Analyst
Madiha Sohail
madiha.sohail@pacra.com
+92-42-35869504
www.pacra.com
Applicable Criteria
Related Research
PACRA Maintains Entity Ratings of Packages Convertors Limited
Rating Type | Entity | |
Current (16-Aug-24 ) |
Previous (18-Aug-23 ) |
|
Action | Maintain | Maintain |
Long Term | AA- | AA- |
Short Term | A1 | A1 |
Outlook | Stable | Stable |
Rating Watch | - | - |
The ratings reflect Packages Convertors Limited ("PCL" or the "Company") and its strong association with its parent company, Packages Limited. Following an internal restructuring in 2020, the manufacturing operations of Packages Limited were transferred to PCL, making it a wholly-owned subsidiary. PCL holds a significant market position in its key segments—Packaging (Flexible Packaging & Folding Cartons) and Consumer Products (Tissues & Sanitary Napkins). The company commands the largest market share in Tissues, Folding Cartons, and Flexible Packaging. Production in these segments is closely tied to the demand for food products and consumer goods, leading to consistently high utilization levels.
During CY23, the Company reported growth in net sales by 18.7%, to PKR 49.3bln (SPLY: 41.5bln; 1QCY24 PKR 13.2bln). The major contribution to sales growth came from local sales. On the back of improved profit margins, the profit after tax of the Company increased from 3.7% to 5.8%; (1QCY24: 6.4%). The company's solid customer base reflects the deep confidence its customers have on it. The cash flows have also been improved as compared to last year. The Company’s alliances with global suppliers is playing a pivotal role in maximizing efficient supply chain management. However, the capital structure of the Company remained highly leveraged 70.1% (CY22: 78.6%; 1QCY24: 67.7%), management of which would remain imperative to the ratings where the long-term debt is related to expansion activities. During CY23, the company made an expansion in the fixed asset for the folding cartons segment. The expansion is made for the Karachi plant. This expansion has contributed in the existing capacity of folding cartons. As per management representation, the company is enjoying ~74% market share in the tissue paper segment. The company is actively pursuing growth initiatives and implementing new technologies to enhance its competitive edge.
The ratings depend on management's ability to improve profit margins while maintaining market share. Effective working capital management, reduced 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.
About
the Entity
In 2020, after internal restructuring Packages Convertors has got the legal status of public limited company. It is a wholly owned subsidiary of Packages Limited and 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 the member of ICAP and has been associated with the company since 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.