PACRA Upgrades the Entity Ratings of Pearl Petro Industry (Pvt.) Limited

The rating upgrade reflects the strengthened financial profile of Pearl Petro Industry (Pvt.) Ltd. ("Pearl Petro" or "the Company"), supported by improved profitability, enhanced coverage indicators, and a stronger overall credit profile. The Company's equity base of Rs. 1.97 billion provides a substantial cushion against leverage-related risks and supports its financial flexibility. Pearl Petro is engaged in the manufacturing and sale of specialized polypropylene (PP) bags, polyethylene (PE) bags and sheets, farmhouse PT sheets, and various other plastic sheet products.During the period, overall capacity utilization remained at satisfactory levels across most product segments. However, utilization in the shopping bag segment declined to 38%, primarily reflecting weaker market demand, resulting in underutilized capacity within this category. Despite this segment-specific weakness, the Company maintained stable operations across its remaining product lines. To support future growth and reduce product concentration risk, the Company is pursuing diversification through the planned commissioning of a new plant for the production of geomembrane films. This strategic initiative is expected to broaden the Company's product portfolio and strengthen its market positioning. Geomembrane films are widely used as anti-seepage barriers in water conservation and infrastructure projects, helping prevent water loss, mitigate structural erosion, and enhance the integrity of earth-fill and concrete dams.
The Company's raw material procurement remains largely import-dependent, with resin sourced from Saudi Arabia, the United States, the UAE, Kuwait, Singapore, and Qatar. Consequently, Pearl Petro remains exposed to foreign exchange volatility. Nevertheless, the impact of currency fluctuations has remained manageable relative to the Company's earnings base, while continued profitability and strong capitalization provide adequate capacity to absorb such risks. Despite a decline of 22% in revenue during FY25, primarily attributable to lower sales in the shopping bag segment, the Company demonstrated resilience in its earnings profile through improved cost management and strategic inventory procurement. Consequently, profitability margins expanded, leading to higher net profitability and stronger cash flow generation. Although inventory build-up, undertaken to mitigate supply chain disruptions amid geopolitical uncertainties arising from the Iran-Israel conflict resulted in a stretched working capital cycle and increased short-term borrowing requirements, the Company's enhanced EBITDA generation supported adequate debt-servicing capacity. The resulting improvement in coverage indicators and maintenance of a strong equity base underpin the strengthening of the Company's overall credit profile. During FY25, the Company reported Profit After Tax amounting to PKR 244mln (FY24: PKR 243mln, 1HFY26: PKR 123mln).
The rating remains constrained by the Company's elevated working capital requirements, which continue to exert pressure on liquidity and necessitate reliance on short-term borrowings. Going forward, sustained revenue growth, continued improvement in profitability, and the maintenance of strong coverage metrics will remain critical to supporting the assigned rating.

About the Entity
Pearl Petro Industry (Pvt.) Limited (the Company), established in 1979 and incorporated in 2014 under the Companies Act, 2017, manufactures packaging materials. The Company specializes in producing polypropylene bags, polyethylene bags (liner bags), farmhouse PT sheets, and other plastic sheets.
The Company is predominantly a family-owned enterprise. Mr. Munawar Hussain Malik, the founder and CEO, holds the majority stake (~72.7%) in the Company. His elder son, Mr. M. Ahmed Malik, owns the remaining shares (~27.8%). As Chairman and CEO, Mr. Munawar oversees all major decisions and strategic directions of the Company.