The Pakistan Credit Rating Agency Limited
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Timnat Thomas

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PACRA Maintains Entity Ratings of MACPAC Films Limited

Rating Type Entity
Action Maintain Maintain
Long Term BBB- BBB-
Short Term A3 A3
Outlook Stable Stable
Rating Watch - -

The ratings reflect MACPAC Films Limited's ( "MACPAC" or the "Company") established position within the Biaxially Oriented Polypropylene (BOPP) segment of the industry. The Company has established a suitable business profile and is now increasing footprints in the Cast Polypropylene (CPP) segment of the industry. Both are petrochemical of which price is linked to oil and gas prices, which causes volatility. Its raw material polypropylene (PP) is imported. This year marked the first year after COVID-19 in which the Company has maintained healthy margins and profitability despite its raw material being sensitive to exchange rate volatility, revival can be seen during 3QFY21. The key input is dependent on regional supply and demand dynamics as well as the strength of PKR to USD. Revenues growth of the players in the packaging industry became slow due to increased competition but the Company succeeded to maintain its market share of ~11% even in unprecedented times. The revenue of the Company increased by 31.4% during the period. New Cast Polypropylene (CPP) unit achieved 85% capacity utilization during the period and will add in profitability as utilization will increase in future. The long term prospects of the Company are linked with demand and expansion in the local packaging business. The Company managed to earn healthy cash flows during the year. The downward trend of policy rates impacted the finance cost positively and in turn, coverages improved. The Company has a leveraged capital structure where the long term debt was related to expansion activities. Currently, MACPAC is in the phase of minimizing its debt and has managed to reduce its borrowings both long and short term through effective working capital management and through the proceeds of the sale of land owned by the Company on Port Qasim.
The ratings are dependent upon the management’s ability to improve margins while sustaining its market share. Prudent management of the working capital, maintaining sufficient cash flows and coverages is imperative for the ratings. Materialization of management’s strategy of diversification resulting in better margins and profitability is important. Any significant decrease in margins and/or coverages will impact the ratings.

About the Entity
MACPAC Films Limited 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 includes multi-layered CPP films variants, manufactured at an installed capacity of 7,000 MT per annum. These films have applications in confectionery: biscuits, cookies, snacks, tea and baked products packaging.
MACPAC Films is primarily owned by the Elahi family ~46%, with major ownership residing with Mr. Shariq Maqbool Elahi ~16%, Mr. Habib Maqbool Elahi ~16% and Mr. Ehtesham Maqbool Elahi ~15%. Munshi family owns a 15% stake in the Company. The remaining holding lies with the Employees Old Age Benefit (EOBI) and the Financial Institutions. The Company has a free float of ~28%.

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.