US Denim Mills (Private). Limited ("UDML" or "the Company") was incorporated on January 18, 2005, as a private Company.

The Company is categorized under the fabric vertical of the US Group. The group established its first manufacturing facility in 1985, and over the years, it strategically expanded its business operations in the textile sector, emerging as a prominent business group. With evolving industry trends, the group shifted its focus to denim jeans in 2008.

The Company is engaged in the manufacturing and sale of denim fabric. Its registered office and manufacturing facility are located at 3-KM, Defence Raiwind Road, Lahore. UDML has a wholly-owned subsidiary, US Fashion Turkey Tekstil Ticaret Anonim Sirketi. The Company’s manufacturing facility is equipped with 229 air-jet looms and 20 power looms. The total energy requirement of the Company is 706,444 mmBTU, primarily met through natural gas and biomass as the main energy sources. However, secondary sources, including diesel, furnace oil, WAPDA, LPG, and solar power, are on standby to ensure continuity in case of the unavailability of the primary sources.

UDML is a prominent business venture of two sponsoring families (Mr. Mian Muhammad Ahsan & Mr. Javed Arshad Bhatti) of the US (Umer-Siddique) Group. It is a wholly owned subsidiary of AJ Holdings (Private) Limited. The holding Company exercises its control over the Company’s board by virtue of its 100% stake in the Company.

The entire ownership is held by the sponsoring group, which primarily oversees investments in subsidiary and associated companies, ensuring the stability of the corporate structure. So, the Company's ownership structure is expected to remain stable in the foreseeable future.

US Group is recognized as the leading exporter of denim and twill in Pakistan, supported by a rich history of operations in the textile industry. Despite its focus on a single sector, the group has consistently demonstrated resilience and growth through various economic cycles.

The Company’s affiliation with the US group demonstrates the strong financial muscle of the sponsors. According to the US Group Sustainability Report CY23, the group size is estimated at USD 356mln. The group includes four additional companies within the industry: (i) US Apparel & Textiles (Pvt). Limited, (ii) Stylers International Limited, (iii) US Workwear and (iv) US Dyeing & Finishing. The sponsors possess a strong financial capacity to support the Company, if needed.

UDML is a business venture of the US (Umer-Siddique) Group. The overall control of the board rests with ten members from the sponsoring families. The inclusion of an independent director will strengthen the overall governance framework of the Company.

The two founders of the U.S Group, Mr. Javed Arshad Bhatti, Chairman of the Board, and Mr. Mian Muhammad Ahsan, have been associated with the Company for over 19 years. All board members have relevant stature and extensive experience, which bodes well for the consistent growth and long-term sustainability of the Company.

The Company has established two committees to oversee key business matters: the Audit Committee and the Performance Assessment Committee. Board meetings are held monthly to review operations and assess the progress toward targets. The discussions on various aspects are formally documented in meeting minutes; however, there is still room for improvement.

To uphold high standards of transparency, BDO Ebrahim & Co. Chartered Accountants have been appointed as the external auditors of the Company, rated in "Category A" by the SBP panel of auditors. They expressed an unqualified opinion on the financial statements of the Company for the year ended June 30th, 2025. 

The Company maintains a well-defined organizational structure divided into several functional departments, namely: (i) Finance, (ii) Marketing, (iii) Quality Assurance, (iv) Operations, (v) Information Technology, (vi) Supply Chain, and (vii) HR & Admin, and procurement functions. All departments report to their respective GM(s), who are responsible for delivering the bottom line and achieving targets. All the GMs report to the CEO.

Mr. Irfan Nazir Ahmad, the CEO, holds an MBA qualification and boasts 29 years of ample experience in the Textile & Apparel Industry, covering Sales & Marketing, General Management, Production Management, and Supply Chain. His tenure includes roles at Reshi Textiles, Azgard Nine Limited, US Denim, and US Apparel, followed by an association with the US group since 2014. Mr. Syed Farrukh Ali, the CFO, has been associated with the group since 2001. He is a Chartered Management Accountant.

The Company has established two formal management committees: the Purchase Committee and the Waste Management Committee. Regular management meetings are held to discuss and address operational issues, with follow-up actions taken to resolve any challenges proactively. These meetings are led by the Company's CEO.

The Company’s daily and monthly Management Information System (MIS) includes comprehensive performance reports, which are regularly reviewed by senior management. Acknowledging the importance of robust information systems to ensure operational efficiency, the Company has implemented the Oracle-based ERP solution, Oracle E-Business Suite, Harmony version 4, to streamline processes and enhance decision-making capabilities.

US Denim utilizes management systems as its mechanism for ensuring effective controls. There is clear evidence of these systems being audited and certified externally. Examples of this include ISO 14001, GOTS, C2C at the gold level, AWS, OCS, GRS, RCS, Higg FEM 3.0, SLCP, ICS Environment, BSCI, and Oeko-Tex.

