Karachi, November 10, 2021 (PPI-OT):VIS Credit Rating Company Limited (VIS) has upgraded the entity ratings of Century Paper and Board Mills Limited (CPBM) to ‘ÁA-/A-1’ (Double A Minus/ A-One) from ‘A+/A-1’ (Single A Plus/A-One). Long term rating of ‘AA-’ signifies high credit quality with strong protection factors. Risk is moderate but may vary slightly from time to time because of economic conditions. Short-term rating of ‘A-1’ depicts high certainty of timely payment where liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned rating has been revised from ‘Positive’ to ‘Stable’. Previous rating action was announced on December 01, 2020.
Upward revision in ratings reflects strong sponsor profile (majority shares held by Lakson Group), low business risk and CPBM’s leading market position in coated board segment. Ratings also incorporate improvement in financial profile with consistent growth in sales, higher margins, sound coverages and reduction in leverage indicators on a timeline basis led by growing equity base. Given the relatively stable demand for coated board and expected growth in the segment, CPBM has achieved higher capacity via modifications in existing plant and machinery along with quality and efficiency enhancement initiatives. Ratings also factor in further BMR activities planned for capacity enhancement of paper and board machines, and power and utilities.
After contracting by 6% in FY20, the market size of paper and paperboard industry increased by 3.5% in FY21 on account of gradual improvement in demand. Gradual contraction of imports of coated board along with other benefits (such as availability and lower lead-time to customers) provides support to local industry players. End clients mostly belonging to FMCG segment reduces the demand risk where the demand is relatively stable. In addition, COVID-19 crisis has affected consumers’ consumption patterns and health consciousness which has favourably impacted the packaging industry over medium to long term.
The management envisages consistent financial performance on the backdrop of higher projected industry demand and cost-efficiencies post expansion. Despite projected increase in debt levels to finance BMR, gearing and leverage levels are expected to remain within manageable levels on the back of expansion in equity base through profit generation. Ratings remain dependent on attaining projected sustainability in profitability, maintaining strong liquidity and overall debt servicing ability, going forward.
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
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/