PACRA Maintains the entity Ratings of Salman Paper Products (Pvt.) Limited

Salman Paper Products Private Limited (SPPPL), a key player in the import and trade of paper & board, operates under a lean business model with high turnover. This approach has bolstered the company's reputation as a top importer of paper and related products, particularly in the southern markets. Mr. Aslam Jilani CEO/director of Salman Paper Products Private Limited, embodies the pivotal figure in its operations, who brings over three decades of industry experience to the table. With only two members on the Board, SPPPL's governance model appears weak in comparison to established corporations and requires enhancement. Currently, there are no board committees established. Moreover, to ensure operational efficiency through the identification, assessment, and reporting of all types of risk arising out of the business operations, the Company lacks an internal audit function that operates under the direct supervision of directors. However, the external auditor is on SBP's panel of auditors and is QCR-rated, providing comfort to the assigned ratings. The management team demonstrates strong operational expertise and a keen understanding of industry trends. The demand for the product is derived mainly from paper and paper board consumers. The strong customer base of the Company bodes well for the assigned rating. The industry-wise volumetric decrease in sales has been reported but the selling prices have absorbed the impact to much extent. The reduced demand for products has led to a decline in actual plant production. The plant has the capacity to produce ~31,000 MT/annum annually, but its utilization capacity dropped to ~70% in FY23, from ~97% in FY22. In FY23, Salman Paper Products Private Limited achieved a topline of PKR 10,091mln, marking a modest increase of about ~5.8% compared to PKR 9,542mln in FY22 (FY21: PKR 6,418mln). Furthermore, the Company faced challenges with rising paper & board costs due to inflation and exchange rate fluctuations but successfully managed to improve its profit margins by transferring it to the consumers. As a result, the gross profit margin rose from ~3.7% in FY22 to ~5.7% in FY23. This increase contributed to a rise in the net profit margin from ~1.1% to ~1.7% during the same period, despite facing significantly higher finance costs. As a result of these improvements, the company achieved a bottom line of ~PKR 171mln in FY23, compared to ~PKR 104mln in FY22. The product demand is expected to come full circle once the macro-level fundamentals improve. The Company has a moderately leveraged capital structure primarily relying on short-term debt for managing its working capital needs.
The ratings are dependent upon the management’s ability to improve margins while sustaining its market share. Prudent management of the working capital, and maintaining sufficient cash flows and coverages are essential for the ratings. Any significant change in margins and coverages will impact the ratings.

About the Entity
The Company was established in 2005 as Jilani Enterprises. In 2012, Jilani Enterprises was renamed to Salman Paper Products Private Limited and got registered with SECP as on 2019 with as hare capital of PKR 20mln. The Company is owned by CEO/owner Mr. Muhammad Aslam Jilani having 99% shareholding. Although Salman Paper Products deal in four main products, but it has wide spread customer and supplier base. The Company imports finished goods as raw material and sells to customers after cutting and printing, selling to northern, central and southern regions of Pakistan. Four products; namely: Art card, Packaging board, Stickers and Printer paper are sold to customers divided into direct sales and dealerships - who resell to other customers. About 70% of customer base of Salman Paper Products is located in southern region.