Karachi August 15 2023: Packages foreign entity, Flexible Packages Convertors was put under a legally mandated restructuring process to assess its profitability prospects and viability of operations.
Flexible Packages Convertors (Proprietary) Limited, South Africa (“FPC”) is an entity based in South Africa which is principally engaged in the manufacture & sale of flexible packaging material. The Company, through its wholly owned subsidiary, Anemone Holdings Limited, Mauritius, controls 63.5% of the shareholding of FPC.
FPC recorded an unaudited loss before tax of ZAR 99 million in 2022 which tightened its already constrained working capital. As also disclosed audited unconsolidated financial statements of the Company for the year ended December 31, 2022; the deteriorating financial performance and tough economic conditions coupled with low sales to key customers, unfavorable product mix and higher than anticipated variable and fixed costs furthered the cash burden on the working capital of FPC which started restraining the production capacity. Resultantly, Packages Limited carried out an estimate of the recoverable amount of the net assets and determined it to be lower than the carrying amount, therefore, an impairment loss of PKR 687 million was recognized in the unconsolidated financial statements for the year ended December 31, 2022.
During the six months period ended June 30, 2023, FPC recorded a further unaudited loss before tax of ZAR 38 million which coupled with the capping of outflow of remittances outside Pakistan on account of national economic scenario and hence non-remittance of investment proceeds to FPC, pushed it into further financial distress. Consequently, FPC was put under a legally mandated restructuring process to assess its profitability prospects and viability of operations. This restructuring assessment has been completed recently whereby the legally appointed Business Rescue Practitioner (‘BRP’) ascertained that FPC is unable to meet its liabilities towards creditors.
The BRP, in accordance with the applicable laws called for a meeting of the creditors to evaluate either to liquidate FPC or sell it as a going concern to repay outstanding creditors. The BRP has notified that the creditors have collectively voted in favor of the sale to a third party to partly settle their outstanding debts, subject to applicable regulatory approvals. Accordingly, the Company expects to recognize an additional loss of PKR 1,202 million in its financials for the half year ended 30 June 2023. However, the consolidated earnings of the Group will improve going forward due to the absence of the loss-making arm.
