1. Roshan Packages Limited
Company Overview

2. Upcoming IPO: Roshan Packages Limited
Transaction Overview
Roshan Packages Limited (“RPL” or the “Company”) is in the process of raising capital through listing on Pakistan Stock Exchange (“PSX”). The Company has applied at PSX and is expected to commence marketing for its capital raising process post approval of PSX and the Securities and Exchange Commission of Pakistan (“SECP”)
The proceeds of the IPO would be used for the following purposes:
To invest in a new paper mill under a join-venture with a Chinese partner to manufacture and supply corrugated paper – c. 45% of the proceeds utilization
To modernize and expand capacity of its existing corrugated and flexible manufacturing facilities – c. 45% of the proceeds utilization
To meet part of the increased working capital requirements – c. 10% of the proceeds utilization

3. Fiscal Year Ending June 30th
Company Overview
Background
Financial Snapshot
Roshan Packages Limited is one of the largest manufacturers and sellers of packaging solutions to exporters of fruits and also various local and multinational corporations.
The Company has two principle product categories:
Corrugated: the Company produces a wide variety of customized cartons to package consumer goods, fruits, textiles, electronic appliances, pizzas, etc.
Flexible: the Company produces wrappers for confectionary, biscuits, snacks, ice-creams, detergents, and labels for PET bottles
The Company has two principle manufacturing facilities over 16 acres in Sundar Industrial Estate approx. 40 kilometers from Lahore
Roshan Packages sources its raw materials from both local and international markets; it imports c. 36% of its raw material requirements on which an import duty of 21% is applicable. An import duty of 20-25% would have been paid had the product manufactured by Roshan Packages were imported
The Company is part of the Roshan Group, which also includes
Urdu Digest: Pakistan’s largest Urdu publication covering science, literature, health, social and political affairs
Roshan Enterprises: Pakistan’s leading exporter of fresh fruits and vegetables
Fiscal Year Ending June 30th
PKR in millions
2011
2012
2013
2014
2015
2016
Income Statement
Revenue
1,389
2,220
2,740
3,066
3,568
3,622
Gross Profit
230
332
381
403
453
588
EBITDA
161
231
253
268
301
412
Profit after Tax 79
142
139
100
133
262
Balance Sheet
Non-Current Assets
499
487
949
1,014
1,204
3,184
Current Assets
495
814
961
1,462
1,651
1,951
Shareholder’s Equity
306
539
747
873
1,019
1,288
Surplus on Revaluation
135
124
208
181
169
1,143
Non-Current Liabilities
106 89
225
200
344
1,087
Current Liabilities
448
549
730
1,221
1,323
1,617
Cash Flow Statement
Cash Flow from Operations
(5)
101
128
(176) 78
Cash Flow from Investments
(151)
(30)
(215)
(128)
(54)
(721)
Cash Flow from Financing 13 15 85
238
(234)
696

4. Products Corrugated Flexible
Roshan Packages produces customized corrugated boxes for consumer products, fruits, textiles, electronic appliances, pizzas etc., flexible wrapping for confectionary, biscuits, snacks, ice-creams, detergents, etc., and wrapping labels for PET bottles

5. Top Clients Client Products / Brands Corrugated Flexible
Roshan Packages has a history of maintaining and developing long-term professional relationships with its clients. Out of a total of over 500, more than 60 clients have been in business with the Company consistently for more than five years, while its top ten clients contributed c. 65% to revenues in FY 2016.
Client
Products / Brands
Corrugated
Flexible
Pepsi-Cola International
Lays , Cheetos, Kurkure, Wavy
Lays , Cheetos, Kurkure
Lotte Kolson
Slanty , Snacker
Slanty , Snacker , Potato Stick , Twich
Continental Biscuits
Tuc, Tiger, Prince Chocolate, Oreo, Candi, Gala
Unilever Pakistan
Surf Excel, Vim, Lipton, Supreme
Sunlight, Vim, Choc Bar, Feast, Jet Spot
Chase International
Mandarin -
Coronet Foods
Rio, Chocolate Sandwich, Lemon Sandwich, Sooper
Unilever Pakistan Foods
Knorr Noodles, Mayo, Rafhan Custard, Corn Oil
Knorr Noodles
Tapal Tea
Tez Dum, Danadar, Green Tea
Tez Dum, Top Liner, Tea Liner
Roshan Enterprises
Mandarin, Mango, Vegetable
Prime Fruits International

6. The Packaging Industry
Strong Market Share in the Organized Packaging Sector
Small to mid-scale cottage industries account for 45% of the packaging market
A few large players in the organized sector account for 50% of the packaging market
Imports make up 5% of the total packaging market
Roshan Packages has a leading market share amongst the producers of corrugated boxes in the organized sector and is the second largest firm providing flexible wrappings.
Source: Information provided by the management of RPL based on their best estimates of the respective companies’ overall production capacities

