KARACHI - Textile sector net profits posted a vigorous 23pc growth in the first half of FY09 over the same period last fiscal year. Demand for textiles is apparently regaining ground as textile composite and weaving sector registered 26pc increase in net sales while spinning sector sales were up by 13pc. State Bank of Pakistan made this stunning disclosure in its third quarterly report at a time when the entire industry, including textile, is facing a recession due to global crisis and energy shortages in the country. SBP said the independent power supply arrangements by almost all large textile firms are resulting in efficient cost management during countrywide power supply shortages. Out of the countrys five largest textile companies, Nishat Mills and Azgard Nine Limited earned 10pc return on equity (ROE) in Oct- Dec 2008, while Gul Ahmed Textiles and Colony Mills, earned two and fourpc ROE respectively. Only Kohinoor Mills were doing badly in this period, with all their spinning, weaving and composite units registering losses, despite having a power plant facility. The earnings before interest and tax (EBIT) margin of the textile sector in HI-FY09 was 13.0pc compared to 9.5pc in HI-FY 08, indicating higher earnings per unit of sale. On this scale, textile composite sector was the best performer with 15.6pc EBIT margin while weaving and spinning reported a margin of around 7.8pc. These results seem more impressive given a 100pc rise in financial costs during HI-FY09, over the same period last year. While textile composite and weaving sectors have managed to still come up with 61 and 43pc increase in net profits, respectively, the spinning sector has taken a blow, with the losses of 31 spinning mils amounting to Rs 783m against Rs 343m profits earned last year. It may be noted here that this data is only representative of large registered companies, while big companies have apparently found ways to get through the power crisis and are now dealing with their financial costs. However, SBP provided support to spinning units for restructuring their loans and by reducing mark-up on export refinance scheme. Similarly, government is also taking steps to resolve problems of textile industries. The impact of global recession on domestic LSM is most visible in the textile industry. Growth in textile industry fell by 0.1pc in July-Mar FY09 over the same period last year. Textile sector was badly hit by power shortages and weak external demand. Both cotton yarn and cloth industries, which have the largest shares in the textile sector, posted negative growth of 0.27pc and 0.33pc respectively during Jul-Mar FY09. While, on the back of relatively better FY09 cotton crop, ginning showed slight improvement of 34pc in this period compared to a decline in the last three consecutive years. In contrast, among the smaller sub-sectors of textile industry, jute goods industry showed a reasonable 6.6pc growth during July-Mar FYO9, well supported by strong demand emanated from record rice and wheat harvests this year. SBP report further said as global textile demand declined, quantum of yarn exports shrank by 7.8pc in July-Mar FY09 over the same period last year and the average export unit value of yarn fell by 8.7pc. Similarly, export unit value of cotton fabric dropped by 1.0pc in this period. The combined impacts of domestic and external factors have resulted in closure of about 20pc spinning mills in the country. Reports also suggest that the US - the importer of over 30pc of Pakistani textile exports - is expected to cut back its textile imports further in 2009 for the third consecutive year.