June 28, 2024 (MLN): Pakistan Credit Rating Agency Limited (PACRA) has updated the entity ratings of Pakistan Aluminium Beverage Cans Limited (PSX: PABC) from "A+" to "AA-" for the long-term and "A1" for the short-term with a stable outlook forecast.
PABC has established itself as a leading manufacturer of beverage cans within Pakistan.
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 barriers and the time required for the installation of the production plant, along with the necessary technical expertise, have strengthened the company.
This has enabled it to establish its brand name and capture the entire market share in Pakistan.
Additionally, the company has secured a major share of clients in Afghanistan and other countries.
The company 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 rating.
During CY23, PABC achieved a significant milestone by enhancing its previous rated capacity of 750mln cans per annum to 950mln cans per annum.
While in the 1QCY24, the company reached a significant milestone of 1200mln cans per annum, following the successful installation and commissioning of its capacity expansion project.
This additional capacity will enable the company to better meet the peak season demand. Going forward, the advanced packaging trend for carbonated drinks and juices is becoming a significant part of the consumption markets.
This development is expected to boost the demand for the product.
The financial risk profile of the company is considered strong, with sufficient cashflows and a well-managed working capital cycle.
During CY23, the company witnessed a substantial increase of ~40% in net sales stood at PKR 19.7bln.
The surge is attributed to increased sales of cans specifically exports, favorable exchange rates, and improved pricing.
While domestic sales faced a decline due to reduced local consumption influenced by inflationary pressures.
The company is working on growing exports to overcome the shortfall of local demand. The remarkable growth in the sales translated into an exceptional increase in the net profits by ~86% to PKR 5bln.
The equity of the company was standing at PKR 10.6bln as of the end Dec'23. 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 firm’s business & volumes; prudent financial discipline and implementation of a stringent control environment shall remain imperative.
Copyright Mettis Link News
Posted on: 2024-06-28T15:14:03+05:00
