Packages Convertors Limited

CREDIT RATING REPORT | Aug-25

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Rating History
Dissemination Date Long-Term Rating Short-Term Rating Outlook Action Rating Watch
15-Aug-25 AA- A1 Stable Maintain -
16-Aug-24 AA- A1 Stable Maintain -
18-Aug-23 AA- A1 Stable Maintain -
18-Aug-22 AA- A1 Stable Initial -
About the Entity

In 2020, after internal restructuring, Packages Convertors has got the legal status of a public limited Company. It is a wholly owned subsidiary of Packages Limited and is principally engaged in the manufacture and sale of packaging materials and tissue products. Tariq Iqbal Khan holds the position of Chairman of the Company. Mr. Khan is a member of ICAP and has been associated with the Company for two years. The CEO of the Company Mr. Syed Hyder Ali has been associated with the Company since its inception and is also the Managing Director of Packages Limited.

Rating Rationale

The ratings reflect Packages Convertors Limited's ("PCL" or the "Company") strong association with its parent company, Packages Limited. PCL holds a significant market position in its key segments—Packaging (Flexible Packaging & Folding Carton) and Consumer Products (Tissue & Sanitary Napkins). The Company commands the largest market share in Tissue and Folding Carton, and an adequate share in Flexible Packaging. Production in these segments is closely tied to the demand for food products and consumer goods, leading to consistent stability in operations.
During CY24, the Company reported net sales of PKR 49.1bln, compared to PKR 49.3bln in CY23. The major contribution to sales growth came from local sales. The profit after tax of the Company declined from 5.9% in CY23 to 5.6% in CY24, mainly due to slightly lower gross margins and higher operating expenses. The Company’s customer base shows the confidence it has gained over time. The Company’s alliances with global suppliers are playing a pivotal role in maximizing efficient supply chain management. The capital structure of the Company improved in CY24, with leverage improving to 63.8% from 70.1% in CY23, primarily on account of scheduled debt repayments and a stable equity base. Continued prudent management of leverage remains imperative to the ratings. During CY24, the Company made an expansion in the fixed assets for the Folding Carton segment. The expansion is made in Karachi. The Company is actively pursuing growth initiatives and implementing new technologies to enhance its competitive edge.

Key Rating Drivers

The ratings depend on management's ability to improve profit margins while maintaining market share. Effective working capital management, improved leverage, strong cash flows, and adequate coverage ratios are key considerations. Successful execution of the diversification strategy to enhance margins and profitability is critical. A reduction in margins or coverage may affect the ratings.

REPORT CONTENTS
  1. Rating Analysis
  2. Financial Summary
  3. Rating Scale
  4. Regulatory Disclosure

Packages Convertors Limited

rating analysis

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Profile
Legal Structure

Packages Convertors Limited ("PCL" or the "Company") was incorporated as a public company in May-2019 whereas all the manufacturing operations of Packages Limited were transferred to PCL in 2020 pursuant to internal restructuring.


Background

Over the years, Packages Limited has continued to enhance its facilities to meet the growing demand of packaging & allied products. However, during 2020, after internal restructuring, Packages Limited has converted PCL into its 100% owned subsidiary, thus enabling Packages Limited to act purely as a holding company. Packages Convertors Limited, remains as one of the flagship investment of the group


Operations

Packages Convertors Limited has prominent market presence in its operational segments - Packaging (Flexible Packaging & Folding Carton) and Consumer Products (Tissue & Sanitary Napkins).


Ownership
Ownership Structure

Packages Convertors Limited is 100% owned subsidiary of Packages Limited


Stability

Packages Limited is the flagship investment holding company of the Ali Group which has a history spanning over a period of more than 65 years. Packages investment book comprises entities engaged in the manufacturing and sale of inks, flexible packaging material, paper, paperboard, and corrugated boxes, biaxially oriented polypropylene film and cast polypropylene film, production and sale of ground calcium carbonate products, entities engaged in insurance, power generation, real estate segment of the economy and recently diversifying into manufacturing of corn-based starch.


Business Acumen

The Group is ranked amongst the leading industrial groups of the country with interests in paper and paperboard, packaging, financial institutions, education, and real estate sectors. Packages Limited has significant successful joint ventures with international conglomerates and long standing relationship with various multinational companies.


Financial Strength

The overall group’s net assets stood at over PKR ~248.7bln in CY24, reflecting a robust financial footing and the capacity to extend support when required. The group recorded a topline of ~PKR 176bln in CY24, marking an increase from ~PKR 156bln in CY23, underscoring its resilient market position and ability to generate sustained revenues.


Governance
Board Structure

The Board comprises of one executive directors, four non-executive directors and two independent directors. Appropriate size of the board and presence of independent oversight supplements good governance framework.


