PACRA maintains the entity ratings of Nishat Packaging Limited

Nishat Packaging Ltd’s (“NPL” or the “Company”) ratings reflect a strong sponsor profile, satisfactory market position, and adequate customer profile. The Company specializes in the conversion and manufacturing of paper and PP bags primarily for cement industry, hence demand closely tied to cement dispatches. In FY24, Pakistan’s cement industry faced significant challenges due to economic pressures, political instability, and a reduction in the Public Sector Development Program (PSDP), all of which negatively affected the construction sector. Despite these hurdles, the industry recorded modest growth of approximately 2%, reaching 45.3 million tons by the end of FY24, up from 44.6 million tons in the previous year. This growth was driven by a surge in export dispatches, while local sales declined—a trend that persisted into 1QFY25. As a result, cement packaging companies also experienced a decline in profitability. As of June 2024, NPL had a total production capacity of 220 million bags per annum, with utilization remaining within the 20-25% range. The Company’s gross profit margin dropped from approximately 15.5% in FY23 to 10.2% in FY24, primarily due to lower sales volumes and reduced sale prices to remain competitive. Additionally, some key customers, including Fauji Cement, Bestway, and Kohat, established their own manufacturing units, decreasing the demand for outsourced cement bags.
The Company reported a net loss after tax of PKR 284 million in FY24 (FY23: PKR 177 million), mainly due to increased finance costs. Going forward, aligning with the industry's demand pattern and gradual shift towards Polypropylene (PP) bags from kraft paper bags, NPL has strategically installed its new PP line with a capacity slightly exceeding the needs of DG Cement. Consequently, the Company has changed its name from "Nishat Paper Products Company Ltd" to "Nishat Packaging Limited." The Company expects the new plant to be fully operational soon with 100% capacity utilization. Moving forward, the Company aims to expand PP bag production (if required by related party), optimize utilization, and stabilize profitability. The manufacturing of PP bags will also diversify the sectoral sale of the bags. The Company is also in the process of selling its old kraft paper bag production plant carrying a capacity of 60 million bags reducing the capacity by 27%. NPL, benefits from economies of scale, supporting its rating. The Company has a leveraged capital structure, with long-term debt linked to expansion activities and short-term debt rising due to slow receivables movement. However, most receivables are from related parties, mitigating credit risk.
The ratings would remain dependent upon the Company’s ability to sustain its healthy business profile amidst strong competition, herein, effective and prudent management of financial risk indicators remains important. Moreover, upholding of governance framework is vital.

About the Entity
Nishat Packaging Ltd was incorporated as a Public Limited Company in 2004. D.G. Khan Cement Company Ltd. (DGKCC) and Shuaiba entered into an agreement on 12th June 2004 for setting up a paper sack plant in Pakistan, but later in June 2008, Nishat acquired the stake from Shuaiba Paper. Now NPL is a backward integration of D.G.Khan Cement Company Ltd. DG Khan cement is the major shareholder with 55% holding, Nishat Mills Ltd holds 25% shares, while the remaining 20% shareholding lies with Mansha Family. Mr.Mian Raza Mansha is the CEO and chairman of the Company. He has more than 24 years diversified professional experience in various business sectors. He is associated by an able team.