Sargodha Jute Mills Limited (hereafter referred to as “Sargodha Jute” or “the Company”) was established on February 10, 1981, as an unlisted Public Limited Company under the provisions of the repealed Companies Act, 1913 (now replaced by the Companies Act, 2017). The Company’s registered office is located at 19-B, Off Zafar Ali Road, Gulberg-V, Lahore, while its regional office is located at 309 Uni Tower, 3rd Floor, I.I. Chundrigar Road, Karachi.

The Company was founded in 1981 by the late Mian Muhammad Aslam. The group operates one jute mill and one textile mill. Following the founder's tenure, the operations of Sargodha Jute were entrusted to his son, Mian Parvez Aslam. Subsequently, the leadership transitioned to the next generation, with the two sons of Mian Parvez Aslam serving as the Chairman and CEO of the Company.

The core business activity of the Company revolves around the manufacturing, sale, and distribution of jute products, leveraging efficient machinery to maintain high standards of quality and operational effectiveness. Sargodha Jute Mills Limited offers a diverse product portfolio, which includes yarn, hessian cloth, hessian bags, sacking bags, and twines. Additionally, the Government of Pakistan is a key contributor to the Company’s revenue through substantial procurement of sacking bags. The Company’s installed production capacity is ~30,500 MT/annum (based on 360 operational days), with a utilization rate of ~38.54% in FY24 (FY23: ~75.07%).

Mr. Parvez Aslam and his family collectively hold a majority ownership stake of ~75% in the Company. Within this, his sons, Mr. Irfan Aslam and Mr. Imran Aslam, each own a 28.32% share. Additionally, Shahzad Textile Mills Limited, an associated company, holds a 24.94% ownership stake in Sargodha Jute.

While there is currently no formal succession plan in place, the ownership of shares and business roles is evenly divided between the two sons of Mr. Parvez Aslam, Mr. Imran Aslam and Mr. Irfan Aslam. Mr. Irfan Aslam serves as the CEO of Sargodha Jute Mills Limited, while Mr. Imran Aslam holds the position of CEO at Shahzad Textile Mills Limited. Establishing formal documentation for succession planning could significantly enhance the long-term stability and continuity of the Company.

Mr. Irfan Aslam, serving as the CEO of Sargodha Jute Mills Limited, brings over two decades of extensive experience in overseeing the Company’s operations. His strong strategic acumen and ability to make timely, effective decisions have been instrumental in steering the Company towards sustained growth and stability.

Mr. Irfan Aslam holds a 24.85% ownership stake in the associated company, Shahzad Textile Mills Limited, which boasts a robust asset base of ~PKR 5.9bln as of Jun’24. In addition to his business interests, Mr. Irfan Aslam demonstrates a strong financial acumen through active investments in diverse sectors, including real estate, the stock market, and foreign exchange markets. The Company is expected to get timely support from its sponsors, if needed.

The Company's board comprises three members, two of whom belong to the sponsoring family. Mr. Irfan, serving as the CEO, and Mr. Ahsan, acting as the COO, hold executive director positions. Meanwhile, Mr. Imran, who chairs the board, serves as a non-executive director. The compact size of the board, with key leadership roles primarily held within the sponsoring family, reflects a concentrated and efficient decision-making approach. However, an independent oversight could enhance the governance structure, fostering greater transparency and balance in strategic decision-making.

Mr. Irfan Aslam, a graduate of a prestigious foreign university, brings over two decades of expertise in the jute industry and currently serves as the CEO of Sargodha Jute Mills Limited. While Mr. Imran Aslam, with a strong foothold in the textile sector, holds the position of CEO at Shahzad Textile Mills Limited. Their extensive experience and leadership have been pivotal in driving the Company’s growth and sustainability.

The board’s overall effectiveness is hindered by its limited size and the significant influence of the sponsoring family, which may affect diverse and balanced decision-making. Additionally, the practice of board meetings held on an “as and when needed” basis reduces the opportunity for structured and regular oversight. Furthermore, the lack of independent directors and the absence of specialized board committees limit the board’s ability to provide robust governance and strategic guidance.

