Press Release

VIS Upgrades Entity Ratings of International Packaging Films Limited

Karachi, June 30, 2022: VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of International Packaging Films Limited (IPAK) to ‘A/A-1’ (Single A/A-One) from ‘A-/A-2’ (Single A Minus/A-Two). Long term rating of ‘A’ signifies good credit quality; protection factors are strong. Risk factors may vary with possible changes in the economy. Short Term Rating of ‘A-1’ indicates high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors and risk factors are minor. Outlook on the assigned rating is ‘Stable’. The previous rating action was announced on February 26, 2021.
The ratings assigned to IPAK take into account its moderate business risk profile underpinned by stable and growing demand supported by end consumers belonging to the FMCG, cosmetic and pharmaceutical sectors, ability to efficiently pass raw material price increase to customers coupled with evolving consumer behavior patterns with increased inclination towards hygienic products post pandemic onslaught. Business risk profile is also supported by sizeable market share held by the company in Bi-axially Oriented Polypropylene films given oligopolistic nature of the industry with limited imports. On the flip side, ratings take note of heightened competition in view of new market entrants along with ongoing capacity expansion initiatives of the existing players. Moreover, the risk profile was elevated on the regulatory front in line with additional custom duty imposed on procurement of raw material, abolishment of anti-dumping duty on the sector and reduction in custom duty on import of final product making import price competitive to indigenous production. The ratings remain sensitive to sizable capital commitments that need to be met from internal revenue generation for set up of associate companies in the medium to long-term.

Assessment of financial risk profile incorporates the company’s conservative financial policy as reflected in low leveraged capital structure, healthy profitability indicators and strong liquidity profile. Revenue growth and improving gross margins on a timeline basis have been a function of increased aggregate demand and higher average selling prices along with inventory gains. Liquidity profile of the company is considered strong as evident from sound cash flow coverages in relation to outstanding obligations. Going forward, strong liquidity position is likely to sustain given decent revenue uptick coupled with no draw down of financing projected. Equity base has augmented during the review period in line with issuance of shares along with healthy internal capital generation. With no plan of procurement of long-term debt in perspective in the foreseeable future, the leverage indicators are projected to improve during the rating horizon. However, the ratings remain sensitive to downturn in country’s macroeconomic indicators involving policy rate increase, commodity super-cycle leading to hike in fuel & energy costs resulting in heightened general inflation, materialization of company’s projections and successful implementation of associate companies’ projects.

For further information on this rating announcement, please contact Ms. Maham Qasim (042-35723411-13, Ext. 8010) and/or the undersigned at 021-35311861-66 (Ext. 207) or email at .

Javed Callea

Applicable rating criterion: Corporates (August 2021)

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