Retail boom turns packaging industry’s fortunes around

Century Paper trebles revenues to Rs13b in just four years.

KARACHI:

The retail sector has been flourishing in Pakistan for the past few years on the back of increased consumer spending, but it is not the only sector benefitting from the phenomenon. Allied industries, particularly the packaging industry, have also made fortunes from a rise in consumer demand in the world’s sixth-largest market by consumer size.

Century Paper and Board Mills Limited, a Lakson Group company listed on the Karachi Stock Exchange, is one example demonstrating this trend.

In just four years, the Karachi-based manufacturer of packaging boards tripled its revenues from Rs4.3 billion in financial year 2007-08 to Rs13 billion in 2011-12.



This growth in revenues is likely to continue in the current year as well. The company has already earned Rs10.4 billion in sales for the nine months ended March 31, 2013 – a 10.4% growth over Rs9.4 billion earned in the same period in FY12.

Similarly, Century Paper’s after-tax profit rose to Rs581.4 million in the first nine months of FY13, up 52.6% over Rs380.8 million in the corresponding period of FY12.

“This growth is the result of successful sales from the capacity addition made in 2008,” Chief Executive Officer Aftab Ahmad told The Express Tribune.

The company, Ahmad said, had installed a state-of-the-art multilayer Coated Duplex Board Machine at its manufacturing facility, which is located on the outskirts of Lahore. That move helped it more than double its production capacity to 240,000 tons per year by 2009, much higher than the 110,000 tons per year it had been producing since 2006.



Century’s major customers, according to Ahmad, include printing companies that meet the packaging requirements of various multinational companies, and major national companies engaged in the fast moving consumer goods sector, pharmaceuticals, food, confectionery and tobacco businesses. Its packaging boards are its main source of revenue.

The growth of packaging companies is closely tied to that of the consumer goods and retail sectors, but it is its business strategy – major decisions about investments and expansion – that has helped Century Paper fully capitalise on the growth opportunity.

Since its inception in 1990, Century’s CEO said, the company has focused on quality and has kept developing import substitutes to various paper and paperboard grades.

The company raised its capacity from 30,000 tons per year to 110,000 tons per year in 2006, Ahmad said. “Over a period of time, the company specialised in quality packaging boards and decided to increase its capacity in this particular product category with some mega expansion,” he added.

After analysing its market potential, he said, the company went for a major expansion drive and kicked off a project in 2006 – a Multilayer Coated Board production machine with an annual output capacity of 130,000 tons and a 20-megawatt co-gen power plant.

The added capacity has resulted in higher volumes, but, according to company Chairman Iqbal Ali Lakhani, the results for FY12 were not ideal despite a higher sales volume than the preceding year. To this, Ahmad said, international prices had decreased, and they could not increase their prices as planned in the budget.

The company, however, seems to be continuing to invest in itself. In 2012, it installed a coal-fired boiler at its manufacturing facility in energy-starved Punjab for the production of process steam.

“This was an excellent and timely decision and it meant we could now run our plant partially, even without gas,” Ahmad said.

The company is targeting a 10% growth for FY13. Since its topline has already grown over 10% in the first nine months of the year, Ahmad’s expected target looks very achievable.

Published in The Express Tribune, June 20^th, 2013.

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