Spinning Sector Overview
.
SPINNING | COST STRUCTURE
The cost structure of spinning sector is mostly variable with ~90% variable
cost. Resultantly, the sector has low operating leverage.
Spinning | Cost Breakdown
6%
9%
.
•
•
On average, the sector spends ~78% of its total production costs on raw
material, i.e. cotton.
The prices of local cotton remain in parity with international prices.
The prices of yarn in international market have declined by ~30% since
FY18. However, the yarn prices have increased in local market by ~70-80%
due to significant rupee devaluation.
200
7%
■Raw Material
■Salaries & Wages
78%
■Fuel/Utilities
■ Other
Spinning | Cotton Price Trend
PACRA
150
.
Other major costs include Salaries and Wages as well as Fuel and Utilities
which both consist of ~16% of the total production cost.
100
50
•
Remaining ~6% is attributable to other costs such as depreciation, repairs,
maintenance, insurance, packing and chemicals.
0
Jun-16
Local Price (PKR/lb.)
Jun-17
Jun-18
Jun-19
Jun-20
International Price (cents/lb.)
Avg. Exchange Rate
20
Source: Trading Economics, Business Recorder, PACRA DatabaseView entire presentation