Press Release

International Industries Limited - VIS places Steel Sector on Rating Watch

Karachi, April 06, 2023: The business and financial risk of the steel sector has increased on a timeline basis emanating from import restrictions, limited raw material coverage, soaring raw material prices, exchange rate volatility, and higher interest rates, resulting in inflationary pressures and a decline in demand in the construction, engineering, automobiles and infrastructure development projects. The ongoing situation is expected to persist in the mid-term impacting the financial risk profile of companies across the sector. Accordingly, VIS Credit Rating Company Limited (VIS) has placed the steel sector and the companies rated therein by VIS under ‘Rating Watch’ status.

VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of International Industries Limited (IIL) at ‘AA-/A-1’ (Double A minus/A-One). Outlook on the assigned ratings have been revised from ‘Stable’ to ‘Rating Watch – Developing’ status. The medium to long-term rating of ‘AA-’ denotes high credit quality with strong protection factors. Moreover, risk is modest but may vary slightly from time to time because of economic conditions. The short-term rating of ‘A-1’ signifies high certainty of timely payment with excellent liquidity factors and good fundamental protection factors. Risk factors are minor. Previous rating action was announced on May 11, 2022.

Assigned ratings incorporate IIL’s position as one of the prominent market players within the steel pipe and tubes sector as well as its sound operational and financial history. During the rating review period, the Company set up a new wholly-owned subsidiary in partnership with a world-leading engineering company to provide the local market with innovative engineering solutions.

Assessment of financial risk profile of the Company depicts weakening, with 1HFY23 recording a notable decline in topline, caused by subdued demand for steel products in both local and export markets. In addition, the Company reported lower gross margins due to higher costs of raw materials resulting from volatility in international prices and currency devaluation. Net margins also remained constrained due to elevated finance costs, despite dividend income support from subsidiaries. Given subdued profitability, lower cash flow coverages of obligations and extended working capital cycle depicts pressure on liquidity position. However, management expects margins to significantly improve in the current half of FY23 on account of IIL’s better positioning relative to market players amidst raw material import constraints. Ratings also take into account improvement in capitalization indicators owing to lower short-term borrowings, a portion of which was re-profiled to long-term debt during the period under review. Management projects further reduction in leverage levels during the remaining half of the ongoing fiscal year with targeted reduction in working capital cycle. Going forward, ratings will remain sensitive to Company’s ability to improve its internal generation capacity and working capital management together with continued support of dividend income from subsidiary in order to support the overall liquidity profile of the Company amidst challenging market conditions. The ratings will remain under Rating Watch based on the unfolding of the economic and market developments going forward and updated over time line according to availability of financial information

For further information on this rating announcement, please contact Ms. Asfia Aziz (Ext: 212) or the undersigned (Ext: 201) at 021-35311861-71 or email at

Sara Ahmed

VIS Entity Rating Criteria: Corporates (August 2021)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2023 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .