Redco Textiles Limited: Resilience and Growth in Pakistan's Textile Sector

Redco Textiles Limited, a public limited company incorporated in Pakistan, has been a significant player in the textile industry since it commenced operations in 1991. The company specializes in the manufacturing and sale of yarn and greige fabric, catering to both local and international markets. As of June 30, 2024, Redco has 49.293 million shares outstanding, held by 760 shareholders. Notably, the major shareholders include directors, the CEO, their spouses, and minor children, who collectively own 60.52 percent of the shares. The local general public holds 30.61 percent, while insurance companies and financial institutions hold smaller stakes.

Over the years, Redco has experienced fluctuations in its financial performance. Despite a year-on-year decline in 2019, the company has generally registered growth in its topline. However, the bottom line faced challenges, particularly in 2022. The gross margin showed signs of recovery after 2019 but faced ups and downs in subsequent years, with a notable dip in 2023 followed by a rebound in 2024. Operating and net profit margins also followed a similar pattern, peaking in 2024 after a decline in 2022.

In 2019, Redco's net sales plummeted by 43 percent year-on-year, primarily due to the high cost of doing business, including taxes and provincial cess, which made the local textile industry less competitive. The company temporarily suspended operations but resumed them in December 2018 after the government introduced a subsidy to support the textile sector. During the downtime, Redco took proactive measures by installing 20 looms to enhance productivity and reduce costs. Despite the operational challenges, the company managed to post a gross profit of Rs. 45.34 million in 2019, a significant recovery from the gross loss of Rs. 192.86 million in 2018.

In 2020, Redco's topline grew by an impressive 41.42 percent year-on-year, even amidst the COVID-19 pandemic. The company benefited from the installation of 32 air jet looms and the introduction of new machinery, which boosted production. The topline also included export sales of Rs. 11.083 million, marking a new revenue stream for the company. Although the cost of sales increased due to rising utility charges and currency depreciation, Redco's gross profit still grew by 13.44 percent year-on-year.

By 2021, Redco continued its growth trajectory with a topline increase of 39.38 percent year-on-year. The company installed an additional 40 air jet looms, further enhancing productivity. However, the cost of sales rose due to inflation and high utility charges, leading to a drop in gross profit. Despite these challenges, Redco's other income surged significantly, indicating a positive shift in its financial landscape.

Redco Textiles Limited has demonstrated resilience in the face of various challenges over the years. The company's ability to adapt to market conditions, invest in technology, and manage costs effectively has allowed it to recover from setbacks and achieve growth. As the textile industry continues to evolve, Redco's strategic decisions will be crucial in maintaining its competitive edge and ensuring sustainable growth in the future.