PACRA Maintains Entity Ratings of Macpac Films Limited

Lahore, October 05, 2020 (PPI-OT): Macpac operates within the Biaxially Oriented Polypropylene (BOPP) and Cast Polypropylene (CPP) segments of the industry. Both are petrochemical of which price is linked to oil and gas prices, which causes volatility. Its raw material polypropylene (PP) is not manufactured in Pakistan and its demand is met almost entirely by imports. So the key input is dependent on regional supply and demand dynamics as well as strength of PKR. Exchange rate volatility also put pressure on the industry margins. Revenues growth of the players in packaging industry became slow due to increased competition.

The assigned ratings reflect Macpac Films relatively stable position in the packaging industry and strong acumen of the sponsors. The Company’s margins showed an improvement – both at gross and operating levels – resulting a decrease in net losses for 3QFY20. Decreasing raw material cost coupled with predictable exchange rates volatility translates into better gross margins. New Cast Polypropylene (CPP) unit achieved 35% capacity utilization during the period and will add in profitability as utilization will increase in future.

The Company has increased its leveraging during 3QFY20, though it remains moderate, with certain repayments coming up. The equity base has reduced due to losses. The ratings are dependent on improving margins and profitability of the Company as a going concern. Meanwhile, adequate equity base and intact coverages is imperative. Sustained losses will have negative impact on 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