Rank #5 in Modarabas
First Imrooz Modaraba (PSX: FIMM) closed the audited year ended 30 June 2026 with a pronounced earnings decline, but the result was not uniformly weak. Sales fell as management faced subdued market activity, pricing pressure, higher input costs and trade disruption. Gross profit and net profit followed revenue lower. Yet the Modaraba cut operating expenses and finance charges, released cash from inventory and receivables, repaid several funding lines, and rebuilt its bank balance. The result is therefore best read as a weak income statement paired with a much healthier cash-flow outcome.
The annual comparison is also unusually demanding because FY2025 included a Rs15.49 million Workers’ Welfare Fund liability write-back. Removing that non-recurring support does not erase the FY2026 decline, but it shows that part of the fall in profit was caused by the absence of a prior-year benefit rather than by the trading business alone. The remaining concern is that gross profit fell faster than sales, which points to genuine pressure on trading economics.
These are AlphaGen model outputs, not figures reported by the company: Alpha QoQ Score 83.34; TTM Performance Score 18.70; 3Y Business Perf Score 44.74; Sector Leadership Score 46.85.
Cash conversion was the clearest positive. Cash generated before working-capital changes was Rs108.67 million. A Rs93.36 million reduction in stock and a Rs23.06 million reduction in trade debtors more than offset the Rs60.01 million decrease in creditors and other liabilities, lifting cash generated from operations to Rs164.59 million. After finance costs, levies, gratuity and deposits, net operating cash flow was Rs96.52 million.
That cash enabled the Modaraba to absorb Rs44.87 million of distributions, spend a net Rs4.40 million on investing activities, repay Rs3.00 million of Qard-e-Hasana and reduce Musharaka/lease financing by Rs31.36 million. Bank balances consequently rose to Rs15.43 million from Rs2.55 million. This is a considerably stronger cash outcome than the prior year, when operating activities consumed cash.
The working-capital release was not just an accounting abstraction. Stock in trade fell 20.7% to Rs357.31 million, while trade debtors fell 12.6% to Rs178.82 million. Current liabilities declined 23.7% to Rs304.02 million. On the published statement, current assets covered current liabilities about 1.83 times, up from roughly 1.66 times a year earlier. Liquidity therefore improved even though total assets contracted.
Cost restraint provided another cushion. Operating expenses fell 7.8% to Rs127.35 million. Salaries and staff benefits declined to Rs68.48 million from Rs72.39 million, travel and conveyance fell to Rs12.26 million from Rs19.36 million, and several smaller expense categories also eased. Finance charges declined 17.0% to Rs21.69 million, helped by lower Musawamah charges and the reduction in other financing balances.
The closing quarter was stronger than the annual headline suggests. Subtracting the nine-month accounts from the audited full year gives implied fourth-quarter sales of Rs231.88 million, gross profit of Rs66.08 million and profit after levies of Rs20.03 million. Against the similarly derived FY2025 fourth quarter, sales were lower, but gross profit and net profit were higher. The implied fourth-quarter gross margin rose to about 28.5% from 15.7%. This arithmetic points to a late-year margin recovery, although the annual report does not provide a product-by-product volume, price or mix bridge, so the cause should not be overstated.
The core annual result deteriorated. Management attributed the 15.5% fall in turnover to subdued market activity, pricing pressure, rising input costs, regional and geopolitical disruption, and weaker demand. FIMM trades industrial raw materials used across paint, coatings, pharmaceuticals, food, agriculture, personal care, household and textile markets. That breadth reduces dependence on one end market, but it also exposes the Modaraba to general industrial demand, imported-input costs and logistics conditions.
Gross profit fell by Rs60.74 million, more than the Rs10.74 million reduction in operating expenses. Gross margin slipped 1.50 percentage points to 21.74%. The filings say lower sales volume and continued cost and pricing pressure caused the decline, but they do not disclose a quantified split among volume, selling prices, product mix, freight, or supplier costs. A defensible reading is therefore arithmetic rather than speculative: weaker turnover and a lower gross margin compressed gross profit; expense savings only partly compensated.
