ISLAMABAD: IFC, a member of the World Bank Group, has signed a deal for a five-year loan investment of US$25 million in Limited, one of Pakistan’s leading packaging and tissue paper producers, to modernize its operations, and cut its water and energy use.
The investment in Packages will help the company sustain and expand its operations to respond to rising consumer demand amid the COVID-19 pandemic. Packages produces essential hygiene products such as tissues, toilet rolls, wipes as well as packaging for food, pharmaceuticals and other products needed by other producers of other consumer goods.
The company’s market standing as a critical and reliable provider of hygiene products and packaging materials will help ensure that supply chains are not disrupted and that prices in the sector remain at reasonable levels.
“This IFC program will not only contribute towards our core sustainability drive for resource conservation but will also upgrade our packaging capability to serve the growing needs of our clients in a more sustainable manner,” said Syed Hyder Ali, Chief Executive Officer of Packages.
IFC has been advising Packages on ways to cut its water and energy use, in a country ranked as among the world’s most energy intensive and facing water shortages. By adopting resource efficiency measures, Packages will be able to annually decrease greenhouse gas (GHG) emissions by about 11,000 tons of carbon dioxide equivalent, and save about 43,000 megawatt-hours (MWh) and about 214,000 cubic meters (m3) of water per annum. Overall the company will save annually about $1.4 million in its operations.
“This is an investment which will deliver multiple dividends for Pakistan. It will help ensure that people can continue to buy critically needed hygiene products amid COVID-19, at reasonable prices. There’s also the additional benefit of cutting greenhouse gas emissions and importantly conserving water and energy use,” said Nadeem A. Siddiqui, IFC Senior Country Manager for Pakistan. “IFC financing will play a countercyclical role during the current COVID-19 crisis and provide the company with access to much needed long-term foreign currency funding. It will help Packages improve its competitiveness and allow it to stay ahead of the technological curve.”
Packages is one of IFC’s oldest clients with a relationship initiated in 1964. The project aligns with IFC’s COVID-19 response strategy to support clients. It also addresses IFC’s strategic focus on climate change through investment in energy conservation and efficiency programs.
Pakistan Stock Exchange has not yet been notified of this development, since there is no update on Packages’ disclosures on the PSX website, until the publishing of this story. There is no announcement for such a deal with IFC in the annual report 2019 or quarterly report 2020 of the company either. However, the company’s stock price has been showing steady and tangible improvement since early April.
Packages Limited’s share price has shown a recovery since April, after a steady decline since December last year and a sharp decline in March 2020, which was also the time when Covid-19 hit Pakistan full blown. From the annual high of Rs 447.61 on December 10, 2019, the stock price eroded to the lowest of Rs218.53 on March 26, 2020. However, as of July 24, the stock price has recovered to Rs391.42. Since March, this is an increase of approximately 79 percent.
Packages Limited’s annual report for 2019 also showed decline in profit after tax. From Rs1,160 million in 2018, the company posted a profit after tax of Rs278 million. That is a 76 percent decline in one year, despite gross profit showing increase, from Rs3,280 million in 2018 to Rs4,373 million in 2019. The profit before tax also showed decrease, with the ratio falling from 16.64 to 9.45 for the same time period. Earnings per share also diluted from 29.69 in 2018 to 15.06 for 2019.
Another interesting nugget here is that as per PSX announcements, Syed Babar Ali owner and executive of Packages Limited, has been on a buying spree for PKGS shares, since even before the Covid-19 crisis hit the industry. He, along with his wife Mrs. Perwin Babar Ali, has been steadily buying Packages Limited shares, since at least as long as mid-2019.
Packages and paper industry make up for one of the essential services industries. So while the sharp decline may be described by the overall erosion in the stock market in March and April 2020, the current recovery for Packages Limited, along with other companies in the industry including Roshan Packages Limited and Merit Packaging Limited, is not as much symptomatic of improved profitability as it is of a return to actual valuation after stock market’s dip.