Lahore, September 05, 2022 (PPI-OT):Bulleh Shah Packaging (Private) Limited ‘BSP’ or ‘The Company’) ratings reflect the strong sponsor’s profile, established market position, and adequate financial profile of the Company. The Company is a wholly-owned subsidiary of Packages Limited. The assigned rating takes into account the good governance framework, strong control environment, and qualified and experienced management team.

BSP is predominately manufacturing i) Corrugated boxes and ii) Paper and Paper boards. The Company’s market share in the overall industry (Paper and Board) is almost ~15%. Liquid packing board (falls under the purview of paper and Board) – the Company is the sole manufacturer in this segment, and corrugated board – BSP is the major supplier and holds 16% market share.

The production utilization of the Company is directly linked with foods and consumer products. During CY21, the utilization level remained on the higher side Corrugator ~98% and paper and board 87%. In order to cater to growing demand and capture market share of imported paperboard BSP has performed BMR on its paper and board mill to enhance the capacity utilization further.

The assigned ratings also incorporate the consistent growth in sales and higher margins. During CY21, the top line of the Company has increased by 26%, the major contribution is made by corrugated boxes 35% followed by liquid packaging board 18%. The profit after tax of the Company has increased by 19%.

Resultantly, the cash flows have also been improved by 20%. Assessment of financial risk profile incorporates the outstanding insurance claim receivable amounting PKR 3.4bln, due to fire incidence in Feb’22. On the other side, leverage indicators continue to remain elevated on account of higher utilization of short-term and long-term borrowings for funding working capital requirements and performing BMR work on its paper and board mill respectively.

Going forward, the impact of higher finance costs and overheads on profitability is expected to be offset by an improvement in margins and an increase in the topline. However, the Company has been managing its energy requirements by using a mix of Biomass, Gas, and supply from WAPDA. Going forward, short-term borrowing is expected to be lowered considering the receipt of an insurance claim. Moreover, The sponsor’s business acumen and strong connections bode well for the rating.

The ratings are dependent upon the management’s ability to improve margins while sustaining its market share. Prudent management of the working capital, and maintaining sufficient cash flows and coverages are imperative for the ratings. Any significant decrease in margins and coverages will impact the ratings.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com