PACRA Maintains Entity Ratings of MACPAC Films Limited

Business News English

Lahore, October 05, 2021 (PPI-OT): The ratings reflect MACPAC Films Limited’s (“MACPAC” or the “Company”) established position within the Biaxially Oriented Polypropylene (BOPP) segment of the industry. The Company has established a suitable business profile and is now increasing footprints in the Cast Polypropylene (CPP) segment of the industry. Both are petrochemical of which price is linked to oil and gas prices, which causes volatility. Its raw material polypropylene (PP) is imported. This year 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 3QFY21.

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. The downward trend of policy rates impacted the finance cost positively and in turn, coverages improved. The Company has a 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 and through the proceeds of the sale of land owned by the Company on Port Qasim.

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.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com