Press Release
JCR-VIS Reaffirms Entity Ratings of International Industries Limited
Karachi, April 10, 2018: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of International Industries Limited (IIL) at ‘AA-/A-1’ (Double A Minus/A-One). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on January 13, 2017.
IIL is Pakistan’s largest manufacturer of steel and plastic pipe with an annual pipe manufacturing capacity of around 750,000MT. The company commenced operations of its large diameter pipe mill for Hollow Structural Sections (HSS) & API pipes and HDPE pipe up to 1,600mm extruder in 2016. This along with inauguration of PPRC pipes and fittings factory in Sheikhupura in 2017 is expected to facilitate in sizeable volumetric growth in sales, going forward.
The assigned ratings incorporate IIL’s market leadership position in the tube and pipes segment, improving financial profile, strong corporate governance framework and extensive experience and track record of its sponsors in the steel sector. Higher business risk factors pertaining to the steel sectors are partly mitigated by duty on pipe imports, track record of sponsors and management’s strategy of maintaining margins at competitive levels.
Sales mix of IIL is diversified in terms of local and export sales and comprises multiple products from the steel and plastic segments. During FY17, growth in sales was driven by higher local sales volumes while exports witnessed a decline. Going forward, broad based growth in sales is expected during FY18 on account of order pipeline for API pipes based on tenders awarded & ongoing pipeline infrastructure development activity in the country and healthy demand outlook for CR pipes (increasing automobile sales), scaffolding pipes (higher construction activity) and galvanized pipes (increased government focus on gas outreach in the election year). Export sales, primarily comprising sales of galvanized pipes, after witnessing a decline during FY16 and FY17 are expected to post growth in FY18 due to improved sales from new markets.
Overall financial profile of the company is supported by improving profitability and strong liquidity profile. Future profitability of IIL is projected to witness healthy growth on the back of significant volumetric increase in sales and higher dividend income from International Steels Limited. Gearing levels have trended upwards on account of increase in borrowings to fund higher inventory levels. Increase in inventory is part of management’s prudent strategy to procure raw material for tenders based orders in order to avoid risk of price fluctuation. Going forward, gearing levels will depend on orders in hand for tender based business and funding mix with regards to expansion plans of the company. Future trend with respect to leverage indicators will be tracked by JCR-VIS.
For further information on this rating announcement, please contact Mr. Jamal Abbas Zaidi (Ext: 207) or the undersigned (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.
Javed Callea
Advisor
Applicable Rating Criteria: Industrial Corporates (May 2016)
http://www.jcrvis.com.pk/docs/Corporate-Methodology-201605.pdf