Pearl Petro Industry (Pvt.) Limited ("Pearl Petro" or "the Company") was incorporated as a private limited company in 2014 under the Companies Act 2017.

Pearl Petro, previously known as MH Plastic, was founded in 1979 by Mr. Munawar Hussain Malik. The Company was engaged in the sales and marketing of plastic bags. Later, its legal structure changed, and it became a private limited company. The Company then began to target corporate customers. Today, the Company has expanded its product line from polypropylene and polyethylene bags to a flexible packaging line, and lately has set up a BOPP film line.

Pearl Petro manufactures and sells polypropylene bags, polyethylene bags (liner bags), farmhouse PT sheets and other plastic sheets. The Company has also set up a flexible packaging line to print and provide packaging products to large-scale corporate clientele. The Company imports raw material - which includes, low density Polyethylene (LDPE), linear low density polyethylene (LLDPE), high density polyethylene (HDPE), and polypropylene (PP) - from KSA, USA, UAE, Kuwait, Singapore, and Qatar. The Company operates at a capacity of 17,500 MT for Polypropylene (PP) and 45,000MT for Polyethylene (PE). The Company's registered office and manufacturing facility are located near Lahore.

Mr. Munawar Hussain Malik (~72.4%) holds the majority of the stake in the Company; while Mr. M. Ahmed Malik, his son, holds the remaining shareholding  of ~27.6%. Previously, Mr. Munawar's daughter, Ms. Bushra Malik, held ~27.6% stake in the Company.

Being a family-owned business, over the years, the management control of the Company has remained unchanged and is expected to remain stable in the near future. There is no documented succession planning in terms of future ownership and management control. However, as per verbal understanding, ownership and management control of Pearl Petro will remain within the family.

The Sponsor of the Company has a solid understanding of the Company's potential and value. Additionally, Mr. Munawar has the knowledge and experience to navigate the challenges and opportunities. This supports the Company's overall risk profile.

The Sponsors hold substantial financial strength to support the Company, if needed.

The Company has a two-member family-dominated Board, which comprises 2 Executive Directors. With growth in operations, setting up an independent Board will improve the overall governance framework.

Mr. Munawar Hussain is the founder & Chairman of the Company. He has over three decades of professional experience. He is fully involved in day-to-day operations and also looks after all the strategic matters of the Company. Mr. M. Ahmed Malik is the Executive Director. He also participates in strategic decision-making.

The Board meets frequently to discuss all the strategic issues. However, these meetings remain informal with documentation of minutes. Moreover, no formal committee exists at the Board level.

M/s. Amin Mudassir and Co. are the external auditors of the Company. They have expressed an unqualified opinion on the financial statements for FY24. The firm is QCR-rated by ICAP and is in the "B" Category of SBP’s panel of auditors.

A well-defined organizational structure exists. Operations are segregated into various departments; wherein clear lines of responsibility are defined for each cadre. All department Heads report to the Deputy GM, who in turn reports to the CEO. The CEO is the man at the last mile, i.e., the key decision maker for the Company and operations. 

The management team has demonstrated commitment to the Company, contributing positive energies for the betterment of the organization. The management team of the Company comprises seasoned professionals. The Finance Manager, Mr. Mushtaq, has been associated with the Company since its inception, possessing all relevant knowledge and experience in its field.

The experience of the sponsors along with a professional management team has helped the Company to streamline its operations. There are no formal management-level committees. Meetings of management are conducted as and when required. Mr. Munawar Malik has the final authority for all decision-making processes.

The Company has deployed an integrated software system, “SofTech” that possesses supplies, production, sales, inventories, and financial reporting. The system has the ability to generate reports on a daily, weekly, and monthly basis, besides other comprehensive data. Further, the Company has installed a database on-site, and stores where data is captured on a daily basis.

The Company has acquired ISO-9001 and ISO-14001 certifications to enhance and maintain the highest levels of quality standards. The Company has developed an effective mechanism for the identification, assessment, and reporting of all types of risk arising out of the business operations. Management of the Company ensures operational efficiency under the direct supervision of the CEO.

