November 27, 2023 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has maintained entity ratings of Pakistan Aluminium Beverage Cans Limited (PSX: PABC) at "A+" for long term and "Al" for short term with a stable outlook forecast, the latest press release issued by PACRA showed.
The demand for aluminium cans is directly linked to consumption of beverage drinks which is always in increasing trend.
The business model of PABC is that of B2B and directly supplies aluminum cans to beverage producers.
The high entry barrier and time for installation of the production plant and technical expertise have provided strength to the company to establish its brand name and capture the entire market share of Pakistan along with the major share of clients in Afghanistan and other countries.
PABC has established a sound customer base with a strong financial profile thus minimizing the credit risk to a low level.
The governance structure is considered strong due to the presence of Board committees and having a sufficient number of board meetings.
Furthermore, external auditors are category-A with satisfactory QCR ratings.
The company has recently increased its rated production capacity from 700 million cans to 950m cans per annum.
PABC has financed and installed an on-grid solar system as well as fulfilling the major energy needs of the company.
Going forward, the company is in the process of finalizing the enhancement of rated capacity to 1,200m cans annually and aims to expand its market share in aluminum beverage cans in Pakistan and abroad by adding leading brands to its clientele.
The financial risk profile of the company is considered strong, with sufficient cash flows and a well-managed working capital cycle.
During 6MCY23, the company generated a top line of Rs11.12 billion (6MCY22: Rs6.510bn, CY22: Rs14.153bn), showing an increase of 57% in revenue.
As a result, during 6MCY23 the company generated a bottom line of Rs2.714bn (6MCY22: Rs1.577bn, CY22: Rs2.703bn).
The company has availed both short-term financial institutions to finance the import of aluminium-based raw materials and long-term facilities to enhance available capacity.
The leveraging of the company stood at 33.7% as of Jun'23 (47.9% as of Jun '22). Being associated with the well-established and stable Liberty Group and Soorty Enterprises bodes well for the rating.
The ratings are dependent on the company’s ability to sustain its market position and management’s ability to run the operations of the company optimally.
With the upcoming growth in the firm’s business and volumes; prudent financial discipline and implementation of a stringent control environment shall remain imperative.
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Posted on: 2023-11-27T12:56:09+05:00