The Pakistan Credit Rating Agency Limited
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Silwat Malik

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PACRA Maintains Entity Ratings To Pakistan Synthetics Limited

Rating Type Entity
(09-Aug-19 )
(11-Feb-19 )
Action Maintain Initial
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Stable Stable
Rating Watch - -

Pakistan’s Polyethylene Terephthalate (PET) packaging sector mostly derives its demand from bottled water and carbonated beverage industry, while, edible oil sector has become an upcoming demand driver. The industry use variants of PET Resin to manufacture plastic caps (closures) and PET preforms. During FY18, PET Resin segment generated a total revenue of PKR 37bln. Having a capacity utilization of 70% - 72%, PET preforms segment is experiencing a volumetric growth and generated an estimated revenue of PKR 27bln. Plastic Closures had an estimated revenue of PKR 2.7bln in FY18.

The ratings reflect Pakistan Synthetics Limited's integrated position in PET industry. The Company entered the business arena by tapping in the PET Resin and Capping segments,. However, recently the Company has set up Preform manufacturing facility. This led the Company's topline to post a volumetric growth. Margins remain stable, however, are subject to volatility in raw material prices due to currency devaluation. Surged exchange loss, in line with high finance cost, stresses the Company's profitability.

The Company's leveraging remains high to fund the working capital requirements. This, coupled with the rising interest rate scenario could exert pressure on the financial profile of the Company. However, the management plans to streamline the debt mix. This, along with better cashflows, is expected to manage the financial risk.
The ratings are dependent on the management's ability to strengthen the relative positioning of the Company in the industry. Improvement in business margins and, in turn, profitability remains imperative. Any deterioration in the Company’s coverages would have negative impact on the ratings.

About the Entity
Pakistan Synthetics Limited was incorporated as a private limited company in 1984. Later, in 1987, the Company was converted to a public limited company. The Company provides a complete range of Plastic Closures and Metal Crowns at an installed capacity of ~559,000 cartons per annum. It also offers a wide range of PET Preforms for various products at an installed capacity of ~25,000 Octabins per annum. The Company also manufactures PET Resins at an installed capacity of 28,000MT per annum. Pakistan Synthetics Limited's manufacturing facilities are located in Hub, Balochistan and Port Qasim, Karachi. While, the registered office is located in West Wharf, Karachi.

Pakistan Synthetic Limited is primarily owned by Haji Karim family (73%). While Mr. Anis Yaqoob holding 10% stake, is the single largest stakeholder of the Company. Financial Institution own 8% of the Company’s shares. Remaining 19% of the stake resides with 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.