PACRA Upgrades The Rating of MACPAC Films Limited

The ratings reflect MACPAC Films Limited's ("MACPAC" or the "Company") established position within the Biaxially Oriented Polypropylene (BOPP) segment of the industry. Over the period, the Company has established an adequate business profile and now increasing its footprints in the Cast Polypropylene (CPP) segment as well. The Company's progress is based on an approach that prioritizes customer relationships, corporate governance, ethics in business relations, commitment to employees, and the larger ESG agenda. Since Jun'20 the Company has shown consistent growth in net revenue. The sales strategy of the Company focuses on creating an optimum sales mix in the domestic market and to penetrate into the export market as the opportunity arises. Enhanced overall sales growth by 32% coupled with higher prices on the back of value-added films have contributed to a top-line of PKR 5.5bln as of the end of Jun'23 (Jun'22: PKR 4.17bln). The Company maintained healthy margins and profitability despite its raw materials being sensitive to exchange rate volatility. The profit after tax increased by 106% and was reported at PKR 379mln for the period Jun'23 (Jun'22: PKR 184mln). To cater to the exchange rate risk the Company has built up sufficient inventory so that customer demand can be managed comfortably with minimized cost. As per management representation, the Company approximately holds 11% market share. Product utilization of the Company is mainly linked with foods and consumer products. During FY23, the capacity utilization slightly declined to ~81% (FY'22: ~82%) due to a shift to high-margin product mix. The Company is also partnering with The Green Ark Sustainability (Pvt.) Limited (TGA) to support the ESG initiative of providing the recycling solutions for post-industrial and post-consumer plastic waste.
Over the period, the Company has successfully managed to reduce its leverage to 13.6% as of Jun'23 (Jun'22: 26.4%). The factors contributing towards low-leverage capital structure are i) Efficient management of working capital by managing advance terms with trade debtors and re-negotiating the terms with suppliers and ii) paying off the long-term debt which was related to expansion activities. The improved working capital management has resulted in the growth of the company's Free cash flows from operations (FCFO) to PKR 915mln in FY23 (FY'22: PKR 427mln).
The ratings are dependent upon the company’s ability to sustain its healthy business profile amidst strong competition, while, effective and prudent management of financial risk indicators remains important. Moreover, upholding of governance framework is vital.

About the Entity
MACPAC Films Limited was incorporated as a Public Limited Company in 1993. The Company is listed on the Pakistan Stock Exchange. MACPAC Films produces multiple grades of BOPP film variants at an installed capacity of 15,000 MT per annum. The Company's diverse portfolio includes multi-layered CPP film variants, manufactured at an installed capacity of 7,000 MT per annum. These films have applications in confectionery: biscuits, cookies, snacks, tea, and baked products packaging. MACPAC Films is primarily owned by the Elahi family ~47.65%, out of which major ownership residing with Mr Shariq Maqbool Elahi ~15.45%, Mr Habib Maqbool Elahi ~15.45%, and Mr Ehtesham Maqbool Elahi ~16.60%. Munshi family owns a 15.35% stake in the Company. The remaining holding lies with the Employees Old Age Benefit (EOBI) and the Financial Institutions and general public. The Company has a free float of ~35%.