PACRA maintains the entity ratings of EcoPack Limited | RW

The ratings reflect EcoPack Limited's ("EcoPack" or "the Company") established position in the PET preform and PET bottle segment, sound governance, and experienced management team associated with the EcoPack for a long. The market share in PET preform and PET bottle segments is 10% and 29% respectively and its strategic location is in the Central region. The PET packaging sector mostly derives its demand from water bottles, Carbonated Soft Drink (CSD) industry, pharma, and other consumables. The industry is exposed to seasonality as beverage demand remains higher in the summer months and the M/O Holy Ramazan. As per management representation, in the preform industry, Ecopack holds ~10% and in the bottle industry holds ~29% market share. Considering the high demand, during 9MFY23 the utilization level stood at ~56% for PET Bottling (Blowing) Division and ~63% for PET Preforms (Injection) Division (SPLY Blowing ~56% and Injection ~62%). On the financial profile, Consistent topline growth has been seen during 9MFY23. The Company’s topline clocked in at ~PKR 3,889mln during 9MFY23 increased from ~PKR 2,877mln during 9MFY22 (FY22: 5,025mln, FY21: 3,101mln). This increase in topline was a result of an increase in volumetric sales of products and sale prices during the period. The major contribution is made by PET bottles ~60% followed by PET preform ~40%. Due to increase in the cost of sales resulting from high raw material prices and increase in finance cost the Company has reported a Net loss of PKR (23)mln during 9MFY23 as compared with the net profit of PKR 76mln during 9MFY22. However, leverage indicators continue to remain elevated on account of higher utilization of short-term borrowing for funding working capital requirements. The local procurement of the raw material (PET resin) relieved the Company from any supply chain issues and also some savings in cost terms during critical times. Going forward, the impact of higher finance costs & overheads on profitability is expected to be offset by transferring the cost impact to customers which results in an improvement in margins and an increase in the top line. On the ownership side, currently, litigation is going on regarding i) appointment of CEO ii) Acquisition of shares beyond prescribed limits and the matter is still pending in the Sindh High Court.
Considering ongoing litigation, the rating watch is placed on the Company. Ratings would remain 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 imperative for the ratings. Any significant decrease in margins and coverages will impact the ratings.

About the Entity
EcoPack was incorporated as a public limited Company in 1992. EcoPack was listed on the Pakistan Stock Exchange in 1994. EcoPack has two product lines, namely i) PET Preforms, and ii) PET Bottles. Currently, the Company has an annual installed capacity to manufacture 729 million PET Preforms and 327 million PET Bottles. EcoPack provides a complete range of PET Preforms and PET Bottles required by the Carbonated Soft Drinks (CSD) and bottled water industry. Majority of EcoPack’s ownership resides with the sponsors through Jamil family (17%). Mr. Hussain Jamil holding 17.2% stake in the Company is the single largest stakeholder. At the end Jun23 the free float of the Company is 32.53% and ~29.12% of shares are held by three entities i) Sumaya Builders & Developers ii) Crosby Pakistan (Pvt) Ltd. and iii) The Eastern Express Company (Pvt) Ltd. and the remaining ~20.99% of shares are held by individuals. The Company’s CEO, Mr. Hussain Jamil, has been associated with the Company since its inception. He is a seasoned businessman and carries over 40 years of experience.