On September 18, 2012 Packages Limited announced a 50/50 joint venture with the worlds second largest paper and board producer, Stora Enso based in Finland. The joint venture will be called Bulleh Shah Packaging (Private) Ltd.
It will include Kasur Mill (paperboard and corrugated packaging) and the Karachi plant (corrugated packaging). At initiation, Stora Enso will hold 35 percent which will later be increased to 50 percent during 2013-14, with both parties committing to 135 million dollars investments during this period.
BSPM currently has an annual capacity of 250,000 tons. With the JV in place the capacity is expected to be increased to 360,000 tons per annum and will employ 950 people.
The outlined rationale behind the venture is for Packages to give its paperboard and corrugated packaging businesses core focus, also presenting packages with Stora Ensos enhanced technology and the opportunity for the global giant to have regional presence.
Over recent years, Packages Limited has observed squished margins, with gross profit margin recorded at a miniscule 4.2 percent and 3.6 percent for 1HCY12 and 1HCY12 respectively, and the company declaring consecutive losses in 2010-11; a management overhaul might be in place.
With Indo-Pak trade ties liberalising, there is mass potential in the region, with access to Indias massive market; an influx of FDI will be observed. Admittance to the neighbouring market will validate for improved terms of trade giving way to cheaper resources and enhanced demand for the countrys products.
This may very well be an opportunity for Packages to lower costs, since the margins are primarily weighed down by high cost of sales, with the JV in effect and the companys plan to expand operations, average cost may come down. There is also the likelihood that trade with India will bring with it lower cost of material and improved sales.
Comments
Comments are closed for this article.