Textile giants' profits slump on falling yarn prices, rising costs

Infographic: TBS

Bangladesh's leading textile companies reported a noticeable slowdown in business during the October–December quarter of FY26, as falling yarn prices, weak global demand and rising production costs combined to erode both revenue and profitability across the sector.

Financial statements show that most giant spinners and textile manufacturers posted year-on-year declines in revenue during the quarter. Malek Spinning's revenue fell 6% to Tk673 crore, while Square Textiles saw a sharper 14% drop to Tk580 crore. Envoy Textiles' turnover declined by 10% to Tk412 crore, Shasha Denims' revenue slipped 4% to Tk328 crore, Matin Spinning recorded a 2% fall to Tk215 crore, and Fareast Knitting's revenue dropped 7% to Tk201 crore.

The pressure on the top line was reflected more severely in profits, highlighting how declining yarn prices compressed margins yarn. Malek Spinning's profit dropped 37% to Tk31.85 crore, while Square Textiles suffered one of the steepest falls, with profit plunging 93% to Tk2.77 crore. Shasha Denims' profit declined 65% to Tk3.95 crore, Matin Spinning's fell 36% to Tk9.91 crore, and Fareast Knitting saw profit collapse by 99% to just Tk0.10 crore. Envoy Textiles stood out as an exception, posting a marginal 1% increase in profit to Tk35 crore despite lower revenue.

Company disclosures indicate that the sharp fall in yarn prices was a key driver behind the weaker performance. Square Textiles said its net profit declined significantly due to a notable drop in yarn prices alongside higher finance costs. With selling prices falling faster than input costs, mills struggled to protect their margins even when production volumes remained stable.

Malek Spinning also cited margin pressure in its quarterly statement, noting that the cost of goods sold rose in the second quarter as sales prices declined compared to raw material prices, while factory overheads increased. The company added that export demand weakened during the period, contributing to lower sales and gross profit, which ultimately dragged down net earnings.

Envoy Textiles painted a mixed picture. While its fabric exports increased by 12% during the quarter, cotton yarn exports plunged by 65%, weighing on overall revenue. Speaking to The Business Standard, company secretary Saiful Islam Chowdhury said the firm has gradually shifted away from exporting yarn as more output is consumed internally. Yarn exports, which once accounted for around 40% of total production, have now fallen to about 20%, reflecting changes in business strategy amid volatile prices.

Shasha Denims attributed its profit decline mainly to a sharp rise in the cost of goods sold combined with lower selling prices, which significantly compressed gross margins. The company said earnings were partially supported by consistent profit contributions from associate companies, preventing an even steeper fall in net profit.

Matin Spinning's results also underscored the impact of weaker yarn prices. The company said revenue declined despite higher sales volume because the average selling price per kilogram dropped from $3.68 to $3.47. Although cost efficiencies helped improve its gross profit margin, the lower price environment still weighed on overall performance.

Industry insiders say the challenges facing textile mills go beyond price fluctuations. Production costs have risen by around 30% over the past two years due to higher gas prices, wage hikes and irregular gas supply, making it difficult for mills to compete with imported yarn. According to data from the National Board of Revenue, cotton yarn imports surged 39% in 2024 to $2.28 billion, while fabric imports by knitwear factories jumped 38% to $2.59 billion, intensifying competition for local producers.

Mill owners also point to reduced government incentives for using local yarn, with cash incentives cut sharply and long delays in disbursement further discouraging garment exporters from sourcing domestically. At the same time, higher gas tariffs, stricter bank loan conditions and allegations of illegal yarn imports have added to the sector's woes.

While the government is considering higher tariffs on yarn imports to protect local spinners, industry leaders warn that without addressing structural cost pressures and restoring competitiveness, falling yarn prices will continue to squeeze revenues and profits in the months ahead.