Ibrahim Fibres Limited ($IBFL)

[Audio Gap] Let me introduce you to the management of the company, who is present in today's CBS session, Mr. Mohammad Naeem Mukhtar, he is the Chairman of the company; Mr. Muhammad Waseem Mukhtar, he is the CEO of the company, and he has joined us over Zoom. Mr. Mohammad Waqar, he's Director of the company; Mr. Abdul Hameed Bhutta, he's Director of the company; Mr. Mohammad Naeem Asghar. He is Chief Financial Officer of the company; and [indiscernible] he is DGM accounts. Now I will show you the table of contents. First, I will give you a brief introduction of the company profile. Afterwards, we will move to the financial highlights. Then we will discuss operating segments. After that, key revenue drivers, challenges and future outlook and in the end, question-and-answer session. Company profile: Ibrahim Fibres was incorporated in 1986. We got stock exchange listing in 1995. Our paid up capital comprises of 310 million shares of PKR 10 each. Net worth of the company as at 31st December 2025, stands at PKR 57,721 million. Yousuf Adil, Chartered Accountants are the auditors of the company. We have long-term AA and short-term A1 plus PACRA entity rating. Our financial year runs through January to December. Listed office of the company is located at 1-Ahmed Block New Garden Town, Lahore. Our plant locations are at 38 to 40-kilometer Faisalabad-Sheikhupura Road, Faisalabad. These are the brief operating results of the company with comparison of last 4 financial periods. During the year under review, that is financial 2025, our sales stands at PKR 104,457 million, gross profit PKR 8,036 million; operating profit, PKR 4,736 million; profit before levy and taxation PKR 2,894 million, profit after levy and taxation, PKR 933 million. Comparison of the last 4 years is also given for your view. Noncurrent assets stands at PKR 41,603 million at the end of the last financial year. Current assets, PKR 55,395 million; current liabilities, PKR 25,163 million. Working capital of the company PKR 30,232 million; long-term financing, PKR 5,222 million; deferred liabilities, PKR 8,892 million. Share capital and reserves, PKR 57,721 million. This is the brief explanation of the material variation of the results between the last 2 financial years. There is a decline of almost 30.4% in our sales as compared to previous period. This decline is primarily attributed to the increase in import of yarns in the country from China and other countries. Gross profit also declined by 17.52%. Profit after levy and taxation declined by 28.13% and profit for the year declined by 60.47%. These declines are related to corresponding reduction in turnover and corresponding reduced operating rate of textile spinning plants. Noncurrent assets increased about 9.15% in our last financial year. This is primarily due to the BMR activities, which we have conducted in the last financial year, mainly of Textile Plant 1, Unit 2, and we have also placed the rotor of CFPP plant. That is the main primary reason our noncurrent assets increased. Current assets also increased almost 10.44%. That is primarily attributable to the low sales turnover, which resulted in higher stock in trade at the year-end. Current liabilities increased almost 26.32%. This increase is in line with the increase in current assets to finance these assets, our liabilities also increases. Noncurrent liabilities increased by 22.7%. This increase is attributable to long-term financing of the BMR activities. This is a graphical comparison of the turnover of last 5 years. You can view that. This is gross profit to sales ratio. Our gross profit to sales ratio for the last financial year that ends at December '25 stands at 7.7%, slightly downward from last year. This is the profit before levy and taxation to sales ratio is -- that is 2.8% in the latest financial year. Profit after levy and taxation to sales ratio is 0.9%. Earnings per share decreased to PKR 3 from PKR 7.6. Breakup value and market price per share: Market price of the company -- share of the company [Technical Difficulty] almost 99.9% of our revenue comes from local sales that is in Pakistan that comprises PKR 104,439 million. The company's revenue is earned from large mix of customers from textile sectors. Key revenue drivers: Polyester staple fiber is our primary revenue driver. Sale of polyester contributes 65% to 75% of total revenue mix. The company has 390,600 metric tons per year of PSF. Yarn textile spinning is country revenue driver. Sale of yarns contributes 35% to 25% of total revenue mix. Company has production capacity of 78,400 metric tons per year of spun yarns. It is -- we produce cotton yarns, polyester and viscose blends. Scale and capacity utilization: Revenue is strongly tied to output levels and capacity utilization, higher utilization leads to greater revenue stability. Commodity prices cycles, critical external drivers. Company's revenues are highly sensitive to oil prices as our raw materials of PSF mainly PTA and MEG related to the prices of the oil. And currently, due to Iran-USA war, there's a lot of problem in that area and cotton prices affects yarn margins. Key business risks, elevated energy costs, high and inconsistent energy tariffs in Pakistan significantly increases production costs for energy intensive operations like yarn spinning and PSF manufacturing, directly impacting competitiveness and margins. Dependence on imported raw materials. PSF production relies on imported PTA and MEG, while spinning depends on volatile cotton supply, exposing the industry to exchange rate risk, import constraints and input cost fluctuations. Intense regional and global competition, producers in China, India and Bangladesh benefit from lower costs and policy support, while global polyester oversupply continues to suppress PSF prices and margins. Policy and liquidity constraints, policy inconsistency at government level, delayed refunds, foreign exchange limitations and disruptive supply chains are affecting import-dependent sectors like PSF. Counter strategies. These are the strategies which we tend to apply to mitigate these risks and challenges, which I have mentioned in the previous slide, energy cost optimization. The management is accelerating energy diversification through investment in renewable energy sources to reduce reliance on high tariff grid power. Supply chain and input risk management: The management is strengthening supply chain resilience through long-term supply arrangements, strategic inventory planning, supplier diversification and prudent ForEx risk management. Competitiveness and market positioning. The management is focusing on cost optimization, productivity enhancement and product quality improvement while leveraging scale and customer relationship to sustain competitiveness. Financial and liquidity management: The company is maintaining disciplined working capital management by diversifying financing sources, optimizing cash flows and proactively addressing policy and liquidity constraints. Any questions?

