Packages Limited is involved in the production and sale of packaging materials and tissue products. The company's history dates back to 1957 when Packages Limited started out as a joint venture between the Ali Group of Pakistan and Akerlund & Rausing of Sweden to convert paper and paper board into packaging material for the consumer industry. In 1968, the firm began its expansion by integrating upstream with the establishment of a pulp and paper mill with a capacity of 24,000 tons per year based on waste paper and agricultural by-products. By January 2003, total capacity of the firm was nearly 100,000 tons per year.
Over the years, the firm has grown into one of the leading manufacturers of paper and board, flexible and conventional packaging material, tissue paper, propylene films, corrugated boxes and printing inks in the country. The firm's key business partners include Unilever, Nestle Pakistan, Tri-Pack Films, Tetrapak Pakistan Limited and Coca-Cola beverages Pakistan among others.
Operations
During 1999-2000, Packages Limited successfully completed the expansion of the flexible packaging line. By 2002, the company started commercial production of corrugated boxes from its plant in Karachi. In 2005, the company went into another major expansion plan for paper and board, tripling its capacity from 100,000 tons per annum to 300,000 tons per annum. 2008 was a year for capacity enhancement in the tissue division through installation of a new tissue paper manufacturing machine with production capacity of 33,000 tons per annum.
In 2011, a lamination machine was installed, which was Pakistan's first high speed solvent-less automatic lamination machine. Whereas in 2012, the company invested in a rotogravure machine for its flexible packaging business and signed a 50-50 JV agreement with Stora Enso OYJ Group of Finland in its 100 percent wholly owned subsidiary, Bulleh Shah Packaging (Private) Limited to enhance growth in the paper and board segment. It was in 2014 that Packages Limited initiated the development of Packages Mall in Lahore through its subsidiary, Packages Construction (Private) Limited.
In 2015, The Company invested in a new toilet roll line and introduced a new brand called Maxob. It also completed the acquisition of 55 percent share in the operation of a flexible packaging company in South Africa and initiated a 50-50 JV with Omya Group of Switzerland to set up a production facility to supply a range of high quality ground calcium carbonate products. 2016 highlights included the incorporation of a wholly owned subsidiary, Packages Power (Private) Limited, for the purpose of setting up a 3.1 MW hydropower project.
Recent performance Given its ongoing growth and expansion strategy, 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 during the year, 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. Despite modest revenue growth, the company'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. The segment witnessed a drop in revenues; price discounts on the back of deflationary trends in raw material and fuel and power costs, higher advertising expense and also lower sales of tobacco industry affected sales. 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 utilisation, operating cost control initiatives and overall lower fuel and energy costs.
In 2017, the firm invested in the up gradation of the flexible packaging line as well as in the downstream operations of lamination, slitting and bag-making to complement the additional capacity brought in. 2017 marked the inauguration of Packages Mall as well. In terms of profitability, the company posted 8 percent increase in sales revenues led by 7 percent growth in volumes. And while the earnings increased by 11 percent year-on-year in 2017, the Director's Report highlights that the firm's EBITDA declined due to the increased raw material costs and the fact that it was not fully passed on to the customers. Also what affected EBITDA was the increase in advertising costs.
The firm's Packaging Division sales grew by 6 percent, year-on-year on the back of volumetric growth during the year Packages Limited made significant investment in machinery for enhancing capacity and quality by investing in a new, wide web Flexo Printing machine. It has also made some investments in a state of the art 7 Layer blown film Extruder and Lamination, Slitting and Bag making machines in flexible packaging division as well as equipment for folding carton division.
The firm's Consumer Products Division saw a sales growth of 14 percent due to improved capacity utilisation and operating cost control initiatives.
2018 and beyond
In Packages Limited's recently announced financial result for CY18, the firm touted a 16 percent year-on-year increase in net revenues, most likely propelled by volumes. However, a 21 percent increase in the cost of sales that include cost of raw material, fuel and power led to a decline in gross profits. Higher expenses resulted in 56 percent year-on-year decline in the firm's bottom-line. Consumer Product Division most likely dragged firm's earnings as the segment was adversely affected by higher raw material cost along with rupee devaluation, which can continue to affect the company's profitability in the coming quarters.
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PACKAGES LIMITED
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2014 2015 2016 2017
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Profitability
Gross margin (%) 14.68 20.98 21.49 20.63
Net margin (%) 18.22 23.73 41.34 39.53
Total Assets Turnover Ratio 0.25 0.28 0.27 0.25
Fixed Assets Turnover Ratio 4.18 4.27 3.92 4.12
Liquidity
Current Ratio 1.67 1.61 1.52 1.70
Quick Ratio 1.13 1.15 1.07 1.20
Gearing
Debt : Equity Ratio 8:92 8:92 7:93 5;95
Return on Equity (%) 5.07 6.90 10.60 9.47
Investment
Basic EPS (Rs.) 29.89 37.42 62.61 69.05
Diluted EPS (Rs.) 26.59 33.62 58.45 65.02
Price-Earning Ratio 22.70 15.56 13.58 7.38
Interest Cover Ratio 4.67 7.08 6.43 17.96
Dividend Yield (%) 1.32 2.58 2.94 5.88
Dividend Cover Ratio 3.23 2.46 2.50 2.32
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Source: Company accounts
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Packages Limited-Pattern of Shareholding as on December 31, 2017
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Shareholders' category Percentage
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Associated Companies, Undertakings and Related Parties 35.91%
Directors and their spouse(s) and minor children 2.65%
Banks, Development Finance Institutions, Non-Banking Finan 3.46%
Insurance Companies 6.59%
Modarabas and Mutual Funds 13.57%
General Public:
Local 22.15%
Foreign 7.49%
Others 8.18%
Total 100%
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Source: Company accounts
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Packages Limited
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Rs (mn) CY18 CY17 YoY
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Local sales 24,781 21,359 16%
Export sales 41 30 34%
Gross sales 24,822 21,389 16%
Net sales 20,699 17,894 16%
Cost of sales 17,419 14,370 21%
Gross profit 3,280 3,524 -7%
Administrative expenses 1,098 1,010 9%
Distribution and marketing costs 1,168 918 27%
Other operating expenses 345 496 -30%
Other operating income 272 227 20%
Profit from operations 941 1,328 -29%
Finance costs 525 445 18%
Investment income 3,029 6,274 -52%
PAT 2,736 6,216 -56%
EPS( Rs. Basic) 29.69 69.05 -57%
EPS (Diluted) 29.18 65.02 -55%
Gross profit margin 15.85% 19.70%
Operating profit margin 4.55% 7.42%
Net profit margin 13.22% 34.74%
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