FY17 FY18 FY19 FY20 -2% -4% FY16 FY17 ⚫Coarse FY18 FY19 FY20 -6% Medium Fine S. Fine Gross Margin Operating Margin Net Margin Source: Pakistan Bureau of Statistics (PBS), PACRA Database

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