Textile exports reached USD 17.9bln in FY25, a modest rise from USD 16.7bln the previous year, reflecting a 7.2% year-over-year growth. The largest contribution came from the composite and garments segment, at USD 14bln, which included the weaving segment at USD 1.8bln and the spinning segment at USD 0.7bln. The production of cotton cloth in FY25 declined by approximately 0.7% year over year, reaching around 877.1mln square meters. During FY25, about 25.3% of the cotton cloth produced was exported (compared to roughly 27.2% in FY24), with the rest used for the domestic market. The country's fabric exports fell by approximately 4.4% in FY25 (FY24: up about 5.8% YoY), with approximately 23.4% of Pakistan's cotton cloth exports going to Bangladesh (compared to about 19.9% in FY24), followed by the USA with about 8.1% of cotton cloth exports (compared to approximately 7.8% in FY24). In FY25, the transition from the final tax regime to the normal tax regime is expected to affect the profitability of export-oriented units, with a 29% tax on profits and a super tax of up to 10%. The recent removal of GST exemption (Finance Bill, 2025) on textile inputs for exporters registered under the Export Facilitation Scheme (EFS) will offer tax protection and create a level playing field for domestic cotton and yarn producers. Currently, international cotton prices are higher than the price of locally produced cotton. The gap has widened to approximately 9.8 cents per pound (as of July 18, 2025), resulting in an average increase of about USD 36.8 per bale of imported cotton. A greater reliance on imported cotton could lead to higher raw material costs, ultimately impacting yarn prices and profit margins for the sector. Conversely, energy and finance costs are expected to stay within a range, given the projected reduction in interest rates and the absence of any major energy tariff increases. Considering the current climate change, flooding in major cotton regions, and shifting crop patterns, the target of approximately 10.2mln bales for FY26 appears challenging.

With an overall production capacity of 229 air-jet looms and 20 power looms, the Company falls in the mid-tier of the respective universe.

A significant portion of the Company’s revenue base is generated from local sales, inclusive of indirect exports. During FY25, the Company’s topline declined to PKR 27.8bln (FY24: PKR 29.6bln), reflecting a contraction of 6.3% year-on-year. The decrease was primarily attributable to the imposition of US reciprocal tariffs and a relatively stable exchange rate environment, which reduced the price competitiveness of the Company’s products in international markets. Consequently, direct exports also depicted a similar trend, standing at PKR 9.4bln compared to PKR 9.7bln in FY24. Indirect sales continue to constitute a sizeable share of the Company’s revenue base, contributing PKR 18.0bln during FY25 (FY24: PKR 19.2bln).

Geographically, the Company maintains a diversified export footprint, with presence in Bangladesh, Egypt, Turkiye, Sri Lanka, Uzbekistan, Jordan, the United Arab Emirates, and several other markets, reflecting low geographic concentration risk. Local sales, however, declined sharply to PKR 353.3mln during FY25 (FY24: PKR 726.4mln), following a minimal contribution from the processing segment. Domestically, the Company supplies to well-established industry players, including Interloop Limited, Nishat Mills Limited, Artistic Garment Industries (Pvt.) Limited, and Soorty Enterprises (Pvt.) Limited, among others. Client concentration remains elevated owing to the predominance of inter-group sales; however, the Group’s longstanding track record and established business relationships provide comfort.

The Company’s gross profit margin inched down to 11.5% in FY25 (FY24: 12.2%) on the back of elevated production costs. Consequently, the operating margin declined to 3.8% (FY24: 7.8%), primarily due to a notable increase in salaries and wages expenses alongside the customer claims. Owing to minimal reliance on external funding sources, the Company’s finance cost remained relatively low, reported at PKR 69mln (FY24: PKR 52mln), mainly comprising bank and other charges. However, taxation expense increased significantly by ~63% year-on-year to PKR 391mln (FY24: PKR 240mln) following the transition from the Final Tax Regime (FTR) to the Normal Tax Regime (NTR), a trend observed across the industry. As a result, the Company’s bottom line declined sharply to PKR 240mln in FY25 (FY24: PKR 1.5bln). Consequently, the net profit margin reduced to 0.9% compared to 5.1% in the corresponding period last year.

The management remains cognizant of the risks associated with rising energy costs and has implemented proactive measures to mitigate their impact on operations. To reduce dependency on conventional energy sources, the Group has successfully invested in renewable energy initiatives, including fully operational solar and biomass projects, which contribute to cost efficiency. In line with its commitment to sustainability, the management has integrated a robust Environmental, Social, and Governance (ESG) framework at the Group level, focusing on continuous investment in environment-friendly projects. These initiatives not only support operational resilience but also enhance the Group’s long-term sustainability profile in line with the best global practices.

The Company primarily finances its working capital requirements through internally generated cash flows. As of FY25, the net working capital cycle extended to 43 days (FY24: 36 days), primarily due to a modest elongation in the inventory cycle, which stood at 47 days (FY24: 41 days). The Company retains sufficient borrowing capacity, supported by manageable short-term trade leverage, and maintains an adequate liquidity profile to meet operational and financial obligations.

As of FY25, the Company’s free cash flows from operations (FCFO) declined significantly to PKR 474mln (FY24: PKR 1.8bln), primarily due to the contraction in profit before tax. Despite this decline, key coverage metrics, including interest coverage and core operating coverage, remained within a comfortable range. The debt payback period, however, increased to 2.0 years in FY25 (FY24: 0.8 years), indicative of a slightly increased timeframe required for debt retirement.

The Company has maintained a low-leveraged capital structure, with debt primarily comprising interest-free loans from related parties and the subsidized Export Finance Scheme (EFS) from the State Bank of Pakistan (SBP). During FY25, the Company’s total leverage declined to 13.5% (FY24: 17.6%), reflecting the strategic repayment of related-party loans. Concurrently, the Company’s equity base strengthened to PKR 9.7bln (FY24: PKR 8.3bln), supported by the plowback of profits from the previous year.