PACRA Upgrades Entity Ratings of MACPAC Films Limited

The ratings reflect MACPAC Films Limited's ( "MACPAC" or the "Company") established position within the Biaxially Oriented Polypropylene (BOPP) segment of the industry. Over the period, the Company has established a suitable business profile and is now increasing footprints in the Cast Polypropylene (CPP) segment of the industry. Both are bi-products of petrochemical of which price is linked to oil and gas prices, which causes volatility. Its raw material polypropylene (PP) is totally imported. FY21is 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 the year. 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 and has shown significant growth by 6x as compared to FY20. Furthermore, the Company has successfully managed to convert its losses into profits and reported net profit after tax of PKR 187mln (FY20: PKR (63)mln. The main contributor towards profitability were the improved revenue base and decreased finance cost on the back of repayment of long term debt and the downward trend of policy rates during FY21. Resultantly, the coverages of the Company have also improved by significant margins. The Company has moderate 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.
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 ~52%, out of which 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%.

About the Instrument
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