PACRA Maintains Entity Ratings of Pakistan Synthetics Limited
Pakistan Synthetics Limited ( "PSL" or the "Company") rating reflects the strong sponsor profile, satisfactory market position, and adequate financial profile of the Company. The principal activity of the Company is the manufacturing and sale of Plastic and Crown Caps, PET resin and PET Preform. As per management representation, Pakistan Synthetics holds a moderate market share of ~10%-15% in the PET Resin segment. Whereas, in the Plastic Caps and Metal Crowns, the Company is a market leader with an estimated share of 60% and 15%-20% in PET Preform. The demand for Pakistan’s PET packaging industry is seasonal in nature as it mostly drives its demand from the country’s beverage sector. PET Preform is the largest segment and it made a major contribution to total revenue of 37% in 6MFY23. While metal crowns and plastic caps contributed 29% and 34% in PET Resin.
On financial side, the Company earned a top-line of PKR 5,810mln (SPLY: PKR 5,016mln). The top line of the Company increased by 16% in 6MFY23. The demand for the product has increased rapidly which leads to piled-up inventory. The Company's net profit decreased by 27% to PKR 411mln (SPLY: PKR 564mln). The decline in profitability is attributable to higher cost of production and increasing finance costs. The Company has a low leveraged capital structure. Long-term debt is related to expansion activities, whereas short-term debt has increased substantially to cater the increasing needs of working capital management. Going forward, the Company focused on consolidating its position in the industry and increasing PET Preform's capacity to accommodate the diverse demands.
The ratings would remain dependent upon the Company’s ability to sustain its healthy business profile amidst strong competition, herein, effective and prudent management of financial risk indicators remain important.
Pakistan Synthetics Limited was incorporated as a private limited company in 1984. In 1987, the Company was converted into a public limited company and was listed on the Pakistan Stock Exchange. The Company provides complete packaging solution through the production and sale of PET Resin at an installed capacity of 28,000MT per annum, PET Preform at an installed capacity of 31,000 Octabins per annum and Plastic Closures and Metal Crowns at an installed capacity of 558,570 cartons per annum. Pakistan Synthetics' manufacturing facilities are located in Hub, Balochistan and Port Qasim, Karachi. The Company's registered office is located in Clifton, Karachi. Pakistan Synthetics is primarily owned by the Yaqoob Karim family (~73%) through individual family members. Mr. Yaqoob Haji Karim (~20%)and Mr. Noman Yaqoob (~21%) are the two largest stakeholders of the Company. Approximately 15% of the stake resides with the general public.