Press Release

JCR-VIS Reaffirms Entity Ratings of Century Paper & Board Mills Limited

Karachi, November 23, 2018: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Century Paper & Board Mills Limited (CPBM) at ‘A+/A-1’ (Single A Plus/A-One). Outlook on the rating is ‘Stable’. The previous rating action was announced on December 11, 2017.

The assigned ratings incorporate CPBM’s market leadership position in the coated paperboard segment with the Company catering to over 35% of total Coated Paperboard and over 50% of the quality segment domestic market demand. Ratings also reflect favorable industry dynamics for the Coated Paperboard Segment and improving financial risk profile. Ratings also draw support from strong sponsor profile of CPBM with majority shares held by Lakson Group of Companies.

Demand for Coated Paperboard has grown at a Compound Annual Growth Rate (CAGR) of 9.2% over the past five fiscal years (FY13-18). Pakistan’s high consumption to GDP ratio along with increasing urbanization and projected growth of the FMCG segment is expected to bode well for demand growth. In order to cater to growing demand and capture market share of imported paperboard, CPBM is in the process of increasing its capacity of Coated Paperboard by 130,000 MT per year. Commencement of operations is targeted 2 years from financial close. Market position of CPBM is expected to strengthen significantly post expansion. During FY18, slowdown in imports on dumped prices from China has been noted as its capacity for recycled materials based Coated Paperboard products has been curtailed in compliance of environmental policies of Chinese government. This has improved competitiveness of local players. Resultantly, margins increased during FY18 and are expected to improve further in FY19. Implementation of levied anti-dumping duties (ADD) on Chinese imports will further support assessment of business risk profile.

Assessment of financial risk profile incorporates improving profitability and liquidity indicators. However, leverage indicators continue to remain elevated on account of higher utilization of short-term borrowings for funding working capital requirements. Going forward, impact of higher finance cost & overheads on profitability is expected to be offset by improvement in margins and increase in topline. While impact of expansion on the financial profile of CPBM has not been factored in the ratings, JCR-VIS expects leverage indicators to remain elevated over the rating horizon. Moreover, cash flow coverage of outstanding debt shall be tracked. Going forward, ratings will remain dependent on maintaining financial discipline particularly with leverage indicators and cash flow coverages in line with rating benchmarks.

For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext: 213) or the undersigned (Ext: 207) at 021-35311861-71 or fax to 021-35311872-3.

Jamal Abbas Zaidi

Applicable Criteria: Industrial Corporates (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited VIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2018 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited