Packages Limited

Current Developments

Strong Consolidated Operational Momentum

Group sales rose from Rs 49.7 billion to Rs 53.1 billion.

The largest operational drivers were:

Bulleh Shah Packaging Recovery

Bulleh Shah Packaging reduced pre-tax losses from Rs 1.1 billion to Rs 391 million.

Management specifically cited:

• Volume growth
• Operational efficiencies
• Improved cost discipline

This matters strategically because BSP has historically been one of the biggest pressure points on group profitability.

StarchPack Inflection Point

StarchPack delivered:

• 79% sales growth
• Profit before tax of Rs 36 million
• Versus Rs 531 million loss last year

This is likely one of the most important developments in the quarter.

The company appears to be transitioning from:

• investment phase
  → operational stabilization
  → commercialization phase

If sustained, this can become a major future earnings contributor.

Tri-Pack Films Turnaround

Tri-Pack Films Limited moved from:

• Rs 92 million loss
  to
• Rs 302 million profit before tax

Management linked this to:

• Higher volumes
• Better working capital management
• Strategic capital investments beginning to pay off

This is particularly important because BOPP film businesses are highly cyclical and sensitive to spreads.

Rising Debt and Finance Costs

The holding company increased borrowing materially:

• Long-term debt rose after Rs 10.9 billion investments into subsidiaries

This pushed standalone finance costs up 64% YoY.

Consolidated long-term financing still remains very high at:

• Rs 75.7 billion gross debt

This remains one of the biggest structural variables for the group.

Future Outlook

Management commentary remains cautiously optimistic despite macro stress.

Key external concerns identified by management:

• Geopolitical tensions
• Supply-chain disruptions
• Higher oil prices
• Inflationary pressure
• Pressure on Pakistan’s external account

Despite this, the group believes Pakistan entered the period from a stronger macro base because of:

• IMF engagement
• Fiscal discipline
• Recovering GDP trajectory

Operationally, the outlook appears constructive because multiple businesses are simultaneously improving:

Likely Positive Drivers Ahead

• BSP turnaround continuation
• Tri-Pack margin normalization
• StarchPack scaling
• Stable pharma profitability
• Real-estate rental growth
• Export/trading synergies via Dubai FZCO

Important Observation

The earnings mix is becoming more diversified.

Previously, investor perception was heavily tied to:

• Packaging
• Paper
• Cyclical industrial exposure

Now the group has exposure to:

• Pharma
• Real estate
• Specialty films
• Corn derivatives
• International trading
• Consumer products

That diversification may structurally improve earnings stability over time.

Growth Plans

Continued Capital Deployment into Subsidiaries

Packages invested another Rs 500 million into StarchPack during the quarter.

This signals:

• management confidence in the business
• long-term strategic intent
• expectation of future scaling

Export and Regional Expansion

Packages Trading FZCO (Dubai):

• Revenue grew 43%
• Profit grew 2.3x

Management explicitly stated the entity is expected to create:

• export synergies
• import efficiencies
• group trading integration

This suggests Packages is gradually building regional supply-chain capability.

Operational Efficiency Focus

Across nearly every subsidiary review, management repeatedly emphasized:

• working capital management
• operational efficiencies
• tighter cost controls

This indicates current strategy is less about aggressive expansion and more about:

• sweating assets harder
• improving utilization
• extracting profitability from previous capex cycles

Capital Investments Already Flowing Through

Several subsidiaries mentioned benefits from prior capex investments beginning to emerge.

Particularly:

• Tri-Pack Films
• StarchPack
• DIC Pakistan

This suggests the group may be entering the harvesting phase of earlier expansion spending.

Risk Assessment

High Leverage Risk

This remains the single largest structural concern.

Group debt profile:

• Long-term finances: Rs 75.7 billion
• Short-term borrowings: Rs 48.1 billion

High interest rates or refinancing stress could materially affect profitability.

Commodity and Energy Exposure

Major subsidiaries remain exposed to:

• paper prices
• polymers
• fuel
• imported raw materials
• exchange-rate volatility

Any spike in energy or commodity prices can pressure margins.

Cyclicality Risk

Businesses like:

• paperboard
• BOPP films
• industrial packaging

remain cyclical industries.

Current profitability improvements may normalize if spreads compress again.

Regulatory and Tax Exposure

The group continues facing PRA tax litigation.

Outstanding disputed tax demand:

• Originally Rs 757.8 million
• Partially reduced during proceedings

While management believes its legal position is strong, the matter remains unresolved.

Foreign Operations Risk

Operations in:

• Sri Lanka
• UAE
• international trading

create:

• FX exposure
• geopolitical sensitivity
• translation volatility

Strategic Significance

Packages Limited is evolving into one of Pakistan’s most diversified industrial holding groups.

The strategic significance today is no longer only:
“paper and packaging.”

Instead, the group now has meaningful exposure across:

• packaging
• films
• pharma
• real estate
• consumer products
• corn derivatives
• international trade
• insurance-linked investments

Several strategic themes stand out:

1. Turnaround Cycle Appears Real

Historically weaker businesses are now recovering simultaneously:

• BSP
• Tri-Pack
• StarchPack

This can materially change consolidated earnings power.

2. Asset Ecosystem Advantage

Packages owns:

• manufacturing infrastructure
• real estate assets
• distribution networks
• export/trading channels
• strategic investments

This ecosystem creates cross-subsidiary synergies that smaller competitors cannot easily replicate.

3. Long-Term Industrial Platform

Management appears focused on building:

• vertically integrated industrial capability
• regional trade optionality
• diversified earnings streams

rather than maximizing short-term quarterly profits.

4. Hidden Asset Value

The group still contains significant embedded value through:

• Nestle Pakistan stake
• Packages Mall
• IGI Holdings exposure
• land bank and industrial assets

which may not always be fully reflected in operating earnings.

Overall View

Q1 CY2026 was operationally strong.

The most important signal was not merely profit growth — it was the simultaneous recovery across multiple subsidiaries.

If:

• BSP continues normalizing,
• StarchPack scales sustainably,
• Tri-Pack maintains profitability,
• and finance costs stabilize,

then Packages could be entering a multi-year earnings improvement cycle.