Members’ Profile

The BoD, with a well-diversified background and relative expertise of its members, is a key source of oversight and guidance for the management. The Chairman of the Board Mr. Tariq Iqbal Khan is associated with the Company since 2020. Mr. Khan is also a Member of Institute of Chartered Accountants of Pakistan and on the board of twelve other companies.


Board Effectiveness

The Board ensures effectiveness through two committees: Audit Committee and the Human Resource & Remuneration Committee, each having five members, respectively. As per the management the meetings were well attended, with discussions focusing on the Company’s performance.


Financial Transparency

PCL's external auditors, M/s A.F. Ferguson & Co., have been the Company's auditors since the Company's inception. The auditor has expressed an unqualified opinion on the financial reports of CY24.


Management
Organizational Structure

The Company operates through eight departments namely, i) Production, ii) Marketing, iii) Finance, iv) IT v) Internal Audit, vi) EHS, vii) Sustainability and viii) Administration. All departments are reportable to the HOD and each HOD is reportable to the CEO, while the internal audit department is also reporting to the Board of Directors through the Audit Committee.


Management Team

The Company’s CEO, Mr. Syed Hyder Ali has been associated with the Company since its inception and is also the Managing Director of Packages Limited. The Company’s CFO, Mr. M. Amjad Shaikh, has over 10 years of relevant experience. Mr. Salman Fazlur Rahman, Mr. Nasir Zaman Khan & Mr. Khalid Abdul Quddus, Business unit manager's of each business units have requisite experience.


Effectiveness

The production facilities have minimal wastage which is effectively managed through re-cycling and re-using in the process of being scrapped to decrease loss. Management committees are established which meet periodically to ensure a smooth workflow.


MIS

The Company is in the process of transitioning to SAP S/4HANA. The system update has been completed, and the final optimization phase, focused on the Hyper Core module, is currently underway. Upon completion, this shift is expected to enhance reporting efficiency and strengthen the overall control environment.


Control Environment

To ensure operational efficiency, the Internal Audit Function is in place that identifies and reports risks. The Audit Committee reviews the internal audit department reports and planned activities.


Business Risk
Industry Dynamics

Pakistan’s packaging industry consists of four major segments, paper, plastic, tinplate and glass. Paper and plastic segments occupy the major share in total market, while other materials such as tinplate and glass have relatively smaller size. With the economy now showing signs of stability after previous challenges, the demand for the segment has remained almost consistent as it forms part of the supply chain for various essential products and industries. The segment’s direct costs consist largely of imported raw materials. Chemical wood pulp is one of the main raw materials in the production of paper packaging. Therefore, volatility in exchange rates and international price trends has an impact on costs.


Relative Position

Amongst the larger players in the tissue paper industry and packaging market, PCL enjoys the largest market share of Tissue and Folding Carton, and an adequate share in Flexible Packaging.


Revenues

The Company generates major revenue through the sale of consumer products Folding Carton and Flexible Packaging. During CY24, the Company reported a stable topline of PKR 49.1bln, slightly lower than PKR 49.3bln recorded in the same period last year. The Company majorly makes sales directly to B2B customers.


Margins

The Gross Profit margin decreased in CY24 is 25% (CY23: 27.2%). As a result, the net profit margin decreased from 5.9% to 5.6% in CY24. The Company posted a net profit of PKR ~2.7 bln during CY24 (CY23: ~PKR 2.9bln).


Sustainability

The Company has a well-established brand name in the market. Going forward, in order to strengthen its market position, the Company is in process of further geographic expansion and other technological advancements in order to improve the effectiveness of the business.


Financial Risk
Working capital

PCL's working capital management is supported through a short-term running finance facility obtained from a consortium of banks. Considering the raw material lead time and high product demand, PCL's inventory days stood at 67 days same in CY24 (CY23: 72 days). The trade receivable days stood same 43 days from 43 days. The Company’s gross working capital days stood at 111 in Dec’24 compared to 115 in Dec’23 due to improved inventory management. Consequently, the Company’s net working capital days stood at 79 days at Dec’24 (CY23: 87 days).


Coverages

As at CY24, the Company’s FCFO stood at PKR 8.4bln (CY23: PKR 9.4bln), reflecting a slight decline, primarily due to stable sales and marginal variations in operating margins. Finance cost, on the other hand, have decreased to PKR 3.0bln (CY23: 3.2bln).


Capitalization

The Company has a highly leveraged capital structure since its inception, although as at CY24, the leveraging improved to 63.8% from 70.1% at CY23. As of Dec’24, the Company’s total borrowings stood at PKR 15.3bln, of which PKR 6.1bln (40%) comprised short-term borrowings. The Company’s equity increased to PKR 8.7bln in CY24, compared to PKR 6.8bln in CY23.   
 