Yes. First question is that how do you plan to compare -- to compete with imported yarn being dumped into domestic market?

This is the question. So we have to reply in writing or if I speak, they will listen.

Sir you can speak.

Okay. All right. So thank you for your question. Basically, I mentioned in the AGM also earlier that there's a lot of dumping happening of various kinds of items, including textiles from China. And already, the textile associations are working with the government that these dumpings are not under WTO rules and regulations, and they have to be stopped through various activities. And it's not only the dumping, also a lot of yarn is coming into Pakistan under the export facilitation scheme, what is called EFS. And within the EFS, so those items are being sold in Pakistan, which is illegal and against the law and rules and regulations. So already, the government is focusing that items, including yarns, which are imported under EFS should be re-exported within the stipulated time frame. So this is illegal without paying any GST or government revenues and taxes. So we are trying to work with the government how to rationalize this. Our own simulation is that if we -- if this EFS situation is sorted out, then IFL's yarn quality is excellent and at comparable with any world-class company in Germany or U.S.A. or even China or India. So we'll be able to run on full capacity. I hope this answers your question.

Our second question from Mr. Zohair, Chase Securities is that what measures have you taken to reduce your energy costs? What is your total energy requirement? And what impact will these measures have on your overall energy cost?

Yes. Basically, at peak, we need about 40 megawatts of electrical power. And we already have -- the average cost we get is pretty competitive vis-a-vis the market cost in Pakistan. But we're already working on moving to battery storage technology along with a solar plant, where we are doing R&D and research on a battery storage technology of about 40 megawatts. So to use entire 40 megawatts through a battery, it requires a lot of multidimensional and complex technical engineering, but we are already working on that. At this time, the energy management has been done through gas power generation, coal power generation as well as the government grid. But there are many, many challenges, as you know, that the gas prices have been jacked up tremendously, and that is something which is beyond our control. But we are working with the solar technology along with battery storage, which hopefully will reduce our energy cost by almost 20%.

Next question is from [ Mr. Suleman Zaheer ] Does company has any plans to diversify its line of business?

That is a strategic question, which is a long-term strategic question that if you look at Peter Drucker's and Michael Porter's philosophy, diversification has many, many dimensions. What are the dimensions of diversification one can study. So Ibrahim Fibres strategy so far has been to diversify within that scope of business, which we do. For example, polyester fiber. So polymer technologies have many, many diversification possibilities like PET bottle manufacturing, making of these drinking water bottles and beverage bottles, which is again within the core of the polymer industry, then polyester filament yarn that is again another possibility then packaging film for these potato chips packing and all this packing material. So these are already in the drawing board. These are already in our pipeline to study. Obviously, right now, Ibrahim Fibres is also studying another line of business, which is food. As you know, that our population is skyrocketing rapidly. We are now 250 million people in Pakistan. And by 2040, we'll be about 400 million people. So food is also an area we are studying in a great detail. And hopefully, that is a line of business we'll enter very soon Inshallah.

