Over the years, the company has successfully been able to achieve growth through leveraging its products and forming long-term fruitful alliances and associations. The firm's key business partners include Unilever, Nestle Pakistan, Tri-Pack Films, Tetrapak Pakistan Limited and Coca-Cola beverages Pakistan among others.
Currently, Packages is the only company in Pakistan offering a complete set of packaging solutions including printed cartons, flexible packaging and shipping containers to the local consumer industry. In the last five years, Packages has made several expansion attempts. In 2011, it installed a lamination machine in the flexible department, completed the rebuild project of Paper Machine PM-6 leading to capacity expansion of 30,000 tons and upgraded the Corrugator Machine in Kasur Plan.
In 2012, it signed a 50/50 Joint Venture agreement with StoraEnso OYJ Group of Finland in its 100 percent wholly owned subsidiary, BullehShah Packaging (Private) Limited. The agreement was implemented in 2013 and Packages completed the transfer of assets and related obligations of Paper & Paperboard and Corrugated business operations to BullehShah Packaging (Private) Limited along with cash equity injection. Packages now holds 65 percent equity in BullehShah Packaging (Private) Limited. In the same year, Packages also invested in a New Rotogravure Machine for its Flexible Packaging Business.
During 2014, the Company invested in an Offset Printing Line to remain abreast of improved technological developments in the Packaging business. In 2015, Packages invested in a new toilet roll line to cater to the growing demand. The company also completed the acquisition of 55 percent share in the operation of a flexible packaging company in South Africa. Further, during 2015, the Board of Directors resolved to start a 50/50 joint venture with Omya Group of Switzerland to set up a production facility to supply a range of high quality ground calcium carbonate products.
Industry and stock performance Packaging industry in Pakistan can be divided in to two sectors. The unorganised and organised sector roughly has a 50/50 percent, and enjoys a direct link to the consumer sector and overall growth of the economy, and thus has high valuation on the stock market. Packages Limited has largely moved with the market over the last one year except in the last couple of months, which could be attributed to a relatively slow first quarter of CY17 in terms of profitability.
Packages Limited - Performance CY16 and 1HCY17 Packages Limited's financial performance in CY16 was a treat for the company. Net revenues were up by five percent year-on-year. However, the overall volume growth was 15 percent in CY16, which was offset by price discounts passed onto the customers of the packaging division due to the deflationary trends in the raw material and fuel and power costs. The firm's earnings jumped by 70 percent year-on-year.
Segment wise, the Packaging Division saw marginal growth in sales, while the volumes in CY16 were up by 12 percent year-on-year. Fall in the top line was again due to the factors mentioned earlier: price discounts on the back of deflationary trends in raw material and fuel and power costs and also lower sales of tobacco industry.
The Consumer Product Division did well in terms of sales growth, which was 18 percent year-on-year in CY16. Earnings of the division were up on account of revenue growth, improved capacity utilization, operating cost control initiatives and overall lower fuel and energy costs.
In short, CY16 was a pleasant year for the firm. The company showed a decent increase in its top line on the back of growing FMCG sector. The higher sales along with growth in dividend income helped Packages Limited to give a tremendous bottom-line.
However, CY17 seems to have started on a slower note for the firm as the top line remained stagnant in 1QCY17, and grew only by three percent year-on-year in 1HCY17. The firm's bottom line receded by six percent year-on-year in 1QCY17, and it is flat in 1HCY17.
Outlook Packages expresses its intent to continue focus on improving shareholders' value by increasing and diversifying revenue and customer base, investing in new technology and ensuring production efficiencies. The firm has been investing vigorously, and has ambitious future plans. In efforts towards technological up gradation, PKGS invested Rs 292 million in a new offset printing line having double coating capability in 2016 to cater to the growing demand in the folding cartons business.
The company also made an investment of Rs 122 million in their pre-press department for a state of art engraving machine and cylinder making line to provide its customers with the highest quality of printing. Furthermore, it also made strategic investments of Rs 82 million including a new facial line, toilet roll line and a fully automated party pack machine to meet growing customer demand in 2016.
Also part of its investments in 2016 was Rs 309.5 million in the equity of OmyaPack (Private) Limited to set up a state of the art production facility in Kasur, Punjab that will supply a range of high quality ground calcium carbonate products specifically tailored to meet local and regional markets. Furthermore, Packages also subscribed to the right shares offered by its associated company, Tri-Pack Films Limited investing Rs 367 million.
Diversifying into different lines, the firm has incorporated a wholly-owned subsidiary, Packages Power (Private) Limited, for the purpose of setting up a 3.1 MW hydropower project with an initial equity injection of Rs 25 million.
The firm has also developed a retail mall - Packages Mall - in Lahore, which is now bustling with visitors.
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PACKAGES LIMITED
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2014 2015 2016
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Profitability
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Gross margin (%) 14.68 20.98 21.49
Net margin (%) 18.22 23.73 41.34
Total Assets Turnover Ratio 0.25 0.28 0.27
Fixed Assets Turnover Ratio 4.18 4.27 3.97
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Liquidity
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Current Ratio 1.67 1.61 1.53
Quick Ratio 1.13 1.15 1.08
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Gearing
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Debt : Equity Ratio 8:92 8:92 7:93
Return on Equity (%) 5.07 6.90 10.60
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Investment
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Basic EPS (Rs.) 29.89 37.42 62.61
Diluted EPS (Rs.) 26.59 33.62 58.45
Price - Earning Ratio 22.70 15.56 13.58
Interest Cover Ratio 4.67 7.08 6.43
Dividend Yield (%) 1.32 2.58 2.94
Dividend Cover Ratio 3.23 2.46 2.50
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Source: Company accounts
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Packages Limited
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Rs (mn) 1HCY17 1HCY16 YoY
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Local sales 10,416 10,039 4%
Export sales 11 13 -15%
Gross sales 10,427 10,052 4%
Net sales 8,827 8,591 3%
Cost of sales 7,018 6,496 8%
Gross profit 1,809 2,095 -14%
Administrative expenses 544 450 21%
Distribution and marketing costs 584 479 22%
Other operating expenses 266 299 -11%
Other operating income 106 138 -23%
Profit from operations 521 1,004 -48%
Finance costs 226 282 -20%
Investment income 3,550 3,127 14%
PAT 3,120 3,129 0%
EPS( Rs. Basic) 34.41 35.15
EPS (Diluted) 32.63 30.54
Gross profit margin 20.49% 24.38%
Operating profit margin 5.90% 11.69%
Net profit margin 35.35% 36.43%
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Source: Company accounts
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Pattern of Shareholding - PACKAGES LIMITED
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Shareholders' category Percentage
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Associated Companies, Undertakings and Related Parties 35.17%
Directors and their spouse(s) and minor children 2.65%
Banks, Development Finance Institutions, Non-Banking Finance 2.78%
Insurance Companies 7.70%
Modarabas and Mutual Funds 14.55%
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General Public:
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Local 21.17%
Foreign 7.84%
Others 8.14%
Total 100%
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Source: Company accounts
Copyright Business Recorder, 2017