The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Assigns Initial Entity Ratings To Pakistan Synthetics Limited

Rating Type Entity
(11-Feb-19 )
Action Initial
Long Term BBB+
Short Term A2
Outlook Stable
Rating Watch -

Pakistan’s Polyethylene Terephthalate (PET) packaging sector mostly derives its demand from bottled water and carbonated beverage industry, while, edible oil sector has become an upcoming demand driver. The industry use variants of PET Resin to manufacture plastic caps (closures) and PET preforms. During FY18, PET Resin segment generated a total revenue of PKR 37bln. Having a capacity utilization of 70% - 72%, PET preforms segment is experiencing a volumetric growth and generated an estimated revenue of PKR 27bln. Plastic Closures had an estimated revenue of PKR 2.7bln in FY18.

The ratings reflect Pakistan Synthetics Limited's integrated position in PET industry. The Company entered the PET Resin and Capping segments initially but has recently installed capacity for Preforms. Resultantly, the Company's revenue improved. Margins remain inline with the peers but are subject to volatility in raw material prices and currency devaluation. The Company's profitability remained modest as it streamlined its operations and presence in different segments. This is expected to improve, going forward, as it emerges as an integrated player. The Company has high leveraging and relatively weak covergaes. The working capital requirements are expected to rationalize on the back of higher sales, going forward, from its current levels.
The ratings are dependent on the management's ability to strengthen the relative positioning of the Company in the industry. Improvement in business margins and, in turn, profitability remains imperative. Any deterioration in the Company’s coverages would have negative impact on the ratings.

About the Entity
Pakistan Synthetics Limited was incorporated as a public limited company in 1987. The Company provides a complete range of Plastic Closures and Metal Crowns at an installed capacity of ~559,000 cartons per annum. It also offers a wide range of PET Preforms for various products at an installed capacity of ~25,000 Octabins per annum. The Company also manufactures PET Resins at an installed capacity of 28,000MT per annum. Pakistan Synthetics Limited's manufacturing facilities are located in Hub, Balochistan and Port Qasim, Karachi. While, the registered office is located in West Wharf, Karachi.

Pakistan Synthetic Limited is primarily owned by Haji Karim family (73%). While Mr. Fawad Anwar holding 9% stake, is the single largest stakeholder of the Company. Financial Institution own 8% of the Company’s shares. Remaining 19% of the stake resides with general public.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.