Merit Packaging Limited (MERIT) reported loss per share of PKR 3.00 for FY25, compared to loss per share of PKR 0.93 in FY24. Furthermore, in 1QFY26, the company reported earnings per share of PKR 2.36, compared to loss per share of PKR 0.17 in the same period last year (SPLY). The Offset Division currently features high end printing machinery, along with efficient pre press, cutting, and high speed equipment. It has a stated capacity of more than 900 metric tonnes. Management attributed the high loss to a considerable decline in customer orders during 4QFY25.
However, the company has reported an improvement in sales orders in the recent quarter. The primary goal for the current year is to achieve a positive bottom line. The key strategy is to strengthen and expand the Offset Division. Management is also focused on controlling internal waste and operational leakages to enhance margins. Global and geopolitical conflicts are expected to increase international and local raw material prices.
The packaging industry remains highly competitive, leading to consistently thin margins. A significant competitive challenge stems from the widespread undocumented economy, where players operating outside the tax net are able to offer highly competitive prices.
The documented market size for quality packaging board is estimated at approximately 300,000 tonnes, including production from Century Paper Packages Limited and limited imported bleached board. When accounting for smaller undocumented players, the total market size is reasonably estimated to be slightly below 500,000 tonnes. The main raw material used is paperboard, nearly 100% of which is procured from Century Paper. While imported boards are also available, they often present quality concerns.
Most imported boards are stock lots sold by traders, which lack consistent quality. The company uses tailor made board to ensure consistent print quality. The division currently has a capacity to produce more than 900 MT per month. Potential output could reach 1,200 MT if production were limited to heavier 350 GSM board, although actual output varies based on customer requirements, which range from 215 GSM to 350 GSM.
The company has commenced machinery maintenance, with one unit completed and another underway. Once both are fully operational, output is expected to rise above the current 900 tonne level.
Important Disclosures
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