Karachi, The Pakistan Credit Rating Agency Limited (PACRA) has maintained its ratings for Salman Paper Products Private Limited (SPPPL), a prominent importer and trader in the paper and board industry. The ratings reflect the company's robust sales model and strong market presence, especially in southern Pakistan, despite facing operational and governance challenges.
According to The Pakistan Credit Rating Agency Limited, SPPPL, led by CEO Mr. Muhammad Aslam Jilani, who holds 99% of the company's shares, operates with a lean governance model that includes only two board members and lacks formal board committees and an internal audit function. This governance structure is noted as a weakness compared to larger corporations. However, the company benefits from the expertise of an external auditor who is on the State Bank of Pakistan's panel and holds a QCR rating, providing some reassurance about the financial oversight.
Salman Paper Products has managed to navigate industry-wide challenges such as decreased demand and higher input costs due to inflation and exchange rate fluctuations. The company reported a production capacity utilization drop to about 70% in FY23 from 97% in FY22. Despite these challenges, SPPPL achieved a topline growth of approximately 5.8% in FY23, reaching PKR 10,091 million, up from PKR 9,542 million in FY22.
The company's profitability also improved, with gross profit margins increasing from 3.7% in FY22 to 5.7% in FY23. This margin enhancement was primarily due to effective price adjustments passed on to consumers, helping to offset rising costs. Net profit margins followed suit, improving from 1.1% to 1.7%, leading to a bottom line of PKR 171 million in FY23, up from PKR 104 million in FY22.
PACRA's ongoing rating for SPPPL is contingent on the company's ability to further improve profit margins and sustain its market share amidst fluctuating market conditions. The agency highlights the importance of prudent working capital management and maintaining adequate cash flow to support operations.