MACPAC Films Limited (MACFL) was incorporated in Pakistan as a limited liability company in 1993. The company is engaged in the manufacturing, buying and selling of plastic packaging. MACFL specializes in biaxially oriented polypropylene (BOPP) and Cast polypropylene (CPP) films as well as different value addition films.

Pattern of Shareholding

As of June 30, 2022, MACFL has a total of 59.301 million shares outstanding which are held by 1308 shareholders. Directors, their spouses and minor children form the largest shareholding category of MACFL with around 48 percent shares. This is followed by general public with 40.53 percent stake in the company. Government of Pakistan holds 7.87 percent shares of MACFL through EOBI. Around 1.74 percent of the company’s shares are held by Modarabas and Mutual funds. The remaining shares are held by other categories of shareholders.

Historical Performance (2018-23)

Barring 2020, MACFL’s topline has been on an upward journey since 2018; but, its bottmline doesn’t seem to comply. In 2019, MACFL posted operating as well as net loss which continued in the subsequent year, however, with a lesser magnitude. The company recovered from losses in 2021 but in the very next year, the bottomline again took a nosedive. In 2023, MACFL registered the highest bottomline growth. The margins follow the same path as the bottomline and maxed out in 2023 after a plunge in 2022. The detailed performance review of each of the years under consideration is given below.

In 2019, MACFL’s topline registered a 14 percent year-on-year growth. During the year, the company sold a total of 9682 MT of plastic packaging which included CPP as well as BOPP. During the year, the company enhanced its product portfolio by starting the commercial production of its newly installed CPP plant with an annual capacity of 7000 MT. During the first year of its production, the CPP plant managed to produce 1121 MT of CPP. However, the sales growth couldn’t trickle down effectively as cost of sales hiked by 22 percent year-on-year in 2019 due to soaring petrochemical landed cost which was the result of Pak Rupee depreciation. Furthermore, increased gas prices also fueled the fire. The company couldn’t increase the prices proportionately due to intense competition. As a consequence, gross profit shrank by 54 percent year-on-year in 2019 with GP margin slipping to 4.3 percent from 10.5 percent in 2018. Administrative expense grew by 14 percent year-on-year due to higher payroll expense as the employee count increased after the installation of CPP plant. Marketing expense also surged on account of higher payroll expense coupled with concentrated sales promotion. A massive exchange loss of Rs.112.496 million propelled a 206 percent year-on-year growth in the other expense. Other income multiplied by 171 percent year-on-year due to revision of provision for ECL as well as gain on the disposal of operating fixed assets; hence it formed up 0.8 percent of MACFL’s net sales in 2019 versus 0.3 percent in 2018. The company posted an operating loss of Rs.111.96 million in 2019 versus an operating profit of Rs.88.62 in 2018. Finance cot grew by 196 percent year-on-year in 2019 as the company incurred capital expenditure for setting up a new plant. Moreover, high discount rate also had a role in driving the finance cost up. MACFL ended up making a net loss of Rs.233.92 million in 2019 with a loss per share of Rs.3.94.

During 2020, MACFL’s topline registered a 10 percent year-on-year drop. This was despite 17 percent rise in the sales volume which clocked in at 14,600 MT in 2020. The revenue drop was the consequence of changes made in the sales mix during the year. A major milestone achieved during the year was the beginning of export sales which diversified the company’s geographical markets. The capacity utilization of BOPP plant dropped to 52 percent in 2020 from 54 percent in 2019. Conversely, CPP plant attained a capacity utilization of 35 percent in 2020, up from 16 percent in the previous year. Cost of sales plummeted by 9 percent year-on-year in 2020 due to petrochemical landed cost and a GIDC levy of Rs.31,084 million imposed during the year. Gross profit further shrank by 45 percent year-on-year in 2020 with GP margin sinking to 2.6 percent. Both administrative and marketing expense inched down by 1 percent and 9 percent respectively in 2020. Other expense grew by 28 percent year-on-year in 2021 which was mainly due to the imposition of GIDC. However, the rise in other expense was offset by a splendid 916 percent growth in other income which was the consequence of gain on the sale of leasehold land in 2020. The operating loss tamed in 2020 to clock in at Rs. 4.4 million versus Rs.111.96 million in 2019. Finance cost registered a 77 percent year-on-year hike in finance cost as discount rate was high for the most part of the year. MACFL registered a net loss of Rs.62.85 million in 2020 which was 73 percent lesser than the net loss of 2019. Loss per share stood at Rs.1.06 in 2020.

