Packages – improved operational performance

Operationally, Packages Limited continues on a strong growth path. Similar to last quarter, top-line grew because of 18 percent increase in local sales, whereas exports reversed trend to register growth of 53 percent. With gross profit margin maintained and overheads controlled through improved capacity utilization and tighter control over fixed costs, the company saw a significant increase in operating profit. Overall the bottom-line declined, primarily because of a decrease in investment income.

In the last calendar year, Packages made investment of over Rs700 million to improve quality and increase capacity of its packaging division. The investment has been paying off in terms of an increase in top-line which has trickled down to higher operational profits.

Last quarter, the consumer products line registered a marginal growth of 2 percent YoY. To remedy that, Packages geared up promotional activities to boost growth which is why marketing expenses have increased in line with sales. Keeping past trends in mind, it appears that top-line has been driven by volumetric growth.

Investment income consists of dividend from subsidiaries and associates, among which some of the most significant are DIC Pakistan Limited, Packages Lanka (Pvt.) Limited, IGI Holdings Limited (formerly IGI Insurance Limited), and Bulleh Shah Packaging (Pvt) Limited.

DIC Pakistan’s area of business is industrial inks. With an increase in cost of raw materials, it has seen declining profits in the recent past. Packages Lanka is engaged in production of flexible packaging and has seen profits decrease due to growing competition and increase in raw material costs. Though Bulleh Shah has seen a rise in profits last year and IGI has posted significant growth last quarter, it appears their performance may have been unable to compensate for others hence the decrease in dividend payments.
Another possible reason for a decline in investment income has been a timing difference of declared dividends which have resulted in a lower recorded net profit in previous quarter.

The JV company, OmyaPack (Pvt.) Limited is in its final stages of setting up a production facility of high quality ground calcium carbonate products for local and regional markets. Commercial production was expected to start in the second quarter of this year and is likely to impact the company’s performance going forward.