Crowe Hussain Chaudhry & Co., Chartered Accountants, a QCR-rated firm and listed in the category ‘A’ on SBP’s panel of auditors, serve as the Company’s external auditors. They have expressed an unqualified opinion on the annual financial statements for the year ended June 30, 2024.

The Company’s organizational framework is structured into two primary divisions: the Head Office and the Mills. All key positions within the organization are filled. Major functional departments include, (i) Accounts & Finance, (ii) Procurement, and (iii) Production. The Chief Financial Officer (CFO) directly reports to the Chief Executive Officer (CEO), establishing a clear financial oversight hierarchy. Meanwhile, the Purchase Manager and Manager Commercial from the Head Office, along with the Mill Managers, report to the Chief Operating Officer (COO), fostering streamlined coordination between the operational and managerial divisions.

Mr. Irfan Aslam, the CEO, is a graduate of a reputed foreign university and brings over two decades of extensive experience in the jute industry. He holds the authority to make strategic decisions for the Company, ensuring its continued growth and success. Supporting him is Mr. Imran Haider, the CFO, who has been associated with the group for nine years and has served in his current role for one year. Mr. Ahsan Ahmad Khan, the COO, has dedicated 29 years to Sargodha Jute Mills Limited and possesses a wealth of experience in the jute industry and oversees day-to-day operations. Another key team member is Mr. Ayyaz Ali Shahid, the Manager Commercial, who has been with the Company for the past seven years. He specializes in raw jute procurement from Bangladesh, a critical component of the Company’s supply chain. Additionally, the finance department is primarily headed by Mr. Tahir, the General Manager of Finance, who ensures effective financial management and oversight within the organization.

With the support of a highly skilled and experienced team of professionals, Sargodha Jute continues to enhance its business capabilities. The management functions are well-defined and supported by a strong IT infrastructure and comprehensive internal controls, enabling effective operational oversight and decision-making. However, the lack of management committees and internal audit function limits the ability to ensure seamless communication and coordination across various functions.

Sargodha Jute Mills uses oracle-based ERP system by the name of Wizmen. Regular reporting of sales figures, raw materials positions, payables & receivables and income statement on monthly basis is shared with top management. Secondly, the Company uses Kaspersky registered antivirus software to protect the data of the Company. On the other hand, data from the production facility is shared on real-time basis because point to point link has been developed between the mill and head office.

The Company is ISO 9001-2015 certified, reflecting its adherence to internationally recognized quality management standards. A dedicated quality control department ensures the consistent delivery of high-quality products to customers. Additionally, the Company has implemented an efficient system for addressing customer complaints and providing prompt resolutions, further enhancing customer satisfaction. However, the establishment of an internal audit function could strengthen transparency and reinforce internal controls, contributing to a more robust governance framework.

Pakistan’s economy is facing serious challenges such as uncertain economic conditions, high energy costs, high interest rates and inflation. These factors present a serious challenge for a business; by increasing costs on one hand and by decreasing consumers’ buying power on the other hand. In the coming year, further reduction in interest rates is expected, however, economic recovery is also expected to remain slow in coming year. During FY24, the domestic market capitalization of the Jute Sector was valued at ~PKR 33.5bln, marking a substantial year-on-year (YoY) growth of ~18.8% compared to PKR 28.2bln in the previous year. From FY19 to FY23, the average production levels of jute goods were ~65,000 metric tons (MT). However, in FY24, total jute goods production witnessed a sharp decline of ~35.0%, dropping to ~41,000 MT from ~63,000 MT in FY23. Among the various product categories, sacking bags maintained their leading position, contributing ~65.9% to the total production in FY24, with output recorded at ~26,500 MT, representing a YoY decrease of ~43.8%. Other product categories, such as Hessian Cloth and Miscellaneous Products, accounted for ~26.8% and ~7.3% of the total production, respectively, during FY24. Likewise, the production utilization of the sector’s key players declined in the current year. The installed production capacity of the five major players in the local Jute Mills Sector remained unchanged and stood at ~114,300 MT in FY24. Notably, Thal Limited and Sargodha Jute Mills collectively dominated the market, holding a combined share of ~75% of the sector’s total production capacity.

The jute industry in Pakistan comprises only a few key players, creating a concentrated competitive landscape. Sargodha Jute ranks as one of the two largest players in the sector, boasting an annual installed production capacity of 30,500 MT. As per the management, the Company holds a market share of ~40%. Thal Jute Mills, the largest competitor, holds a slightly higher market share, supported by its marginally larger installed capacity of 33,800 MT. The remaining market share is distributed among smaller players, including White Pearl Jute Mills, Indus Jute, and Madina Jute, each contributing a relatively modest portion to the industry landscape.

Sargodha Jute Mills Limited’s turnover faced significant pressure in FY24, as revenue contracted by ~36.4% to ~PKR 5,162mln, down from ~PKR 8,113mln in FY23. This marked deterioration stemmed from various factors. Export sales witnessed a sharp decline of ~46.5%, primarily driven by elevated production costs, which eroded the competitiveness of the Company in global markets. Domestically, the prior year benefitted from an unusually high level of jute bag procurement by the government, a demand surge that was not sustained in FY24.

During FY24, the Company demonstrated a notable improvement in profitability metrics. The gross margin increased to ~16.7% (FY23: ~12.9%, FY22: ~13%), primarily driven by enhanced cost efficiencies. Similarly, the operating margin improved to ~12.1% in FY24, up from 9.3% in FY23 (FY22: ~9.2%), reflecting better operational performance. Furthermore, the net profit margin recorded a significant rise, reaching ~5.2% in FY24 (FY23: ~2.2%, FY22: ~4.6%). This substantial increase was largely attributable to a rise in other income, showcasing the Company’s ability to improve and sustain its bottom line despite external challenges.

The Company remains proactive in addressing the challenges by implementing strategic measures to mitigate adverse impacts. To reduce escalating energy costs, the Company is actively investing in renewable energy solutions. An extension of 420 KW was completed after June 2024, with a further expansion of 1,500 KW underway and expected to become operational by April 2025. This will bring the total solar energy capacity at the mills to 2.2 MW, demonstrating the Company’s commitment to sustainability and cost efficiency. Jute bags remain the Company’s flagship product, valued for their environmentally friendly and biodegradable properties. With growing social awareness and a global shift towards eco-friendly products, jute bags are well-positioned to become the preferred choice among consumers, further enhancing the Company’s market appeal and long-term sustainability.

During FY24, the Company’s gross working capital days rose to 139 days (FY23: ~94 days, FY22:  ~91 days), reflecting an extension of the cash cycle. Similarly, net working capital days increased to 134 days in FY24 (FY23: ~92 days, FY22: ~16 days). This decline was primarily attributable to elevated inventory levels, driven by the unusually high procurement of jute bags by the government in the preceding year and the subsequent carryover of inventory disturbed the Company’s cash conversion cycle.

During FY24, free cash flows from operations also remained the same at ~PKR 621mln (FY23: ~PKR 658mln, FY22: ~PKR 492mln). Interest coverage ratio is slightly under stress mainly on the back of a significant surge in finance costs which stood at ~PKR 323mln in FY24 (FY23: ~PKR 327mln, FY22: ~PKR 173mln). Company’s investment portfolio consists of ~PKR 426mln TDRs and ~PKR 276mln listed equity security investments.

The Company has gradually reduced its borrowings and increased its equity on the back of revaluation of assets resulting in a reduced leverage of 10.0% in FY24 (FY23: 20.9%, FY22: 32.3%). Total borrowings of the Company decreased to ~PKR 410mln (FY23: PKR 909mln, FY22: PKR 1,260mln). The debt portfolio solely comprises short-term borrowings to meet the working capital needs of the Company.