PACRA Maintains Entity Ratings of Pakistan Synthetics Limited

Lahore, February 10, 2020 (PPI-OT): Pakistan’s PET packaging industry derives its demand from the country’s beverage industry, which has been negatively impacted due to the reduced purchasing power of end consumers. This, in turn, has reduced the demand for the PET packaging industry’s products. The ratings reflect Pakistan Synthetics Limited’s (Pakistan Synthetics or ‘the Company’) established presence in the PET packaging industry through the provision of an integrated packaging solution to its customers.

Pakistan Synthetics witnessed top-line growth on the back of volumetric increase in sales as the Company continued to establish its new Preform segment. The Company’s margins declined due to increased cost of imported raw material, putting pressure on margins. The increased finance cost and significant exchange loss eroded the Company’s bottom-line as it suffered a net loss in FY19.

Although margins did not improve, stable rupee provided some relief as the Company returned to profitability, albeit modest. The Company’s financial profile remains under pressure due to asset liability mismatch at trade level, declining coverages and high leveraging. The Company has recently received capital through right issue, increasing its equity base and providing cushion for repayment. The ratings draw strength from the Company’s association with a strong business group and sponsor’s demonstrated ability to provide support.

The ratings are dependent on the management’s ability to strengthen the Company’s position in the industry and continued revenue growth. Improvement in margins and reducing the asset liability mismatch remains imperative. Significant decline in coverages may have a negative impact on 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