Persistent UnprofitabilitySustained negative EBIT and net income with falling gross margins signal structural profitability problems. Over months this erodes retained earnings, limits reinvestment, and makes it harder to fund improvements internally, raising medium-term viability concerns without turnaround.
Negative Free Cash FlowPersistent negative free cash flow indicates operations do not generate sufficient cash to cover capex and working capital. This forces reliance on external financing, constrains investment in efficiency or capacity, and increases liquidity risk during cyclical demand shifts.
High Financial LeverageA relatively high debt-to-equity ratio raises interest and refinancing risk, particularly given the company’s losses and negative cash flows. Leverage reduces operational flexibility and amplifies downside in a cyclical textile market over the coming months.