 

Aug-25

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Packages Convertors Limited

financial summary

(PKR mln)

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Dec-24
12M		 Dec-23
12M		 Dec-22
12M
Audited Audited Audited
A. BALANCE SHEET
1. Non-Current Assets 16,352 14,089 11,988
2. Investments 0 0 0
3. Related Party Exposure 289 102 103
4. Current Assets 16,569 18,130 17,459
a. Inventories 7,929 10,185 9,250
b. Trade Receivables 6,109 5,611 6,155
5. Total Assets 33,210 32,320 29,550
6. Current Liabilities 7,188 7,869 6,545
a. Trade Payables 4,440 3,986 3,757
7. Borrowings 15,373 16,020 16,625
8. Related Party Exposure 0 0 0
9. Non-Current Liabilities 1,932 1,606 1,859
10. Net Assets 8,717 6,825 4,522
11. Shareholders' Equity 8,717 6,825 4,522
B. INCOME STATEMENT
1. Sales 49,176 49,379 41,585
a. Cost of Good Sold (36,888) (35,955) (33,397)
2. Gross Profit 12,288 13,423 8,189
a. Operating Expenses (4,496) (4,056) (3,342)
3. Operating Profit 7,792 9,367 4,847
a. Non Operating Income or (Expense) 6 (775) (360)
4. Profit or (Loss) before Interest and Tax 7,797 8,592 4,487
a. Total Finance Cost (3,081) (3,205) (1,900)
b. Taxation (1,954) (2,484) (1,038)
6. Net Income Or (Loss) 2,763 2,903 1,549
C. CASH FLOW STATEMENT
a. Free Cash Flows from Operations (FCFO) 8,415 9,470 5,396
b. Net Cash from Operating Activities before Working Capital Changes 5,146 6,646 3,880
c. Changes in Working Capital 1,796 (726) (4,029)
1. Net Cash provided by Operating Activities 6,942 5,920 (149)
2. Net Cash (Used in) or Available From Investing Activities (3,225) (3,577) (4,202)
3. Net Cash (Used in) or Available From Financing Activities (3,772) (401) 1,903
4. Net Cash generated or (Used) during the period (54) 1,942 (2,448)
D. RATIO ANALYSIS
1. Performance
a. Sales Growth (for the period) -0.4% 18.7% 39.2%
b. Gross Profit Margin 25.0% 27.2% 19.7%
c. Net Profit Margin 5.6% 5.9% 3.7%
d. Cash Conversion Efficiency (FCFO adjusted for Working Capital/Sales) 20.8% 17.7% 3.3%
e. Return on Equity [ Net Profit Margin * Asset Turnover * (Total Assets/Shareholders' Equity )] 35.6% 51.2% 33.8%
2. Working Capital Management
a. Gross Working Capital (Average Days) 111 115 111
b. Net Working Capital (Average Days) 79 87 84
c. Current Ratio (Current Assets / Current Liabilities) 2.3 2.3 2.7
3. Coverages
a. EBITDA / Finance Cost 3.0 3.3 3.1
b. FCFO / Finance Cost+CMLTB+Excess STB 1.6 1.8 1.7
c. Debt Payback (Total Borrowings+Excess STB) / (FCFO-Finance Cost) 1.7 1.6 2.5
4. Capital Structure
a. Total Borrowings / (Total Borrowings+Shareholders' Equity) 63.8% 70.1% 78.6%
b. Interest or Markup Payable (Days) 33.3 78.7 95.8
c. Entity Average Borrowing Rate 19.6% 19.6% 14.1%

Aug-25

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Packages Convertors Limited

rating scale

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Aug-25

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Packages Convertors Limited

regulatory disclosure

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  1. Rating Team Statements
    1. Rating is just an opinion about the creditworthiness of the entity and does not constitute a recommendation to buy, hold, or sell any security of the entity rated or to buy, hold, or sell the security rated, as the case may be. (Chapter III; 14-3-(x))
    2. Conflict of Interest
      1. The Rating Team or any of their family members have no interest in this rating (Chapter III; 12-2-(j))
      2. PACRA, the analysts involved in the rating process, and members of its rating committee and their family members do not have any conflict of interest relating to the rating done by them (Chapter III; 12-2-(e) & (k))
      3. The analyst is not a substantial shareholder of the customer being rated by PACRA [Annexure F; d-(ii)]
      4. Explanation: for the purpose of the above clause, the term "family members" shall include only those family members who are dependent on the analyst and members of the rating committee.
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  3. Conduct of Business
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