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“the Company”) was established on February 10, 1981, as an unlisted Public Limited Company under the provisions of the repealed Companies Act, 1913 (now replaced by the Companies Act, 2017).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 7th Floor office # 702, Tricon Corporate Center, Jail Road, Gulberg-2, 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 ~28.93% in FY25 (FY24: ~38.56%).

Mr. Parvez Aslam and his family collectively hold a majority ownership stake of ~70% in the Company. Within this, his sons, Mr. Irfan Aslam and Mr. Imran Aslam, each own a 28.31% 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 24.8% ownership stake in the associated company, Shahzad Textile Mills Limited, which boasts a robust asset base of ~PKR 6.3bln as of Jun’25. 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, serves as the Company’s external auditors. They have expressed an unqualified opinion on the annual financial statements for the year ended June 30, 2025.

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 the 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, overseeing 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 an 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 a 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 a real-time basis because point to point link has been developed between the mill and the 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 continued to face macroeconomic headwinds during FY25, including elevated energy costs, high inflationary pressures, and tight monetary conditions for most of the year. These factors adversely impacted business operations by increasing input costs and constraining end-user demand, particularly in sectors dependent on government procurement. While interest rates were reduced toward the latter part of FY25, economic recovery remained gradual and uneven. During FY25, the domestic market capitalization of the Jute Sector was estimated at ~PKR 49.4bln, reflecting an increase compared to ~PKR 46.4bln in FY24, largely in line with nominal GDP growth and inflationary effects. However, sector fundamentals weakened, as total production of jute goods declined by ~26.8% YoY, falling to ~30,000 MT in FY25 from ~41,000 MT in FY24. Over the last five years (FY21–FY25), sector production has contracted by ~57.2%, underscoring sustained structural challenges. Among product categories, sacking bags remained the dominant segment, contributing ~46.7% of total production at ~14,000 MT, though output declined sharply by ~46.2% YoY. Hessian cloth accounted for ~43.3% of production at ~13,000 MT, while miscellaneous products contributed the remaining ~10.0%. The decline in production was primarily driven by lower government offtake, elevated raw jute prices, and reduced capacity utilization across the sector. The installed production capacity of the five major jute mills remained unchanged at ~114,300 MT in FY25. However, capacity utilization deteriorated further, reflecting subdued demand and cautious production planning. The sector remains highly concentrated, with Thal Limited and Sargodha Jute Mills collectively accounting for ~56% of total installed capacity, reinforcing their dominant position despite overall sector contraction.

Pakistan’s jute industry operates as an oligopolistic market, characterized by a limited number of players and high entry barriers due to capital intensity and reliance on imported raw material. Sargodha Jute Mills Limited remains one of the two largest players in the sector, with an installed production capacity of ~30,500 MT per annum. As per management estimates, Sargodha Jute Mills commands a market share of ~40%, positioning it as a key supplier, particularly for government tenders related to sacking bags. Thal Limited, the largest competitor, holds a marginally higher installed capacity of ~33,800 MT, translating into a slightly larger market share. Together, the two companies dominate the sector in terms of scale, and operational experience. The remainder of the market is fragmented among smaller players, including Indus Jute Mills (~20,000 MT), White Pearl Jute Mills (~15,000 MT), and Madina Jute Mills (~15,000 MT). These players collectively hold a smaller share of production and have limited pricing power compared to the two dominant mills. Given the continued contraction in sector production during FY25, relative positioning has become increasingly important, favouring larger players like Sargodha Jute Mills due to their operational flexibility, balance sheet strength, and established buyer relationships.

During FY25, Sargodha Jute Mills Limited’s revenue declined sharply to ~PKR 3,380mln from ~PKR 5,162mln in FY24, reflecting a contraction of ~34.5%. The decline was primarily driven by a significant reduction in both local and export sales. Local sales reduced to ~PKR 3,337mln (FY24: ~PKR 3,380mln), while export revenues declined to ~PKR 569mln (FY24: ~PKR 581mln). The subdued performance reflects the absence of government procurement volumes and continued pressure on export competitiveness amid elevated input costs.

Profitability moderated during FY25 following the elevated margins observed in FY24. The gross margin declined to ~11.0% (FY24: ~16.7%), mainly due to higher raw material and energy costs amid lower sales volumes. Consequently, the operating margin reduced to ~4.6% (FY24: ~12.1%). However, the net profit margin improved to ~9.7% (FY24: ~5.2%), largely supported by sizeable non-operating income, including gains from disposal of assets and investment-related income.

The Company remains proactive in addressing challenges by implementing strategic measures to mitigate adverse impacts. To reduce escalating energy costs, the Company has invested in renewable energy solutions, completing its full solar installation by 30 June 2025. Prior to FY2024-25, the Company had 300 KW of solar capacity already in place. During the FY2024-25, an additional 1940 KW was installed, bringing the total installed solar capacity to approximately 2.2 MW.  This milestone demonstrates the Company's commitment to sustainability and long-term 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.

The Company’s working capital position weakened in FY25, with gross working capital days increasing to ~227 days (FY24: ~139 days) and net working capital days rising to ~218 days (FY24: ~134 days). The deterioration was primarily driven by elevated inventory levels, particularly raw material and finished goods, as sales volumes remained subdued, resulting in a stretched cash conversion cycle.

Free cash flows from operations declined significantly to ~PKR 122mln in FY25 (FY24: ~PKR 621mln), mainly due to adverse working capital movements. Finance costs reduced to ~PKR 80mln (FY24: ~PKR 323mln) following lower borrowings, resulting in an EBITDA coverage of ~5.3x (FY24: ~2.7x). The Company maintained a strong liquidity cushion through its investment portfolio comprising ~PKR 402mln in TDRs and ~PKR 836mln in listed equity investments. 

The Company’s leverage remained low and manageable, with total borrowings at ~PKR 509mln in FY25, translating into a leverage of ~10.7% (FY24: ~10.0%). The debt profile remained entirely short-term, utilized to meet working capital requirements. Equity levels remained healthy, supported by retained earnings and revaluation surplus.