Karachi: Cherat Packaging Limited, a unit of the Faruque Group, disclosed a net profit of PKR 131 million for the quarter ending September 30, 2024, as Pakistan's economic climate shows signs of recovery spurred by an IMF Extended Financing Facility and a decline in inflation. However, the company faces ongoing industrial slowdowns and heightened competition, particularly affecting its packaging operations.
During the three-month period, the company experienced a decline in sales revenues, primarily due to reduced demand from the cement and FMCG sectors and a shift in packaging preferences towards polypropylene bags. According to information available from the Pakistan Stock Exchange (PSX), the subdued economic activities have led to a decrease in cement dispatches, which in turn impacted the company's sales volume.
Operational costs rose due to increased prices for input materials, while finance costs decreased by 60% owing to lower working capital utilization and early repayment of long-term loans. This financial adjustment follows a Supreme Court order allowing a tax credit adjustment from 5% to 10% for certain expenditures, leading to the recognition of an additional PKR 55 million for the quarter.
In response to changing market dynamics, Cherat Packaging is advancing its diversification strategy. The company has plans to establish a carrier/SOS bag unit by March 2025, which is expected to be financed through long-term loans. This expansion is part of a broader effort to tap new markets and improve resource utilization.
Furthermore, the board has approved the sale of the company’s last Papersack Line, a move to streamline operations and focus more on polypropylene bag production for the cement industry. These strategic decisions are aligned with the company’s goal to enhance its position in the flexible packaging market and meet evolving customer demands.
Looking forward, while Pakistan faces challenges like fiscal deficits and energy inefficiencies, macroeconomic indicators suggest a potential stabilization path. Cherat Packaging remains optimistic about maintaining its market leadership and leveraging its operational efficiencies and financial strength to navigate the complex economic landscape.