Verdict: Roshan Packages Limited (RPL) finished the year ended 30 June 2026 with a stronger top line, better gross profit and higher reported profit after tax, but the quality of the improvement was mixed. Consolidated net revenue rose 12.2% and gross margin expanded modestly, while finance costs climbed 37.2%, statutory profit before tax fell 31.3%, operating cash flow remained negative and gross debt increased sharply. The result is therefore best read as an operating recovery accompanied by a tighter funding and cash-conversion position—not yet a clean, broad-based earnings upgrade.
This analysis uses the audited consolidated financial statements for FY2026 because the group includes the pre-operational Roshan Sun Tao Paper Mills subsidiary. Figures are in Pakistani rupees and comparisons are against FY2025 unless stated otherwise. The auditor issued an unmodified opinion. Where management did not quantify a driver—particularly the separate effects of price, volume and mix—this article does not manufacture a split.
Results at a glance
- Net revenue increased to Rs10.837 billion from Rs9.661 billion, a gain of Rs1.176 billion or 12.2%.
- Gross profit rose 16.8% to Rs904.2 million. Gross margin improved to 8.34% from 8.02%, an increase of about 33 basis points.
- Consolidated operating profit increased 9.7% to Rs367.7 million, but operating margin eased to 3.39% from 3.47% because operating expenses grew faster than gross profit.
- Finance costs rose to Rs260.7 million from Rs190.0 million. Reported profit before taxation declined to Rs113.0 million from Rs164.5 million.
- Profit after taxation increased 4.4% to Rs115.0 million and basic/diluted EPS improved to Rs0.81 from Rs0.78. A deferred-tax credit was important to this outcome.
- The board recommended a final cash dividend of Rs1 per share, equal to 10% of par value.
- AlphaGen models: Alpha QoQ Score 84.93; TTM Performance Score 88.05; 3Y Business Perf Score 42.89; Sector Leadership Score 53.64. These are model outputs, not figures reported by the company.
What improved
Demand recovery and utilization supported revenue
Management attributes the revenue increase to stronger business volumes together with pricing discipline, product mix and a greater focus on higher-value business. It does not disclose a precise price-volume-mix bridge, so the individual contribution of each factor cannot be verified. Physical production data nonetheless supports the volume-recovery claim: corrugation output increased to 31,409 metric tonnes from 27,735 tonnes, lifting utilization of 60,000-tonne installed capacity to 52.3% from 46.2%. Flexible-packaging output rose to 6,845 tonnes from 6,472 tonnes, raising utilization of 12,240-tonne capacity to 55.9% from 52.9%.
Those utilization levels are improving but still leave substantial unused capacity. That gives RPL room to grow without immediately duplicating its existing conversion footprint, provided it can win profitable orders and source inputs efficiently. The directors’ report says the group maintained supply continuity through alternative trade routes, supplier diversification and strategic procurement while emphasizing contribution margins, customer profitability and on-time-in-full delivery.
Gross profit grew faster than sales
Cost of revenue increased 11.8%, slightly slower than the 12.2% rise in net revenue. That small positive spread lifted gross profit by Rs129.7 million and expanded gross margin by roughly one-third of a percentage point. Management links the improvement to revenue growth, disciplined commercial management, strategic procurement and operating efficiencies. Given continued volatility in imported and internationally priced raw materials, freight and energy, the expansion is useful evidence that commercial execution improved even though absolute margin remains thin.
The six-year record adds perspective. FY2026 net revenue and gross profit exceeded the prior-year figures and surpassed the FY2024 revenue and gross-profit levels. Yet the 8.34% gross margin remains below approximately 9.9% in FY2023 and 12.6% in FY2021. RPL has therefore recovered scale and some spread, but has not returned to the more favorable margins seen earlier in the cycle.
Reported profit after tax edged higher
Profit after tax rose by Rs4.9 million to Rs115.0 million despite the fall in statutory pre-tax profit. The reason sits below the pre-tax line: current income tax of Rs77.2 million was more than offset by a deferred-tax credit of Rs79.3 million, creating a net income-tax credit of about Rs2.0 million. Final tax and the minimum-tax differential, totaling Rs63.4 million, had already been deducted in arriving at the reported Rs113.0 million profit before taxation.
That accounting structure matters. PAT growth did not come from stronger financing-adjusted operating economics; it relied on the deferred-tax benefit offsetting current tax. For repeatable earnings, investors should focus on operating profit, finance costs, tax paid and cash generation rather than assuming FY2026’s effective tax outcome will recur.
What weakened / needs attention
Higher operating expenses diluted the gross-profit gain
Administrative expenses rose to Rs383.7 million from Rs336.6 million, selling and distribution expenses increased to Rs124.4 million from Rs118.6 million, and the company recorded an Rs11.9 million expected-credit-loss provision versus a Rs35.3 million reversal in FY2025. Other operating expenses were Rs16.5 million compared with Rs19.2 million. In aggregate, these lines absorbed enough of the gross-profit increase that operating profit grew more slowly than revenue and gross margin, nudging operating margin lower.
The expected-credit-loss swing deserves attention because trade debts also increased 16.3% to Rs2.561 billion—faster than sales. Management says it tightened receivable monitoring and credit management, but the balance-sheet and cash-flow evidence shows collections remained a material use of funds.
Finance costs overwhelmed the operating advance
Finance costs increased by Rs70.7 million, or 37.2%, to Rs260.7 million. Other income was broadly flat at Rs71.7 million. As a result, profit before income tax, final tax and the minimum-tax differential fell to Rs176.3 million from Rs208.3 million; after final and minimum taxes, statutory profit before taxation dropped to Rs113.0 million from Rs164.5 million. The PBT margin contracted to 1.04% from 1.70%.
