August 15, 2023 (MLN): Packages Limited (PSX: PKGS) has suffered a massive loss of Rs1.889 billion due to its South African subsidiary, Flexible Packages Convertors (Proprietary) Limited (FPC), the company's filing on PSX showed today.
FPC, which is 63.5% owned by Packages Limited through its wholly-owned subsidiary Anemone Holdings Limited (AHL), recorded an unaudited loss before tax of ZAR 99 million in 2022 and ZAR 38m in the first half of 2023.
The poor performance of FPC was attributed to the tough economic conditions in South Africa, low sales to key customers, unfavorable product mix, and higher-than-expected variable and fixed costs.
As a result, Packages Limited had to write off Rs687 million as an impairment loss in its unconsolidated financial statements for the year ended December 31, 2022.
The situation worsened in 2023 when FPC faced a severe cash crunch due to the capping of the outflow of remittances outside Pakistan on account of the national economic scenario.
Consequently, FPC was put under a legally mandated restructuring process to assess its profitability prospects and viability of operations.
A Business Rescue Practitioner (BRP) was appointed to oversee the process and negotiate with the creditors.
The BRP, in accordance with the applicable laws called for a meeting of the creditors to evaluate either to liquidate FPC or sell it as a going concern to repay outstanding creditors.
The BRP has notified that the creditors have collectively voted in favor of the sale to a third party to partly settle their outstanding debts, subject to applicable regulatory approvals.
Accordingly, the company expects to recognize an additional loss of Rs1.202 billion in its financials for the half year ended 30 June 2023.
However, the consolidated earnings of the Group will improve going forward due to the absence of the loss-making arm.
