Press Release
VIS Reaffirms Entity Rating of Frontier Foundry Steel Limited
Karachi, June 23, 2025: VIS Credit Rating Company Limited (VIS) has reaffirmed the medium to long-term rating of Frontier Foundry Steel Limited (“FFSL” or “the Company”) at ‘A/A1’ (Single A /A One). Medium to long term rating of ‘A' indicates good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. Short term rating of 'A1' indicates a strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned rating has remained ‘Stable’. Previous rating review was conducted on July 24, 2024.
FFSL has been incorporated in Pakistan as a private limited company since 1986. As part of its plan for PSX listing, the Company transitioned into a Public Limited (unlisted) Company during the year 2023. The principal activity of FFSL is manufacturing and sale of steel bars. The Company also operates copper extraction and ingot casting facilities as an auxiliary business which is expected to add around PKR 3 bln to the Company’s revenue stream annually through exports. The registered office of the Company is in Peshawar Cantt, Pakistan. The Company has two production plants for steel bar; one is situated in Peshawar and the other in Lahore.
Assigned ratings reflect the medium to high business risk profile of Pakistan’s long steel (rebar) manufacturing sector, characterized by cyclical demand patterns, reliance on imported scrap, and energy-intensive operations. Sector profitability remains constrained due to input cost volatility, foreign exchange exposure, and limited pricing flexibility within a fragmented market structure. Construction-related demand remained weak in FY24 but has exhibited early signs of recovery in ongoing FY25, supported by monetary easing. Nonetheless, a sustained demand rebound remains contingent on broader macroeconomic conditions. Regulatory adjustments—such as the removal of import restrictions and the introduction of tax measures—have influenced raw material availability and competitive dynamics, though ongoing policy uncertainty continues to affect long-term business planning.
Ratings also factor in the Company’s financial risk profile. Revenue growth in FY24 was primarily attributed to higher average selling prices, which offset the impact of elevated energy costs. However, in ongoing FY25, gross margins have come under pressure due to declining selling prices with continued cost escalations. Net margins in FY24 were adversely affected by increased finance costs but have remained relatively stable in ongoing FY25 amid a lowering interest rate environment. Capitalization weakened in FY24, driven by higher short-term borrowings, but has since remained normalized. While coverage indicators were adequate in FY24, some tightening has been observed in FY25 in line with reduced profitability. Liquidity remains sufficient to provide cushion to meet near-term obligations.
Going forward, ratings will remain sensitive to the Company’s ability to maintain profitability amid cost pressures and price volatility, alongside sustaining improvement in coverage indicators. Capital structure and working capital management will continue to be key rating considerations. In order to reduce the carbon footprint and support profitability, the company has embarked on eco-friendly energy generation through 15MW solar plant installation and the outcome of the renewable energy project and its impact on energy cost reduction and margin support will also be important.
For further information on this rating announcement, please contact at 021-35311861-64 or email at info@vis.com.pk.
Applicable Rating Criteria:
Corporate Rating
https://docs.vis.com.pk/docs/CorporateMethodology.pdf
VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf