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Topline Flash Note: Gul Ahmed Textile Mills: Corporate Briefing Session Notes

• Gul Ahmed Textile Limited (GATM) today conducted a Corporate Briefing session, wherein the management discussed its current performance and outlook.
• The retail stores of GATM across the country had remained closed for approximately 8 weeks. This along with loss of export orders has resulted in revenue loss of Rs8bn and loss of contribution margin of Rs1.6bn.
• The retail segment has not yet normalized, as stores are operating under shorter timings (closed on weekends which is usually peak sales time).
• However, the management commented that, for the month of Jun-2020, textile related exports are expected to cross the US$1bn mark.
• GATM too has sufficient export orders in hand till Nov-2020. The company has started to export products related to Health care segment, which mainly includes protective gowns, scrubs and masks, which are also US FDA approved.
• The management further highlighted that due to COVID-19, consumption patterns of consumers have changed significantly and every segment will be impacted in a different way.
• The home textile segment is expected to grow in the future as its demand has increased significantly as people are spending more time at home in wake of the pandemic.
• However, the apparel segment is likely to suffer due to its luxury nature as consumer spending has overall declined.
• The sales from e-commerce were recorded at ~Rs0.5bn in FY19, which is expected in excess of Rs1bn in FY20E.
• During 9MFY20, the capacity utilization of Spinning was ~86%, while Weaving & Processing was operating at 89% utilization level.

On possible impact of locust on cotton crop yield, management commented that they currently have sufficient inventory of cotton, however the significant decline in cotton output can lead to higher cotton imports and higher prices, which can have negative impact on margins.