In 2021, MACFL’s topline posted the highest ever revenue growth of 40 percent year-on-year which was on account of a 51 percent rise in off-take which reached 14,600 MT. The company also focused on improving its geographical reach which was evident from the export revenue of Rs.52 million in 2021. Not only that, the local market shares of the company also grew by manifold in 2021. Out of its annual capacity of 15000 MT, MACFL utilized 71 percent to produce 10,655 MT of BOPP. CPP plant utilized 73 percent of its annual capacity and produced 5,107 MT. Higher sales and production volume effectively absorbed the fixed cost resulting in a 20 percent year-on-year hike in cost of sales. Gross profit multiplied by 763 percent year-on-year in 2021, translating into an impressive GP margin of 16.4 percent, up from 2.6 percent in 2020. Administrative expense grew by 29 percent year-on-year which was the effect of increased capacity utilization which required more human resources, consequently, payroll expense rose. Marketing expense registered a steep hike of 134 percent year-on-year in 2021 primarily on the back of hefty carriage and octroi charges on account of greater sales volume. The absence of GIDC resulted in a 90 percent year-on-year fall in other expense in 2021. Other income also slid by 69 percent year-on-year in 2021 due to high base effect of gain on the sale of fixed assets in the previous year. Despite elevated operating expense, MACFL was able to post an operating profit of Rs.365.72 million in 2021 which culminated into an OP margin of 12.1 percent. Finance cost tamed by 42 percent year-on-year in 2021 on account of monetary easing and improved cash flow management resulting in reduced borrowings. MACFL was able to post a net profit of Rs.186.67 million in 2021 as against the net loss of Rs.62.85 million in 2020. EPS stood at Rs.3.15 in 2021 while NP margin stood at 6.2 percent,

The growth trajectory continued in 2022 and MACFL posted a 38 percent year-on-year rise in its topline with 15 percent volumetric growth. Off-take stood at 16,851 MT in 2022 which comprised of which 11,531 MT pertained to BOPP and the remaining 5,500 MT were CPP. Export turnover stood at Rs.59 million in 2022 up from Rs.52 million in the previous year. In line with increased demand, the company operated its BOPP plant at 80.6 percent capacity and CPP plant at 86 percent capacity in 2022. Gross profit grew by 23 percent year-on-year in 2022; however, declining value of Pak Rupee shoved the GP margin down to 14.6 percent in 2022 from 16.4 percent in 2021. Administrative and marketing expense soared by 23 percent and 10 percent respectively. This was the result of unprecedented inflation, higher production and sales volume which pushed up the payroll expense and freight expense as well as strong sales promotion. Other expense posted an unusually high growth of 730 percent in 2022 which was the effect of a massive exchange loss worth Rs.76.86 million incurred during the year due to pitiable state of local currency. Other income posted a reasonable 27 percent year-on-year escalation primarily on account of scrap sales. Operating profit registered a marginal 3 percent year-on-year downtick in 2022 with OP margin sliding down to 8.5 percent. Despite unmatched level of discount rate, finance cost only grew by 2 percent in 2022 as the company considerably tapered its external borrowings in 2022. The bottomline shed its value by 1 percent year-on-year to clock in at Rs.184.25 million in 2022 with an NP margin of 4.4 percent and an EPS of Rs.3.11.

Recent Performance (Year ended June 2023)

Despite myriad challenges circling the local economy, MACFL, on account of its apt sales mix and an increasingly enhanced inclination towards export sales, was able to turn the odds in its favor and registered a 32 percent year-on-year rebound in its net sales in 2023. While the improved sales volume contributed a great deal in topline growth, upward price revisions also have a say as evident in the cost which grew by only 15 percent year-on-year in 2023. Gross profit posted a staggering 115 percent year-on-year climb in 2023 with GP margin jumping up to 24 percent from 14.6 percent in the previous year. Administrative and marketing expense surged by 44 percent and 47 percent respectively which makes good sense given high inflation and increased production and sales volume. Detailed financial statements are still awaited to decipher a 110 percent rise in other expense, it was apparently the consequence of higher provisioning for WWF and WPPF booked during the year. Other income grew by 45 percent year-on-year in 2023 which seems to be on the back of exchange gain. During the year, the company booked an impairment loss worth Rs.35.12 million on its trade debts. Nonetheless, operating profit registered a 134 percent year-on-year rise with OP margin reaching its all-time high of 15.2 percent in 2023. Finance cost bumped up by 42 percent year-on-year and rightly so given the record level of discount rate. This coupled with higher effective taxation to the tune of 46 percent, up from 30 percent in the previous year somewhat diluted the bottomline growth which still managed to clock in at 106 percent in 2023. Net profit stood at Rs.379.21 million with an NP margin of 6.9 percent in 2023 versus 4.4 percent in 2022. EPS also grew from Rs.3.11 in 2022 to Rs.6.39 in 2023.

Future Outlook

Amid depressed local demand on account of economic and political instability, MACFL is all set to leverage the demand from export markets by forming a fully owned subsidiary overseas. This will strengthen MACFL’s sales revenue and margins by hedging against inflation and currency depreciation. Furthermore, the company will also be able to cut back on its freight cost as its export destinations will be nearer to its production site.