June 17, 2020 (PPI-OT)

Following is the text of press release issued by The Pakistan Credit Rating Agency Limited (PACRA)

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The ratings reflect Packages Limited's ('Packages' or 'the Company') holding company character and robust profile built over the years as the flagship Company of the Ali Group. The sponsor's business acumen and strong connections have remained beneficial. Lately, the Company is in process of internal restructuring and will transfer the manufacturing business into 100% owned subsidiary; Packages Convertors Limited. Packages has prominent market presence in its operational segments - Packaging (Flexible Packaging and Folding Cartons) and Consumer Products (Tissue).

The Company was able to pass on the surge in raw material prices and maintained its margins. However, profitability remained subdued due to high finance cost and low dividend income after discontinuation of dividend stream from Tetra Pak Limited. In the wake of recent pandemic, volumes remain low in tissue and flexible packaging businesses. However, the management is confident to hold its market share share and improve performance, going forward, despite rise in competition. The profitability of the Company is expected to remain under pressure as envisaged dividend flow from investments may be delayed due to prevailing situation.

Packages holds a sizable investment book ~ PKR 43bln (as at Mar-20), comprising core (PKR 12bln), strategic (PKR 5bln) and non-strategic (PKR 26bln) investments. Packages Mall, a real estate venture, is operational as envisioned. However, it had to waive off rents due to Covid-19. OmyaPack (Pvt.) Ltd, a JV with an international player for calcium carbonate, became operational and is still evolving. While, Bulleh Shah Packaging (Pvt.) Ltd. has generated profits for the first time. In CY19, Packages financed CAPEX and working capital needs through debt. However, leveraging remains low and strong coverages provide comfort.

The ratings are dependent upon achieving operational efficiency, holding margins and building sustainable dividend stream from maturing investments. Maintaining low leveraged capital structure and strong coverages is critical. Predictable and consistent impact of internal organizational restructuring would remain imperative.

For more information, contact:AnalystThe Pakistan Credit Rating Agency Limited (PACRA)Awami Complex, FB1, Usman Block New Garden Town,Lahore - PakistanTel: +9242 586 9504 -6Fax: +9242 583 0425Email: hammad.rashid@pacra.comWeb: www.pacra.com

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© Pakistan Press International, source Asianet-Pakistan