JCR-VIS upgrades Corporate Governance Rating of Security Papers Limited to CGR 9

Karachi, July 24 2013 (PPI-OT): JCR-VIS Credit Rating Company Limited has upgraded the Corporate Governance Rating of Security Papers Limited (SPL) from ‘CGR-8++’ to ‘CGR-9’.

Corporate governance ratings are based on evaluation of key governance areas of the rated organization, which include Regulatory Compliance; Board Oversight; Management Profile; Self-regulation; Financial Transparency and Relationship with Stakeholders. The rating takes into consideration the continued commitment of the Board and management of the company to maintain sound governance framework.

SPL has remained in compliance with the revised Code of Corporate Governance issued by the Securities and Exchange Commission of Pakistan in 2012. The CEO of SPL, who was previously common Managing Director of Pakistan Security Printing Corporation Limited (PSPC) and SPL, has taken early retirement from Government service after her nomination as director was withdrawn by PSPC, to focus solely on SPL’s operations. Dual roles previously may have created certain conflict of interest situations as SPL is the largest supplier to PSPC; these are expected to have been eliminated.

The board comprises professionals with vast experience and diversified background providing strategic direction to the company. Four directors on the Board have obtained corporate governance certification while two are exempt, given their Board level experience.

Financial and corporate governance related disclosures in the annual financial statements are considered comprehensive; in addition, SPL has received various awards from professional bodies with regards to corporate and management practices, distribution to shareholders and health and safety practices.

During FY13, the company created a new position of Chief Operating Officer to support the CEO and oversee all operational activities of the company. An experienced resource was appointed who led a team of senior management personnel on multiple process, quality and technical improvement projects, with the input of factory floor personnel.

He has recently resigned and the company is in the process of hiring a suitable successor. As per management, improvements introduced have already been entrenched in SPL’s culture. JCR-VIS will continue to monitor the company’s ability to keep production losses within manageable limits.

A trade agreement between PSPC and SPL is expected to be finalized shortly which will result in formal documentation of the customer supplier relationship between the two. Price determination mechanism which is cost plus basis and involves negotiation between management of both entities is expected to remain the same.

Diversification in product mix remains low though efforts are being made for bringing improvement in the same. As such, product off-take risk is low as SPL is the only company providing bank note paper to PSPC. Initiatives to diversify product mix may nevertheless contribute positively to the company’s financial strength over the long term.

For more information, contact:
Mr. Javed Callea
JCR-VIS Credit Rating Company Limited
Tel: +9221 35311861 (10 lines) (Ext: 501)
Fax: +9221 35311872-3
E mail: javed.callea@jcrvis.com.pk

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