PACRA Maintains Entity Ratings of Packages Convertors Limited

The ratings reflect Packages Convertors Limited's ("PCL" or the "Company") strong competitive position, supported by its strategic importance within the Packages Limited Group and its established presence in Pakistan's packaging and consumer products industry. The Company maintains a leading position across its core business segments—Packaging (Flexible Packaging & Folding Carton) and Consumer Products (Tissue & Sanitary Napkins). Its competitive profile is further supported by a diversified customer base, long-standing relationships with leading FMCG companies, and strong execution capabilities. Demand for the Company's products is closely linked to the consumption of essential food, beverage, pharmaceutical, and personal care products, underpinning the resilience and stability of its operations. The ratings further incorporate PCL's ability to leverage its strong market position, operational efficiencies, and favorable long-term demand dynamics within Pakistan's packaging and consumer goods sectors. The Company's cost structure remains exposed to imported raw materials, particularly plastic resins and chemical wood pulp. During FY25, chemical wood pulp imports declined by 8.9% YoY to USD 159.5mln from USD 175.1mln, reflecting the gradual shift of paper producers toward non-wood fibers and agricultural residues. During CY25, the Company continued to expand its balance sheet, with total assets increasing to PKR 38.8bln from PKR 33.2bln in CY24, primarily driven by investments in fixed assets, including the implementation of the SAP S/4HANA ERP system and ongoing capital expenditure, and the expansion of the Folding Carton plant in Karachi. The asset base expanded during CY25, with inventory and trade receivables increasing to 18.4% and 13.9% of sales, respectively. Meanwhile, the equity base strengthened to PKR 10.5bln from PKR 8.7bln, reflecting the Company's improved capitalization. While borrowings increased to finance capital expenditure and working capital requirements, the Company's capital structure remained adequate, with the gearing ratio improving to 62.8% in CY25 from 63.8% in CY24, reflecting the increase in the equity base. Going forward, the Company will maintain leverage at an appropriate level to support the Company's financial profile. On the earnings front, the Company reported net sales of PKR 51.1bln in CY25 compared to PKR 49.1bln in the preceding year, reflecting a year-on-year growth of approximately 4.0%, primarily driven by volume-led growth across its core business segments. Despite the increase in revenue, the gross profit margin moderated to 23.5% from 25.0% in the preceding year due to elevated input costs, while higher administrative and distribution expenses also weighed on profitability. Lower finance costs partially offset these pressures, resulting in a marginal increase in profit after tax to PKR 2.8bln (CY24: PKR 2.76bln). Consequently, the net profit margin remained broadly stable at 5.5% (CY24: 5.6%), demonstrating the Company's ability to maintain profitability while continuing its expansion initiatives.
The ratings are dependent on the Company's ability to sustain its market position while maintaining profitability, cash flow generation, and effective working capital management. Maintaining leverage and coverage indicators at appropriate levels, along with the timely realization of benefits from ongoing expansion initiatives.

About the Entity
It is a wholly owned subsidiary of Packages Limited and is principally engaged in the manufacture and sale of packaging materials and tissue products. Tariq Iqbal Khan holds the position of Chairman of the Company. Mr. Khan is a member of ICAP and has been associated with the Company for six years. The CEO of the Company Mr. Syed Hyder Ali has been associated with the Company since its inception and is also the Managing Director of Packages Limited.