The next question again from Mr. Zohair, Chase Securities. Recently, it has been observed that Ibrahim Fibers Limited has increased its yarn prices. Has the full impact of this increase been passed on to customers?

Well, right now, the last 2 months, actually, all the forecasts and the predictions have all gone haywire because of this Iran war situation, along with the crude oil hitting $100 a barrel. So, so far, the yarn prices, which Ibrahim Fibres increased has been passed on to the customers, and they have absorbed. Obviously, with high prices, the prices of diesel going up, the freight cost goes up, freight costs for everything, including transportation of food as well and transportation of passengers and cargoes like yarns and fabrics and everything virtually. So we will see inflation spike also going forward in Pakistan where inflation will go up again probably almost close to double digits, let's say, 10% and plus. So, so far, the buyers are absorbing the yarn prices as well as even the polyester prices as well.

Now we have 3 questions from [ Mr. Muhammad Kushan ] Question #1, are you able to successfully pass on the impact of cotton prices to yarns? If yes, to what extent?

Well, as you know, that cotton prices have again gone up in this upcoming cotton season to about PKR 20,000 per 37 kg. Again, that is because of the crude oil prices and diesel prices and Iran war situation. In terms of Ibrahim Fibres, we have inventory of cotton until September this year. So the new cotton crop has not been purchased yet. So we plan to start buying in June. We'll see how the new prices pan out vis-a-vis cotton. But so far, we've been increasing yarn prices in line with the crude oil prices and the international prices of PTA.

Question #2, what's your outlook on PSF margins globally? Especially in the time of war? Do we see any expansion in PSF margins as seen in other petrochemical products?

Well, at this time, if we talk about as of today, the -- there are obviously some inventory gains available and there are -- because the previous feedstocks are at cheaper prices. Going forward, because of the war, the demand has gone down and the situation is very volatile and unpredictable. China being the main producer of PSF within Asia, so it's very difficult to predict how the margins would be in 3 months' time or 6 months' time. It all depends on the Iran war situation and how Strait of Hormuz situation is solved. Once crude oil comes down to about, let's say, $60 a barrel, which has been the pre-war prices or even lower, let's say, $50 a barrel, then probably the PSF margins would increase and go up.

Question #3, does cotton prices also impact the prices and demand of PSF?

To a certain extent, yes, especially in the domestic market because a substantial quantity of PSF is blended with cotton for making polyester cotton textiles and fabrics for exports as well as domestic market. So -- but there's an inverse relationship that if cotton prices spike too much and polyester prices are lower, then the PSF demand goes up. But it's an inverse relationship. depends on the cotton market dynamics on a year-to-year basis.

Another question from Mr. Zohair, Chase Securities. Could you please share a breakdown of inventory levels for yarn and polyester staple fiber as of December 31?

I am not sure of that. Probably the accounts guys can answer it. I don't have answers straight to it. Sorry.

I will separately inform you about these inventory levels. Mr. Zohair, okay? You have any breakup available?

[Foreign Language]

We will send you later on. Mr. Zohair, please share your e-mail with me. Can you repeat the EFS thing government is working on?

Well, EFS has been actually a situation where it has misfired very badly. The idea is export facilitation scheme. So basically, within export facilitation scheme, the idea was to import items without paying any government duties, including the sales tax, 18% GST. But the ground reality, which we hear from people in the industry is that a lot of the EFS items are actually not exported back what was their main original purpose. They are sold locally, which is illegal, which is against the rules and regulations. So hence, affecting the domestic demand-supply situation and the domestic pricing as well for all items, including fabrics and yarns and fabrics and polyester fiber and many other things. So now the government is trying to change the rules and regulations of EFS. So I think the EFS experiment has not gone very well at all.

Any further question?

Is company facing any difficulties in the funds from government?

Well, they have the same difficulties almost every company faces. There's a time lag. Some refunds are given after 3 months, some after 6 months, some refunds are after a year. So you say they say even in the U.S.A. also, once anything goes into the government's treasury getting it back is a bit of a challenge, but we don't have any extraordinary issues. It's just a normal thing which every company faces in Pakistan. Any other question?

No further questions. Can we close the call?

We shall wait for 2 minutes. Let's wait for a couple of minutes. 11:26. Wait a couple of minutes before we finish the briefing questions.

No further questions. I think, sir, we can close.

Yes.

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