The price of the major raw material used in the making of plastic, Polyethylene Terephthalate (PET), is correlated with international oil prices. Any volatility in the oil prices and exchange rates is, therefore, a significant source of risk for this segment. The variability in oil prices during FY24 was mainly due to the supply chain disruptions caused by the war in the Middle East and increased raw material prices on a global level due to high inflation and interest rate hikes. However, during FY24, oil prices decreased by ~3.0% YoY due to low demand for oil from major importers like China due to the economic slowdown.

The Company has built a strong market position in the industry with its long operations resulting in healthy relationship with suppliers, distributors, and customers.

The Company generates its revenue through the sale of various plastic products, including Polypropylene bags, Polyethylene Bags (liner bags), farm house PT sheets, and other plastic sheets, to both corporate clients and local markets. During FY24, the Company reported an uptick of ~11% in revenue to PKR 12,612mln (FY23: PKR 11,333mln) primarily due to a significant increase in Polypropylene Bags sales. However, during 6MFY25, the Company reported a ~22% decline in revenue (6MFY25: PKR 4,598mln, 6MFY24: PKR 5,935mln). The majority of the topline (~48%) is driven by sales of polypropylene bags. All sales are made directly to customers, including several well-established brands such as Punjab Foods and Engro Fertilizers.

The Company's performance saw a downturn, as evidenced by relatively declining margins during the period. Over the last 3 years, the prices of these inputs have remained volatile owing to PKR depreciation. However, it can pass on the price fluctuations to its end customers. During FY24, overall margins showed a significant decline. Gross margins dropped to ~5.2% from ~8.2% during FY23, primarily due to high raw material costs and higher energy costs. The Company's net profit margin during FY24 was ~1.9% (FY23: ~2.7%). During 6MFY25, the gross margin was ~5.2% (6MFY24: ~6.77%), while the net margin was ~2.6% (6MFY24: ~2.7%). Margins are expected to remain at an adequate level.

The management aims to maintain cost control and sustain performance through the commissioning of a three-layered printing plant and the capacity enhancement of the BOPP plant.

The net working capital cycle of the Company increased and reported at ~44 days in FY24 (FY23: ~35 days). Whereas, inventory days of the Company improved to ~15 days as of FY24 (FY23: ~30 days). A decrease in inventory days is owing to a reduction in procurement as per the Company’s strategy, management procures mass production when prices are in favour and procures maximum stock, while stock acquisition is minimized during high-price periods. Trade receivable days of the Company increased to ~38 days as of FY24 (FY23: 24 days). However, trade payable days of the Company reduced to just ~9 days as of FY24 (FY23: ~20 days). As of 6MFY25, the net working capital cycle of the Company increased to 92 days (6MFY24: 46) mainly due to increase in trade receivable days from 36 in 6MFY24 to 71 in 6MFY25. The Company holds an adequate borrowing cushion.

The Company maintains a stable coverage profile. In FY24, EBITDA increased to ~PKR 749mln, from PKR 732mln in FY23. Despite higher borrowing levels, this led to an increase in the EBITDA-to-finance cost coverage ratio to 8.8x in FY24 (FY23: 5.6x). Sustaining adequate coverage levels will be critical moving forward to ensure financial flexibility and resilience.

The Company's equity base in FY24 increased ~18% and reported at ~PKR 1.7bln (FY23: ~PKR 1.36bln), owing to increased accumulated profit. Total borrowings as of FY4 increased by ~24% and were reported at ~PKR 2.2bln (FY23: ~PKR 1.8bln). Thus, the Company posted an improved debt-to-equity ratio of ~59% in FY24 (FY23: ~58.3%). The Company’s equity base strengthened, supported by profit accumulation, reaching PKR 1,723mln as of 6MFY25 (FY24: PKR 1,602mln ). The Company continues to operate with a leveraged capital structure, with a debt-to-equity ratio of ~64.9% in 6MFY25 (FY24: ~59%). Going forward, leverage ratio is expected to remain at an adequate level.