PACRA Assigns Initial Entity Ratings to Cherat Packaging Limited

Lahore, June 28, 2019 (PPI-OT): The ratings reflect Cherat Packaging Limited’s established position as the largest cement bag manufacturer in the country. Over the years, the company has built a strong business profile and recently diversified its revenues by adding flexible packaging. The company has maintained healthy margins and profitability. It imports its raw material, which remains sensitive to rupee devaluation. However, the management expects to sustain margins through timely inventory procurement and phased passing out of cost.

The long term prospects of the company are linked with demand and expansion in local cement capacity, exports cement demand and flexible packaging business. The company has a leveraged capital structure supplemented by strong coverages and prudent working capital management. The long term debt is related to expansion activities, whereas short term debt has increased recently pursuant to aggressive inventory procurement. The company’s association with Ghulam Faruque Group and its strong governance framework are the rating factors.

The ratings are dependent upon the management’s ability to improve revenues while sustaining margins. Prudent management of the working capital, maintaining sufficient cash flows and optimal capital structure is imperative for the ratings. Materialization of management’s strategy of diversification through flexible packaging into better margins and profitability is important.

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