Press Release

VIS Assigns Initial Ratings to CBM Plastics (Private) Limited

Karachi, November 13, 2019: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB+/A-2’ (Triple B Plus/ A Two) to CBM Plastics (Private) Limited. The long term rating of ‘BBB+’ signifies adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. The short term rating of ‘A-2’ signifies good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is ‘Stable’.

CBM Plastics (‘CBM’ or ‘the Company’) manufactures plastic containers (jerry cans & plastic drums) for packaging of lube oil, pesticides, food products and ethanol. The Company has a diverse product portfolio, with products ranging from 50 ml to 250 liter containers. Since its incorporation in 1992, the Company has been headed by Mr. Iftikhar Hussain, who still remains at the helm.

The assigned ratings take into account CBM’s stable profitability margins, wherein variation in raw material prices - which mainly includes HDPE - and exchange rate parity, is passed on to the client. Accordingly, CBM’s gross margins have remained stable. The Company is a major supplier of ‘lube oil’ containers for 3 oil marketing Companies, as a result of which, the Company’s top line depicts concentration risk. However, comfort is derived from long standing business relationships with the major clients as either the sole supplier or the major supplier (80-90%).

As of Jun’19, CBM’s gearing (inclusive of operating lease) stood at 1.7x. However it is pertinent to mention that majority (75%) of the debt represents short term running finance lines and these are fully matched by stock and trade debts. The remaining debt includes a mix of off-balance sheet operating lease (13%) and on-balance sheet finance lease (11%). Going forward, the gearing is projected to rise to 1.9x and then fall as the debt is paid off.

CBM’s liquidity is constrained by the tax regime applicable on the Company, which impacts its cash flow availability for debt servicing. Nevertheless it is considered adequate. The ratings remain dependent on continuity of long term contracts with major clientele, strengthening of cash flows, and maintenance of leveraging in accordance with projections.

For further information on this rating announcement, please contact the undersigned (Ext: 201) or Ms. Muniba Khan (Ext: 214) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

Applicable Rating Criteria: 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 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 2019 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited