The Pakistan Credit Rating Agency Limited
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Ayesha Qasim

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PACRA Assigns Initial Entity Ratings to EcoPack Limited

Rating Type Entity
(05-Nov-18 )
Action Initial
Long Term BBB+
Short Term A2
Outlook Stable
Rating Watch -

Pakistan’s Polyethylene Terephthalate (PET) packaging sector mostly derives its demand from bottled water and carbonated beverage industry, while, pharmaceutical and edible oil sectors have become an upcoming demand driver. To cater to this demand, introduction of different PET bottles sizes have become important drivers for the sector’s growth. Strong consumer demand for beverages and other products that use PET packaging remains pivotal to the overall packaging industry's growth.

The industry primarily operates in two segments: PET Preforms and PET Bottles. PET Preform segment is experiencing volumetric growth. Whereas, PET Bottle segment enjoys better margins. The beverage companies in the last few years have installed bottle manufacturing units themselves limiting the growth in bottles segment for the vendors and at the same time creating a strong demand for Preforms from the vendor industry.

The ratings reflect the Company's established position in PET Preform and PET Bottle segments. EcoPack has experienced a rising top-line owing to significant demand growth in PET Preform segment and its increased share in revenues. Strong competition in PET Bottles market has led to modest growth in the Bottles business. However, this has led to an overall decline in margins percentage, as PET Preforms is relatively a lower margin and high volume segment. The Company's overall leveraging has increased but coverages remain comfortable. Sound working capital management lend support to financial profile.

The ratings are dependent upon the Company's ability to continue on it's growth momentum while improving its margins and capacity utilization. Deterioration in margins and/or coverages will have a negative impact on ratings.

About the Entity
EcoPack was formed in 1992. A year later, the Company started its commercial operations of manufacturing and selling Polyethylene Terephthalate (PET) Preforms and Bottles. In 1994, EcoPack was listed on the Karachi Stock Exchange. Over the years, the Company has continued to expand and enhance its facilities to meet the growing demand of PET packaging industry. EcoPack has two product lines, PET Preforms and PET Bottles. Currently, the Company has an annual installed capacity to manufacture 797 million PET Preforms and 304 million PET Bottles. EcoPack provides a complete range of PET Preforms and PET Bottles required by the Carbonated Soft Drinks (CSD) and bottled water industry.

Majority of the Company shares are held by the Jamil family. Mr. Hussain Jamil holding 17.2% shares in the Company, is one of the largest stakeholders of the Company. Investment companies own 2.8% of the Company’s shares. Remaining 60% portion of the shares is a free float, of which 20% shares are held by acquaintances of the Sponsors.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.