The Pakistan Credit Rating Agency Limited
Press Release


Shahzad Saleem

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PACRA Maintains Entity Ratings of Packages Limited

Rating Type Entity
(30-Jun-18 )
(30-Dec-17 )
Action Maintain Maintain
Long Term AA AA
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings reflects sound risk profile of Packages Limited. Over the years, company has shown a strong character converting its challenges into opportunities. Sponsor's business acumen and their widespread reach have been beneficial.

The company enjoys a strong market presence in its segments - packaging (flexible and cartons) and consumer products (tissue paper). Company continues to increase its top-line backed by volumetric growth. Overall a decline was witnessed in the margins owing to surge in raw material prices followed by increase in marketing expenses, impacting operating profits of the company's core business. Although competition is heating up for its tissue business, the management is confident to hold current performance pattern.

The company holds a sizeable investment book of 64bln comprising strategic (PKR 18bln) and non-strategic investments (PKR 46bln). These generate a healthy dividend stream and support the companys' bottom line.

Packages has inaugurated Packages Mall – a Real Estate Project as a part of its diversification strategy. It became operational in CY17. The new JV of calcium carbonate– OmyaPack (Pvt.) Ltd - with an international player is progressing as envisaged. It is expected to begin commercial operations in CY18. Meanwhile, Bulleh Shah is expected to overcome its' difficult times based on efforts to achieve operational efficiencies. Potential dividend income from Packages Mall, Bulleh Shah Packaging, and OmayaPack are expected to compensate to a certain extent the ending dividend stream from TetraPak - an already divested entity.

The ratings are dependent upon timely commencement of the growth activities and inflow of stable income. The ratings draw comfort low leveraged capital structure and its ability to maintain margins from it's core operations.

About the Entity
Packages Limited was established in 1957 as a Joint Venture between Ali Group of Pakistan and Akerlund & Rausing of Sweden, to convert paper and paperboard into packaging for consumer industry. Packages is listed on the Pakistan Stock Exchange (PSX) since 1965. Over the years, Packages has continued to enhance its facilities to meet the growing demand of packaging products. The Company has two business units in packaging division: folding cartons and flexible packaging. It started commercial production of tissue paper in 1982 and currently provides a complete range of tissues and personal hygiene products. Over the years, Packages has invested in other businesses that has given it character of a sizeable investment company as well.

Ali Group holds 50% shares of the company through individual family members (14%) and various entities (36%), with IGI Holdings owning the prime share of 28%. Foreign partners and financial institutions own 8% and 24% stake respectively, in the company. Remaining 18% shares are held by general public.

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.