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Pakistan Profits Up As Sector Recovers

The Pakistani textile sector is having a great year, after a gloomy 2012. Profitability is up dramatically, increasing four-fold compared to the same period last year. The results stretch through the third quarter, but are expected to continue for the entire year.

Stock prices started to rise last year, and Pakistan now has one of the most dynamic stock markets in the world. Prices were even up for dead and dying textile concerns, initially raising the idea that the activity was speculative. However, the new profit numbers show that the sector is actually rebounding, and the rising prices are justified.

Zeeshan Afzal, a broker at Topline Securities, said, “Fiscal year 2013 was one of the better years for Pakistan textile sector in terms of sales and profits.”

Stable cotton prices and growing regional demand are responsible for the increase. Companies continue to struggle with a shortage of power, especially in the winter. The government is taking steps to address the shortage.

The deprecation of the dollar against the rupee and cheaper financing helped the export sector surpass expectations. The cheaper rupee combined with increased demand from China for yarn and cotton imports, due to a price floor in that country.

Pakistan exported $13 billion worth of textile products in 2013, up 5.9 percent in dollar terms and 14.7 percent in terms of the rupee. Yarn and grey cloth exports were up 24 percent and 10 percent respectively, to $2.2 billion and $2.7 billion.

A large change in cotton prices could undermine the positive news, but that is unlikely through 2014, according to experts. Pakistan’s production should be 13.25 million bales in 2014, up from 13 million bales in 2013.

In 2014, new GSP Plus status from the European Union and improvements in the energy situation could continue strong earnings. Further demand from China and additional rupee depreciation should help the trend.