VIS Maintains Entity Ratings of Kompass Pakistan (Private) Limited

Karachi, May 07, 2021 (PPI-OT): VIS Credit Rating Company Ltd. (VIS) has maintained entity ratings of Kompass Pakistan (Pvt) Limited at ‘BBB+/A-2’ (Triple B Plus/Single A-Two). Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Positive’. Long term rating of ‘BBB+’ signifies adequate credit quality with reasonable and sufficient protection factors. Risk factors are considered variable if changes occur in the economy. Short Term Rating of ‘A-2’ signifies good certainty of timely payment, sound liquidity factors and company fundamentals. Access to capital markets is good. Risk factors are small. Previous rating action was announced on April 8, 2020.

Incorporated as private limited company, Kompass Pakistan (Pvt) Limited (KPL) is a family owned business. Core operations of the company include manufacturing of flexible packaging bags and pouches catering primarily to the Fast Moving Consumer Goods (FMCG) industry. KPL has a fully integrated packaging facility in which it extrudes polyethylene films and procures BOPP, PE and CPP films from the local market which are then printed and laminated in accordance with the needs of the customer.

In order to cater increasing demand and management’s focus on value-added segment, KPL is currently in the process of expansion whereby it plans to add new machines over the next 18 months. Business risk profile draws support from the stable demand emanating by end clients belonging to the FMCG and ability to pass on increase in raw material prices. Going forward; VIS expects the order book for the industry to remain stable in the ongoing year, despite Covid-19 concerns. The company maintains a diversified product stream and strong clientele profile; client concentration risk is considered on the higher side, however the same is mitigated through prevalence of renewable contractual agreements.

Revision in rating outlook reflects improvement in profitability profile of the company along with expansion plans in the value-added segment. Timely completion of the planned expansion and maintenance of projected leverage and gearing indicators is considered important from a ratings perspective.

Ratings take into account improving revenue base of the company over the past two years being a function of both volumetric growth and higher average selling prices. Gross margins have improved on a timeline basis owing to higher revenues, lower fuel costs and greater margins from the premium oil/ghee segment. Going forward, management envisages profitability to improve in the backdrop of higher projected revenue and expansion plans in the value-added segment.

Liquidity profile of the company is considered adequate as evident from sufficient cash flow coverages in relation to outstanding obligations. Going forward, liquidity profile is expected to strengthen on account of higher projected profitability. Assigned ratings incorporate sound leverage indicators with the same improving on a timeline basis owing to higher growth in equity base due to profit retention. Given projected increase in debt levels to finance expansion, capitalization indicators shall increase going forward; however projected reduction in the same will be monitored by VIS.

For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873

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