Analyst Briefing: Ecopack’s preform segment to reflect bigger chunk of its business in future owing to greater demand

November 23, 2020 (MLN): Ecopack Limited (ECOP), one of the leading manufacturers of Polyethylene Terephthalate (PET) bottle in Pakistan, recently conducted its analyst briefing to discuss the latest financial performance, as well as the ongoing projects of the company. The Company is involved in the principal activity of manufacturing and sale of PET bottles and preforms for beverages and other liquids packages.

ECOP’s plant is located at Hattar Industrial Area in KPK with a production capacity of 327 million bottles and 729 million preforms per year. It is the premier vendor for internationally renowned and local brands such as Pepsi, Coca-Cola, Qarshi Jam-e-Shireen, Murree Sparklets etc.

The key points of the briefing covered by Ismail Iqbal Securities revealed that the company’s financial performance during FY20 was adversely affected by the pandemic.  The Covid-19 pandemic which occurred between March to July 2020 accounted for around 70% of the Polyethylene Terephthalate (PET) bottle industry’s annual sales and hence forced the company to post a loss after tax of PKR 104 million.

According to the report, as of FY20, PET preforms accounted for 53% while PET bottles accounted for 47% of company sales. The company holds 30% of the outsourced PET bottle market making it the market leader.

While discussing about company’s business diversification and expansion, the management informed that the company completed an expansion of its large-bottles manufacturing project which has the ability to produce 17 million bottles ranging from 2.5 litre to 16 litres per year. The main customers for these bottles would be from the edible oil, bottled water and hygiene industry.

The management also told that company’s preform injection capacity declined to 729 million preforms per year from 797 million preforms largely due to the disposal of an old preform machine which was expensive to run because of its high energy cost compared to ECOP’s new preform machines.

Going forward, the company expects its preform segment to make up a bigger chunk of its business as there is greater preform demand in the market compared to bottled because some beverage brands have their own bottle-blowing capacities, the report highlighted.

The company uses PET resins as a main raw material for manufacturing PET preforms and bottles which company procures from Novatex Limited in Karachi. With the decline in oil prices, the company’s raw material costs and freight costs of procuring PET resins from Karachi has declined, the report mentioned.

With regards to power requirements, the management said that ECOP’s current power requirements are met through the local grid. However, the company has made rental arrangements under the approval of SNGPL to produce in-house power from RLNG which will come online in the next calendar year.

Once the in-house power arrangements have been made, ECOP will choose between the grid or in-house generation based on lower cost, the report cited.

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Posted on: 2020-11-23T14:12:00+05:00

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