VIS Reaffirms Entity Ratings of Century Paper and Board Mills Limited

Karachi, November 21, 2019 (PPI-OT): VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of Century Paper and Board Mills Limited (CPBM) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the rating is ‘Stable’. Long term rating of ‘A+’ signifies good credit quality with adequate protection factors. Risk 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. The previous rating action was announced on November 20, 2018.

Assigned ratings incorporate CPBM’s market leadership position in the coated paperboard segment with the company catering to 36% and 53% of the total and quality segment demand, respectively. Despite challenging macroeconomic environment, industry dynamics for the coated paperboard segment have remained supportive while overall financial profile remains adequate with leverage indicators having declined on a timeline basis. Ratings also draw support from strong sponsor profile of CPBM with majority shares held by Lakson Group of Companies.

Paper and paperboard industry has witnessed a slight contraction by ~3% in overall market size during outgoing fiscal year 2019. The decline is attributable to overall economic slowdown in the country. Nonetheless, CPBM withstood the challenging operating environment and maintained its market share whereas reduction was observed in imports of coated paperboard. Significant rupee devaluation resulted in higher landed cost of imports vis-a-vis local products coupled with tapering off imports on dumped prices from China has improved the competitiveness of local players.

Given the supportive industry dynamics, consistently high capacity utilization and in order to capture the market share of higher priced imports, management is reassessing capacity expansion project feasibility based on revised rupee dollar parity and change in demand supply dynamics. Amid expansion plans, the management is also diversifying its footprint in international market through exports.

During FY19, sales growth was primarily a function of higher selling prices. However, profitability declined due to sizeable jump in finance cost. Going forward, stable sales volumes are expected to support earning profile despite significant increase expected in power cost. Liquidity profile remains adequate given satisfactory cash flows and debt servicing ability. Leverage indicators witnessed improvement on the back of higher equity base. Gradual reduction in leverage indicators is expected till debt for expansion is undertaken.

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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