Lahore, August 21, 2023 (PPI-OT): The ratings reflect Packages Convertors Limited (“PCL" or the "Company") association with Packages Limited, the holding Company of Packages Convertors. In 2020, after internal restructuring, the manufacturing business of Packages Limited were transferred to PCL, which is now a wholly-owned subsidiary of Packages Limited. PCL has a prominent market presence in its operational segments - Packaging (Flexible Packaging and Folding Cartons) and Consumer Products (Tissue and Sanitary Napkins). PCL enjoys the largest market share of Tissues, Folding Cartons and Flexible Packaging. The production of each segment is directly linked with the demand of food products and consumer goods. Considering the higher demand, the utilization level has remained on the higher side.

On the financial profile side, during 6MCY23 the Company has reported growth in sales by 32.8%, to PKR 25.9bln (SPLY: 19.5bln). The major contribution in sales growth came from Tissue segment. The profit after tax of the Company has increased resulting in improved NP margins from 5.5% to 7.5%. The cash flows have also been improved as compared to last year. The strategic relationships with international suppliers helped the Company in reaping the benefits of catering demand.

However, the capital structure of the Company remained highly leveraged ~73% (6MCY22: 74%) which would remain imperative to the ratings where the long-term debt is related to expansion activities. However, good FCFO provides a cushion for the financial cost and debt repayment. Going forward, in order to strengthen its market position, the Company is in the process of further expansion and other technological advancements. The backing of Packages Limited is playing a pivotal role in supporting the current rating.

The ratings depend upon the management's capacity to enhance profit margins while upholding its market share. Skillful oversight of working capital, lowering the leverage ratio, robust cash flows, and adequate coverage are under considerations for the ratings. The successful execution of the management's diversification strategy, leading to improved margins and heightened profitability, holds significant importance. The ratings would be impacted by decline in margins or coverages.

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: [email protected]

Website: www.pacra.com