MACPAC Films Ltd. Reports Modest Revenue Growth Amidst Challenges in FY24.

Karachi: MACPAC Films Ltd. (MACFL) recently held its corporate briefing to discuss the financial performance for the fiscal year 2024 (FY24) and outline its future strategies. The company reported a slight increase in revenue, registering PkR5.6 billion compared to PkR5.5 billion in the previous fiscal year, primarily due to price adjustments.

According to AKD Securities Limited, despite the increase in topline, MACFL faced a decline in sales volume, attributed to increased competition from a new market entrant. The company’s production output slightly decreased, with 17,594 tons produced in FY24 compared to 17,833 tons in the same period last year. In response, management is aiming to focus more on producing value-added films to avoid a price war with competitors.

Profitability took a hit this year, with profits recorded at PkR257 million (EPS: PkR4.35), down from PkR379 million (EPS: PkR6.39) in FY23. This decline was primarily due to a significant rise in average gas prices, which surged from PkR1,200/mmbtu in July 2023 to PkR2,750/mmbtu. Despite challenges, the company initiated exports in FY24, achieving PkR103 million compared to no exports the previous year, although export margins remain lower than domestic ones.

Operating expenses rose considerably, reaching PkR303 million in FY24, driven largely by inflationary pressures. As the company currently relies on gas and RLNG for power, upcoming discontinuation plans for gas supply to captive plants by January 2025 have prompted management to explore alternatives such as transitioning to the K-Electric grid or using furnace oil.

To mitigate energy costs, MACFL is installing a 1MW solar power system, with 50% already operational. The management expects solar generation to be more cost-effective compared to grid consumption. The ongoing gas shortages have forced the company to depend on RLNG, increasing energy costs by an additional 20-25%.

The company has also shifted its focus from toll manufacturing, which previously accounted for 55-60% of operations, to exports, which serve as a hedge against potential local currency depreciation. Looking ahead, management anticipates a rise in plastic demand, noting that current plastic consumption per capita is significantly lower at 7.5kg compared to 36kg in developing countries.

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