The audited statements do not provide a simple rate-versus-volume bridge for finance cost. The consolidated balance sheet, however, shows that gross debt increased about 64.0% to roughly Rs2.852 billion from Rs1.739 billion, driven mainly by short-term borrowings rising to Rs2.464 billion from Rs1.564 billion and new long-term financing. It is therefore reasonable to infer that a much larger average borrowing requirement was a major contributor, while the exact split between balances, rates and timing is not disclosed.
Cash conversion and liquidity moved in the wrong direction
Net cash used in operating activities was Rs414.6 million, compared with Rs396.5 million used in FY2025. Before finance costs and taxes, operations generated only Rs64.4 million after working-capital changes because working capital absorbed Rs627.2 million. The largest drags were a Rs370.1 million increase in trade debts, a Rs212.0 million reduction in trade and other payables, and higher stores and spares. Inventory itself was broadly flat at Rs1.435 billion.
Capital expenditure more than doubled to Rs432.5 million. Short-term investment purchases and maturities also moved cash through the investing section, but the core message is straightforward: internal cash generation did not fund the year’s operating and investment needs. Financing inflows of Rs620.9 million, mainly net short-term borrowing and new long-term funding, partly bridged the gap.
Cash and bank balances ended at Rs102.7 million, while gross debt was roughly Rs2.852 billion, leaving net debt near Rs2.749 billion on a simple cash-offset basis. Current assets increased 14.4% to Rs5.966 billion, but current liabilities rose 20.0% to Rs3.980 billion; the current ratio slipped to about 1.50 times from 1.57 times. This is not an immediate insolvency signal—the company reported no debt defaults—but it reduces the room for execution errors.
The paper-mill option: strategic upside with funding risk
Roshan Sun Tao Paper Mills, the wholly owned pre-operational subsidiary, is developing a 300-tonne-per-day recycled packaging-paper mill at Sheikhupura. The strategic logic is credible: backward integration could improve paper availability and quality, reduce freight and foreign-exchange exposure, and capture value from recovered paper. Management estimates total project investment at about Rs6.99 billion on a 70:30 debt-to-equity structure.
After year-end, the subsidiary secured firm debt-financing approvals aggregating Rs5.2 billion, while the parent had earmarked about Rs700 million of liquid investments toward its equity contribution at 30 June 2026. Engineering and EPC arrangements continued to advance. The subsidiary remained pre-operational and reported a Rs31.4 million FY2026 loss.
This project can alter RPL’s cost structure and strategic position, but it also raises execution, leverage and commissioning risk. Approvals are not the same as a completed, ramped-up plant. The next evidence to watch is financial close and drawdown terms, EPC milestones, actual equity funding, commissioning timing, and whether the mill reaches utilization without placing excessive pressure on the packaging business’s working capital.
What the AlphaGen models are signaling
The high Alpha QoQ Score and TTM Performance Score are directionally consistent with the recent operating recovery: sales, gross profit and the latest full-year PAT moved higher. The much lower 3Y Business Perf Score better reflects the uneven medium-term record, including margin compression versus earlier years, volatile bottom-line performance and weak cash conversion. The Sector Leadership Score near the middle of the range suggests that RPL’s recent momentum has not yet translated into clear, durable sector leadership. These scores should be read as structured model assessments, not audited metrics or investment advice.
What to monitor next
- Gross margin and utilization: whether higher corrugation and flexible-packaging output produces further margin expansion rather than only more revenue.
- Receivables and cash conversion: whether trade-debt growth slows and operating cash flow turns positive without a large payables stretch.
- Borrowings and finance costs: whether debt begins to normalize after FY2026’s roughly 64% increase, and whether financing costs fall faster than operating profit grows.
- Tax normalization: whether PAT remains resilient without a similarly favorable deferred-tax movement.
- Paper-mill execution: financial close, EPC progress, equity injections, commissioning milestones and the eventual effect on raw-material costs.
- Dividend funding: the Rs1-per-share recommendation is modest in absolute terms, but cash distributions should be assessed alongside negative operating cash flow and project commitments.
Bottom line
RPL’s FY2026 result contains genuine operating progress. Revenue grew, utilization improved, gross profit reached Rs904 million and the group defended a small gross-margin expansion in a difficult input-cost environment. Those are meaningful positives. But operating expenses, a steep rise in finance costs, negative operating cash flow and higher debt prevented that progress from becoming a stronger pre-tax result.
The central question for FY2027 is not simply whether sales can keep growing. It is whether RPL can convert higher capacity utilization into wider operating margins and cash, while funding the paper-mill project without allowing leverage and working-capital needs to dominate the income statement. Until that happens, the result is best classified as an encouraging operational recovery with material financial-execution work still ahead.
Primary sources and evidence limitations
- Pakistan Stock Exchange: RPL company page and dated result announcements
- Pakistan Stock Exchange: Roshan Packages Annual Report 2026 (audited consolidated statements)
- Pakistan Stock Exchange: financial results for the year ended 30 June 2026
- Roshan Packages investor-information page
Evidence limitation: management identifies volumes, pricing discipline, product mix, procurement and efficiency as drivers but does not quantify a full price-volume-mix or raw-material bridge. Production volumes are disclosed, not unit selling prices or a complete sales-volume reconciliation. The analysis therefore reports management’s explanation, uses the audited line-item arithmetic, and avoids assigning unsupported percentages to individual causes.