The Pakistan Credit Rating Agency Limited
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Shazia Afzal

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PACRA Maintains Entity Ratings of EcoPack Limited

Rating Type Entity
(30-Apr-21 )
(07-May-20 )
Action Maintain Maintain
Long Term BBB+ BBB+
Short Term A2 A2
Outlook Negative Negative
Rating Watch Yes Yes

The ratings reflect EcoPack's established position in PET Preform and PET Bottle segment with 10% and 26% market share respectively and its strategic location in North. The PET packaging sector mostly derives its demand from water bottles, Carbonated Soft Drink (CSD) industry, pharma and other consumables. The increase in consumer demand for CSD products and conversion from glass to plastic bottles in recent years brought significant growth in PET packaging industry. However, the industry remains exposed to seasonality as beverages demand remains higher in summer months. In recent years, the Company's sales mix has shifted towards preforms from the bottling segment, which is a lower margin segment, resulting decreasing topline at the first hand. Decreased PET Resin prices due to falling crude oil prices internationally may reduce some pressure on margins and lowered financing expense on the back of reduced benchmark rates will help the Company to improve its bottom line in the long run. The Company’s capital structure remains moderately leveraged, though borrowings have shown meager increase. The Company's working capital is well managed resulted in low short term borrowings during the period. The local procurement of the raw material (PET Resin) relieved the Company from any supply chain issues during critical times.
The 'Rating Watch' signifies uncertainty created by the COVID-19 outbreak in the prevailing challenging economic environment. The Company remains operational as it is exempted from shutdown, being related to food & allied sector. The demand may take time to recover amidst countrywide lockdown and closure of restaurants, banquet halls, and non-essential shops.
The ratings are dependent on the Company's ability to sustain volumes and top-line in current scenario. Meanwhile, improving margins along with positive bottom line remains critical. Prolonged lockdown, resulting in significant dip in demand and sustained losses would have negative impact on the ratings.

About the Entity
EcoPack was incorporated as a public limited Company in 1992. EcoPack was listed on the Pakistan Stock Exchange (Formerly Karachi Stock Exchange) in 1994. EcoPack has two product lines, namely i) PET Preforms, and ii) PET Bottles. Currently, the Company has an annual installed capacity to manufacture 729 million PET Preforms and 327 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 Mr. Hussain Jamil (17.2%) shares in the Company and is the largest shareholder. Around 56% shares are held by acquaintances of the Sponsors while 27% shares are held by general public. EcoPack’s BoD comprises two independent Directors, four non-executive Directors and one Executive Director. Jamil family dominates the Board with five directors representing the family.

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.