Other income dropped to Rs4.71 million from Rs21.50 million. FY2025 included the Rs15.49 million reversal of a Workers’ Welfare Fund provision after a favourable Sindh High Court judgment; no comparable gain recurred in FY2026. Excluding only that write-back, FY2025 other income would have been about Rs6.01 million, much closer to FY2026. This distinction matters because it separates a legal-accounting benefit from recurring trading performance.
The auditors issued an unmodified opinion but drew attention to the Workers’ Welfare Fund treatment. Management reversed the cumulative provision in FY2025 and recorded no FY2026 provision. Separately, the notes disclose disputed Sindh Revenue Board demands of Rs26.09 million, including penalties and surcharge, for earlier tax periods. Appeals remain pending, and a stay was granted subject to a Rs1.50 million payment already made. The audit opinion was not modified, but the matter remains a contingent-risk item rather than a closed operational gain.
Levies remained heavy relative to earnings. FIMM recorded Rs42.57 million as minimum-tax differential under IFRIC 21/IAS 37, compared with Rs49.27 million in FY2025, and reported no separate taxation charge. Because the levy declined much less than profit before levies, post-levy earnings absorbed a disproportionate hit. Profit after levies fell 58.6%, materially faster than both sales and gross profit.
Inventory quality also deserves attention despite the lower year-end balance. The provision for slow-moving and obsolete stock rose to Rs7.79 million from Rs2.28 million after a Rs5.51 million charge, whereas FY2025 benefited from a reversal. Trade-debtor expected-credit-loss provisions increased to Rs15.03 million from Rs12.25 million. The balance-sheet totals improved, but these provisions show that the composition and ageing of working capital still carry risk.
Total assets declined 15.2% to Rs575.94 million, mainly because inventory, receivables and import-related working capital contracted. Equity edged down 2.0% to Rs266.80 million after the year’s profit and distribution. The funding structure became cleaner: running Musharaka of Rs29.79 million and the Rs3.00 million management-company Qard-e-Hasana were repaid, while Musawamah financing remained Rs160.00 million and lease obligations fell to Rs1.57 million.
The remaining Musawamah line is still economically important. It carries a return linked to three-month KIBOR plus 1.5% and finances inventory sales. FIMM therefore retains exposure to short-term benchmark rates even after reducing balances. The annual report also shows Rs115.64 million of import bills payable and quantifies foreign-exchange sensitivity: a 2% adverse currency move would reduce profit before tax by about Rs2.31 million, all else equal. That is manageable relative to annual gross profit, but material compared with Rs39.50 million of net profit.
The Rs10 distribution is covered by reported earnings, unlike a payout funded entirely from reserves, but it consumes roughly three-quarters of FY2026 profit. Cash coverage is better: operating cash flow of Rs96.52 million was more than three times the implied Rs30 million distribution. Still, much of the cash improvement came from releasing working capital. Repeating the same scale of inventory reduction every year is not a sustainable substitute for stabilising gross profit.
FY2026 breaks the earnings momentum of the prior two years, but it is not a return to the FY2023 low point. Sales and gross profit are below both FY2024 and FY2025; however, gross profit remains above FY2023 despite substantially lower sales, showing that the business has retained part of the margin recovery achieved after that difficult year. Net profit is also well below FY2024 and FY2025, but remains positive versus FY2023’s loss.
The model scores capture that mixed picture. The high Alpha QoQ Score is consistent with the derived fourth-quarter rebound. The much lower TTM Performance Score reflects the weak full-year earnings comparison. The 3Y Business Perf Score and Sector Leadership Score sit closer to the middle, fitting a business that has improved structurally from FY2023 but has not yet demonstrated stable, sector-leading earnings through the current downturn.
This analysis uses FIMM’s audited standalone annual statements and the company’s nine-month interim accounts. The annual filing supports the reported earnings, balance sheet, cash flow, dividend, legal contingency and management’s stated drivers. It does not disclose a detailed product, customer, volume, price or geographic bridge, so no company-specific causal split has been invented. The fourth-quarter figures are calculated as audited full-year amounts minus the reported nine-month amounts and should be read as derived, not as a separately presented quarterly statement.
Primary source: First Imrooz Modaraba Annual Report 2026.
Comparable interim source: FIMM quarterly accounts for the nine months ended 31 March 2026.
Issuer listing and announcement archive: PSX Data Portal — FIMM.