Press Release

VIS Reaffirms Entity Ratings of Crescent Steel and Allied Products

Karachi, December 17, 2024: VIS Credit Rating Company Limited (‘VIS’) has reaffirmed the entity ratings of Crescent Steel & Allied Products Limited (‘CSAP’ or ‘the Company’) at ‘A-/A2’ (Single A Minus/A Two). 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 'A2' suggests good likelihood of timely repayment of short-term obligations with sound short-term liquidity factors. Outlook on the assigned ratings remains ‘Stable’. Previous ratings action was announced on December 13, 2023.

CSAP, incorporated on August 1, 1983, as a public limited company listed on the Pakistan Stock Exchange (PSX), operates as a conglomerate with a primary focus on steel pipe manufacturing. The company’s registered office is in Lahore, while its principal office is located in Karachi. The steel segment remains the primary contributor to revenue, specializing in the production of large-diameter spiral welded pipes and various line pipe coatings, whereas the cotton and hadeed segments are currently non-operational. Altern Energy Limited has historically been a significant contributor to profitability through dividend income to the investment segment of the Company; however, this contribution is anticipated to cease from FY26 onwards after final dividends in FY25, due to the termination of the Power Purchase Agreement (PPA) of main subsidiary Rousch (Pakistan) Power Limited (RPPL).

Assigned ratings take into account the business risk profile of the Company, reflecting the high industry risk associated with Pakistan's steel pipes sector. This assessment considers the sector's exposure to fluctuating demand, dependence on large-scale infrastructure projects, reliance on imported raw materials, and exposed to fluctuations in exchange rates and international commodity prices. The industry faces challenges such as low-capacity utilization, taxation challenges, and increases in gas and electricity prices.

Assigned ratings also consider the financial risk profile of the Company. Revenue growth was supported by the continuation of the K-IV Greater Karachi Bulk Water Supply Project, which mitigated exposure to raw material price volatility, aiding margins. Improvements in the capitalization profile were driven by reduced debt levels, cash generation, and profit retention. The liquidity position strengthened with better working capital management and lower working capital needs. However, 1QFY25 metrics depict pressure on profitability and coverage due to delays in raw material delivery for the K-IV project and reduced income from non-core operations. Coverage ratios in 1QFY25 were affected by lower Funds from Operations (FFO) and higher taxation under the Finance Act 2024.

Going forward, the assigned ratings will remain sensitive to the timely execution of the K-IV project and the addition of new contracts to sustain profitability and operational cash flows. The termination of the power purchase agreement of RPPL is expected to impact dividend income contributions. Maintenance of improved margins, coverage metrics, and a stable liquidity profile will remain a key consideration. Moreover, materialization of any diversification initiatives by the management will also provide support to assigned ratings.

For further information on this ratings announcement, please contact on 021-35311861-64 or email at info@vis.com.pk.







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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