Press Release

VIS Maintains Entity Ratings of Aisha Steel Mills Limited

Karachi, January 01, 2024: VIS Credit Rating Company Limited maintains entity ratings of Aisha Steel Mills Limited ('ASL' or 'the Company') at 'BBB+/A-2' ('Triple B Plus'/'A-Two'). Medium to long term rating of 'BBB+' indicates adequate credit quality; protection factors are reasonable and sufficient. Risk factors are considered variable if changes occur in the economy. Short term rating of 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook has been revised from "Rating Watch - Negative' to 'Stable'. Previous Rating action was announced on March 31, 2023.
ASL was incorporated in Pakistan in 2005 as a public limited company, commencing commercial operations in 2012. The Company is involved in the manufacturing and sale of cold rolled coils and hot-dipped galvanized coils. ASL, part of the Arif Habib Group, represents a significant private sector investment in the local flat-rolled steel industry. Situated at Port Qasim, Karachi, the Company meets both local demand and exports to various international destinations, including North America, Asia, Africa, Europe, and the Middle East. ASL derives demand from the automobile, engineering, and appliances industries.
Assigned ratings incorporate an ongoing high business risk profile for the flat steel industry, marked by adverse macroeconomic conditions in FY23, including import restrictions, currency depreciation, escalating steel prices, high inflation, elevated energy costs, and policy rate hikes. The sector, mainly led by International Steels Limited (ISL) and Aisha Steel Mills Limited (ASL), experienced a substantial contraction in revenues due to reduced demand. Ongoing challenges, such as weak economy and reduced FX availability are anticipated to keep demand muted in the cold-rolled coil category.
Ratings also encompass the financial risk profile of ASL. The financial performance of the Company saw a significant contraction in revenue and gross profit, leading to a net loss in FY23. ASL's capitalization metrics showed signs of improvement, aided by sponsor support and a reduction in debt utilization, resulting in some respite in gearing and leverage positions, while debt coverage remained stressed during the period under review.
Change in outlook is underpinned by the exhibited and the continued funded sponsor support to the company. Going forward ratings will remain sensitive to management’s ability to achieve its projected plans and improve its stressed liquidity and coverage metrics. Moreover, improvement in the profitability profile and the maintenance of capitalization indicators will also be important considerations for future ratings.
For further information on this ratings announcement, please contact Mr. Saeb Muhammad Jafri (Ext: 202) or the undersigned (Ext: 201) at 021-35311861-64 or email at info@vis.com.pk.





Javed Callea
Advisor


Applicable Rating Criteria:
Industrial Corporates
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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