Press Release
VIS Maintains Entity Ratings of CBM Plastics Private Limited
Karachi, November 22, 2024: VIS Credit Rating Company Limited (‘VIS’) has maintained the entity ratings of CBM Plastics Private Limited (‘CBM’ or ‘the Company’) at ‘BBB+/A2’ (Triple B plus/A Two). Medium to long term rating of 'BBB+' indicates adequate credit quality; Protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short-term rating of 'A2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings have been changed to ‘Positive’ from ‘Stable’. Previous ratings action was announced on December 21, 2023.
CBM was founded in 1992 and specializes in production and sale of plastic containers and packages. The product portfolio mainly includes blow-molded plastic drums, containers, jerry cans, caps and closures that are primarily supplied to the lubricant oil industry. Manufacturing facilities are located at S.I.T.E industrial area, Karachi. It is a family-owned business, with two members collectively owning more than 60% shareholding and the rest held by the other family members.
Assigned ratings take into account the business risk profile of CBM, operating in the downstream segment of Pakistan's plastic industry. The company manufactures blow-molded plastic containers and packaging solutions for the lubricant oil industry, a sector characterized by stable demand but moderate competition. The ratings consider the impact of raw material price volatility, primarily due to fluctuations in global oil prices and exchange rates, as well as regulatory considerations related to environmental policies. CBM’s dominant market share within the segment provides support to its business risk profile, partially mitigating these risks. However, the Company faces an elevated client concentration risk, which is mitigated by established relationships with major clients.
Assigned ratings also take into account CBM's financial risk performance, which reflects revenue growth driven by price adjustments and modest volume increases in FY24. The gross margin remained stable despite rising power costs, supported by regular price adjustments and inventory management practices. Capitalization metrics improved marginally due to profit retention and reduced short-term borrowings, while liquidity indicators were adequate, with a higher current ratio and improved cash conversion cycle. Debt service coverage remained stable, although slightly impacted by increased finance costs in a high-interest-rate environment.
Going forward, ratings will remain sensitive to CBM's continued ability to enhance capitalization indicators, particularly in equity base expansion. Moreover, the management’s ability to maintain sound profitability, coverage and liquidity metrics will also be important considerations for future reviews.
For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf