PACRA Assigns Initial Entity Ratings To MACPAC Films Limited

Pakistan’s packaging industry drives demand mainly from country’s food sector, posting a growth of 10-15%. Packaging industry use variants of Polymer Resin to manufacture BOPET, BOPP and CPP films. During FY18, the packing film industry generated revenue around PKR 20bln. Major players in the packaging industry includes: Tri-Pack Films Limited, Macpac Films Limited, International Packaging Limited and Astro Films - Ismail Industries Limited.

The industry primarily operates in three segments: Biaxially Oriented Polyethylene (BOPET) Films, Biaxially Oriented Polypropylene (BOPP) Films and Cast Polypropylene (CPP) Films. All these segments are experiencing volumetric growth. Whereas, CPP film segment enjoys better margins by providing high sealability features. In the last few years, the food packaging companies have kept a high focus on better shelf life for their packaged products creating a strong demand for CPP films in market.

The ratings reflect Macpac Films established position in the packaging film (BOPP and CPP) industry. The Company has experienced a rising top-line owing to significant demand growth of packaging material. However, increasing competition, rising raw material prices and currency devaluation has led to an overall decline in the Company's margins. This is expected to improve, going forward, as CPP production increases. The Company has moderate 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 Company has strong governance framework.
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 or sustained would have negative impact on the ratings.

About the Entity
Macpac Film Ltd. was incorporated as a Public Limited Company in 1993. The Company is listed on the Pakistan Stock Exchange. Macpac Films produces multiple grades of BOPP films variants at an installed capacity of 15,000 MT per annum. The Company's diverse portfolio also includes multi layered CPP films variants, manufactured at an installed capacity of 6,996 MT per annum. These films have applications in confectionery: biscuits, cookies, snacks, tea and baked products packaging.

Macpac Films is primarily owned by Elahi family (51%), with major ownership residing with Mr. Maqbool Elahi (47%). Munshi family owns 15% stake in the Company. Employees Old Age Benefit holds 8% shares. 27% of the shareholding resides with the General Public.