Press Release

International Steels Limited - VIS places Steel Sector on Rating Watch

Karachi, April 10, 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 Steels Limited (ISL) at ‘A+/A-1’ (Single A plus/A-One). Outlook on the assigned ratings has been revised from ‘Stable’ to ‘Rating Watch – Developing’. The medium to long-term rating of ‘A+’ denotes good credit quality with adequate protection factors. Moreover, risk factors may vary with possible changes in the economy. 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 23, 2022.

The assigned ratings factor in the company’s position as one of the leading flat steel producers in the country as well as its robust operational and financial history. Additionally, the ratings take into account successful completion of capital expenditure that has enhanced capacity and efficiency through commissioning of new Purlin machines in the service center and resolution of bottlenecks in CRC production. Although capacity utilization levels were reported lower in the ongoing year due to import compression, ISL was able to navigate through these import restrictions because of partly matching export business proceeds.

Assessment of financial risk profile of the Company depicts weakening, with 1HFY23 recording a notable decline in topline, caused by slowdown in 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. Elevated finance costs added notable stress to net margins. Ratings remain dependent on projected improvement in profitability profile through management’s strategy of de-leveraging balance sheet to reduce the impact of elevated finance cost. With subdued profitability, liquidity profile of the Company also witnessed weakening in the ongoing year; projected improvement in the same is considered important. As per management, the Company is focusing on reducing its working capital cycle and channeling the cash towards early retirement of long-term debt to reduce overall financing cost burden amidst higher interest rate environment. We expect that this in turn should improve the capitalization indicators as well liquidity profile. Going forward, Company’s ability to uplift its internal generation capacity and effectively manage its working capital during this challenging macroeconomic period will be important from a rating’s perspective. 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: 306) at 021-35311861-71 or email at

Faryal Ahmad
Deputy CEO

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 .