LAHORE - The spinning sector continued to perform extremely well in 1QFY11, as revenues escalated to Rs29.2bn from Rs19.5bn in 1QFY10, up 49 percent. Gross margins surged by 643bps to 19 percent. According to experts, this was predominantly led by a rise in cotton and yarn prices both in the international and domestic markets. For local cotton prices it was due to the uncertainty about the extent of damage to the cotton crop in the flood affected areas, they added. Internationally, cotton and yarn prices soared on the back of higher demand from China and India holding back its surplus stock. Usage of leftover cotton inventory from last year, procured at much lower rates further supported the gross margins. The spinning sector overall posted earning of Rs3.2bn, up 642 percent YoY. Bilal Qamar, a textile industry expert, viewed that as a result of high yarn prices the weaving sectors gross margins took a hit as it declined by 68bps YoY to 11 percent despite revenues growing by 44 percent YoY. Operating profits, nevertheless, settled at Rs406mn, up 56 percent YoY. A slight dip of 2 percent in financial costs further supported the bottom line which came in at Rs178mn, up 170 percent YoY. According to experts, revenues of the textile sector augmented by 39 percent to Rs84.6bn in 1QFY11 not only on the back of better product prices in export and local markets, but also owing to an uptick in volumes. Although, during the quarter, cotton prices both in international and local markets kept fluctuating and stayed on the higher side, improvement in the gross margin by 305bps to 19 percent, was a result of some cotton inventory being carried forward from last year that was purchased at much cheaper rates. Moreover, a 33 percent increase in Other Income and 8 percent decrease in finance cost contributed to the earnings growth which was a phenomenal 295 percent to Rs7.2bn. countrys textile sector continued to relish revenue and profit growth, which came in at 39 percent and 295 percent respectively, in 1QFY11. Spinning, weaving and composite all displayed impressive earnings performance with the spinning sector once again turning out to be the star performer. For sectoral analysis; a sample of 25 spinning, 6 weaving and 16 composite companies have been put together, which represent 88, 100 and 90 percent of the market capitalization of their respective sub sectors.