The Pakistan Credit Rating Agency Limited
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Ateeb Riaz

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PACRA Maintains Entity Ratings of EcoPack Limited

Rating Type Entity
(06-Nov-19 )
(07-May-19 )
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

The ratings reflect EcoPack's established position in PET Preform and PET Bottle segments. PET packaging sector mostly derives its demand from bottled water, Carbonated/other Soft Drink (CSD) industry and strategic location. The increase in consumer demand for CSD products over the years and conversion to plastic bottles from glass brought significant growth in PET packaging industry. However, the industry remains exposed to seasonality as demand is higher in summer months. The overall growth in demand is reflected in the top-line of EcoPack as it maintained its market share in the industry. The Company was unable to translate this growth in gross profit as sales mix shifted to greater preform sales, a lower margin product. The growth in bottling segment was limited as most CSD industry players have in-house bottling plants. The margins were also lower as imported raw material and other input costs increased and could not be passed onto customers entirely. This led to lower profitability. The Company's leveraging increased during the year but remains moderate with adequate coverages. The Company utilized higher short-term borrowings to manage its working capital needs. This led to exhaustion of borrowing cushion at trade level.
The ratings are dependent on the management's ability to strengthen the relative positioning of the Company in the industry. Improvement in volumes, business margins and, in turn, profitability remains imperative. Any elongated drop in volumetric sales and/or deterioration in the Company’s coverages would have negative impact on the ratings.

About the Entity
EcoPack was incorporated as a public limited Company in 1992. A year later, the Company started its commercial operations of manufacturing and selling Polyethylene Terephthalate (PET) Preforms and Bottles. EcoPack was listed on the Pakistan Stock Exchange (Formerly Karachi Stock Exchange) in 1994. 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, namely i) PET Preforms, and ii) 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's shares are held by the Jamil family (~32%). Mr. Hussain Jamil holds 17.2% shares in the Company and is the largest shareholder. Around 38% shares are held by acquaintances of the Sponsors while 32% shares are held by general public. EcoPack’s BoD comprises two independent Directors, three non-executive Directors and two Executive Director. Jamil family dominates the Board with five directors representing the family. Mr. Hussain Jamil , the CEO, has been associated with the Company since its inception. He is a seasoned businessman and carries over 40 years of experience.

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.