7. The Packaging Industry (Cont.)
End Market Dominated by Fruit and FMCG
Packaging products in Pakistan are mostly consumed by the Fast Moving Consumer Goods (“FMCG”) and Fruit sectors
Roshan Packages drives c. 94% of its sales in FY 2016 from those two sectors
Source: Information provided by the management of RPL based on their best market estimates

8. Strong Growth in Fast Moving Consumer Goods
Growth in the Fast Moving Consumer Goods (“FMCG”) sector is driven by:
Increase in the Pakistani middle class
Strong growth in Pakistani Gross Domestic Product (“GDP”)
Larger increase in overall consumer spending in Pakistan
North America
Europe
Central and South America   
Asia-Pacific
Sub-Saharan Africa
Middle East & North Africa
Source: McKinsey & Company Research F
Source: World Bank
Source: Statista, The Statistics Portal

9. Shortage of Excess Capacity Affecting Revenue Growth
Roshan Packages has been facing capacity shortage that has affected its ability to grow sales
The Company has decided to undergo expansion to increase capacity, diversify its product offerings and increase operational efficiency
It increased capacity in Flexible division during last quarter FY 2016 and will roll out remaining expansions in FY 2017 and 2018
Achieved 27% YoY revenue growth in first quarter FY 2017
Note: the Company increased capacity in its Flexible plant during 4Q16, and thus its capacity utilization for FY 2016 isn’t indicative of production over the year
Revenue CAGR
: 41%
: 23%

10. Expansion of Corrugated Plant
Roshan Packages has invested in an state-of-the-art corrugator from BHS Corrugated, a world-class German-based manufacturer of corrugators and corrugated rolls with over 50 years of experience
The machinery has already arrived at Roshan Packages’ pant and will be erected and commissioned in phases during FY 2017 and FY 2018
The corrugated plant’s production capacity will increase from 30,000 metric tons to 60,000 metric tons during third quarter of FY 2017 and will subsequently increase to 90,000 metric tons during first quarter of FY 2018
The expansion will cost c. PKR 940 million, out of which Roshan Packages has already invested c. PKR 360 million. Part of the proceeds from the equity raising shall be used for this purpose

11. Expansion of Flexible Plant
Roshan Packages has invested in the following world-leading manufacturers of printing machinery:
Extrusion machine from WindMoller & Holscher, Germany
Rotogravure printing machine WindMoller & Holscher, Germany
Wax coating machine from Uteco, Germany
The extrusion machine and the rotogravure printing machine were installed during fourth quarter of FY 2016 and have increased the flexible plant’s production capacity from 3,600 metric tons to 10,800 metric tons
The wax coating machine will be installed during FY 2017 and will subsequently increase production capacity to 12,240 metric tons
The expansion will cost c. PKR 1,350 million, out of which Roshan Packages has already invested c. PKR 905 million. Part of the proceeds from the equity raising will go towards this purpose

12. Roshan Sun Tao Paper Mills (Private) Limited
Roshan Packages has initiated backward integration by establishing a subsidiary Roshan Sun Tao Paper Mill to supply corrugated paper
The paper mill is a joint-venture with Shangdong Yongtai Paper Mill, a Chinese manufacturer of corrugated paper
Shangdong Yongtai has paper producing capacity of 120,000 metric tons and is in process of increasing capacity to 600,000 metric tons; it recorded revenues of PKR 4.4 billion (RMB 281 million) in FY 2015
Shangdong Yongtai is part of the Shangdong Yulong Real Estate Group, a diversified conglomerate with interests in real estate, construction, water and power, concrete, recreation, and trade.
Roshan Sun Tao will have a capacity of 137,000 metric tons and is expected to be operational by FY 2019
Roshan Sun Tao is expected to provide c. 30% of its produce to Roshan Packages and the rest to the market in FY 2019
The paper mill is expected to cost c. PKR 4 billion, with 60% expected to be financed through debt and 40% through equity
Roshan Packages will own 60% of the equity share while Shangdong Yongati will retain the remaining 40% of the equity share
Shangdong Yongtai has subscribed its portion of the equity at an 83.33% premium

13. Roshan Sun Tao Paper Mills (Private) Limited (Cont.)
The paper mill will provide the following benefits:
Ease shortage of high quality corrugated paper available to Roshan Packages
Cater to the rising demand of corrugated paper in the domestic market
The paper and board industry in Pakistan has been declining due to large presence of cottage industries, whose products are of low and inconsistent quality
Most corporate and export-oriented companies in Pakistan have therefore increasingly turned towards importing paper
Roshan Sun Tao can offer inexpensive and high quality substitute for imported paper, which stood at c. 600,000 metric tons in FY 2014
Source: The Pakistan Business Council