Nishat Packaging Ltd( "NPL" or the "Company" ) is a Public Limited Company incorporated under the repealed Companies Ordinance 1984, on 23 July, 2004. The Company's name has been changed to Nishat Packaging Limited from Nishat Paper Products Company limited on account of shift towards the manufacturing of Polypropylene bags (PP bags).

Nishat Packaging Ltd was a Joint venture project of Nishat with Shuaiba Paper Products Company Ltd. Kuwait (Shuaiba). The Primary purpose of the project was the vertical integration in Cement business for supply of paper sacks for cement packaging. 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.

The Company is engaged in the conversion and manufacturing of paper and polypropylene packaging material with annual production capacity of 250 million bags (160 million paper bags and 90 million Polypropylene bags). The paper plant is situated adjacent to D.G. Khan Kairpur cement unit, in District Chakwal, in close proximity of some other big cement producers. The PP plant is situated in Quaid-e-Azam Business Park Industrial Estate Shaikhupura.

NPL shareholding is primarily vests with DG Khan Cement (55%) and Nishat Mills Ltd (25%). Among the sponsoring family, major ownership is with Mrs. Naz Mansha 6%, Mr Umer Mansha and Mr Hassan Mansha 4% each. Nishat Mills Ltd has 31% of shareholding in DG Khan Cement. Thus ultimate shareholding remained with Nishat Group

Nishat is one of the largest and most diversified Industrial houses in South East Asia. Whereas, D.G. Khan Cement is one of the largest cement players in the industry with the asset base amounting to PKR 138bln.

Nishat is regarded as being on par with multinational companies operating locally in terms of product quality, services, and management expertise. Leveraging their extensive experience, the sponsors have established themselves as trusted partners in the packaging industry. Mr. Mian Mansha, the visionary behind the Nishat Group, has a long-standing track record of success, which serves as a strong foundation for Nishat Packaging Ltd.

The Financial strength of the sponsors is sufficient to support the Company in times of crisis. D.G. Khan Cement is AA-/A1+rated by PACRA. D.G. Khan Cement has ~PKR 138bln assets and ~PKR 77.5bln equity as of the period ended on Sep'2024.

The Board consists of seven members. There is also a female representation on the board. There are four executive directors, and two non-executive directors on Board. But no Independent representation. However, being the subsidiary of a listed company independence oversight is compensated.

The BoD, with the diversified background and expertise of its members, is a key source of oversight and guidance for the management. The chairman, Mr. Mian Raza Mansha, holds the position of CEO also. He has been associated with the Company for the last 18 years.

The minutes of the Board meetings are well documented. The Board has no formal committees to assist the board.The quality of minutes reflects the involvement of all directors in the agenda items. Total four meetings were held during the outgoing year and attendance was well sufficient in the meetings.

M/s KPMG Taseer Hadi & Co. are the external auditors of the Company. They have expressed an unqualified opinion on the financial reports for FY24. The firm is QCR rated by ICAP and is in the A Category of SBP’s panel of auditors.

To perform well, NPL has structured and organized its organogram as per the operational needs. The Company operates through Procurement, Sales and Marketing, Finance and Accounting, production and Technical department and Administration Departments.

The Company has a set of experienced & professional management. The Company’s CEO, Mian Raza Mansha has more than 24 years diversified professional experience in various business sectors including Banking, Textile, Power, Cement, Insurance, Hotels, Properties, Natural Gas, Agriculture, Dairy etc. He received his Bachelor degree from the University of Pennsylvania, USA. Currently he is on the Board of ten other companies.

Management’s effectiveness and efficiency can be ensured through the presence of management committees. At NPL, management committees are not in place. Thus, indicating a room for improvement.

Nishat Packaging Ltd manufacturing facilities in Chakwal and in Sheikhupura are connected with the Company’s Head Office in Lahore through an ERP(Oracle based customized system). To facilitate the management, various reports related to Finance, Sales, HR, Production and Import are generated on daily and monthly basis. Other customized reports can be generated on ad hoc basis. Frequecny of these reports may alter as per the managements requirement.

The Company has an internal audit function in place, with effective mechanism for identification, assessment and reporting of all types of risks arising out of the business operations. This function is necessary to provides support, guidance and monitoring of the internally placed SOPs along with conducting Gap Analysis for evaluating already placed policies and procedures.

Pakistan’s packaging industry consists of four major segments, paper, plastic, tinplate and glass. Paper and plastic segments occupy the major share in total market. NPL operates under paper and plastic (Polypropylene) segment of the Industry. The demand of this segment is directly correlated with cement production. The segment’s direct costs consist largely of imported raw materials. Therefore, volatility in exchange rates and international price trends has an impact on costs. 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.

Nishat Packaging Ltd is one of the main players in the industry. Large market players in the paper segment are Cherat Packing Ltd (production capacity 660mln bags/annum), Thal Ltd (production capacity 356mln bags/annum), and Ultra Pack (Pvt) Limited (production capacity 120million units/annum). As of June 2024, NPL had a total production capacity of 220 million bags per annum, with utilization remaining within the 20-25% range. 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%

The Company generates revenue by selling bags to cement manufacturers. Some of its customers are D.G. Khan Cement, Maple leaf Cement, and Gharibwal cements. The top 3 Customers generated more than 80% of the total revenue. During FY24, the revenue of the Company declined by 19% YoY and stood at ~PKR 2.5bln (FY23: ~PKR 3.09bln).

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. Net Margin declined to ~-11.4% FY24 (FY23: -5.7%) as a result of a significant rise in finance costs due to inclined borrowings for the new PP plant. The Company has posted a Net Loss of PKR 285mln during FY24 (FY23: PKR -177mln).

The Company is a backward integration of D.G. Khan Cement. The main purpose of the Company is to supply packaging material to the related Company. Aligning with the industry's demand pattern and gradual shift towards Polypropylene bags from kraft paper bags, NPL has strategically installed its new PP line with a capacity slightly exceeding the needs of D.G. Khan Cement.  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’s working capital requirements are a function of its inventory, trade receivables, and trade payables which are financed through short-term borrowings and FCFO. The Company’s working capital management is supported through short-term running finance facility obtained from various banks. NPL inventory days stood on higher side at ~170 days during FY24 (FY23: ~142 days), but the receivable days decreased to ~107 days (FY:23 ~124 days). Resultantly, the net working capital days increased to ~275 days during FY24 (FY23: ~263 days).

In FY24, NPL’s FCFO’s stood at ~PKR 216mln increasing from ~PKR 100mln in FY23. The FCFO/Finance cost also showed a increase from ~0.4x of coverage during FY23 to ~ 0.5x during FY24 due to incline in FCFO's and rise in finance cost from PKR 463mln during FY23 to PKR 537mln during FY24.

The Company’s gearing ratio increased from ~58.3% in FY23 to ~62.0% in FY24 due to a rise in long-term borrowings from PKR 28mln to PKR 1,402mln. This was primarily driven by the installation of a new polypropylene plant, largely financed through debt with a minor equity contribution.