Press Release
VIS Reaffirms Entity Ratings of International Steel Limited
Karachi, October 29, 2024: VIS Credit Rating Company Limited (VIS) has reaffirmed entity ratings of International Steel Limited (“ISL” or “the Company”) at ‘A+/A1’ (Single A plus/Single 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' suggests strong likelihood of timely repayment of short-term obligations with excellent liquidity factors. Outlook on the assigned ratings remain ‘Stable’. Previous action was announced on November 24, 2023.
ISL was incorporated in Sindh, Pakistan on September 3, 2007, and became a publicly listed company on the Pakistan Stock Exchange on June 1, 2011. ISL operates as a subsidiary of International Industries Limited (IIL), which maintains a 56.34% ownership stake. The company is engaged in the manufacturing of cold-rolled, galvanized, and color-coated steel products, with its registered office located in Karachi and manufacturing facilities situated in the Landhi Industrial Area. ISL is part of the Amir S. Chinoy Group, which has diversified operations in the industrial sector of Pakistan.
The assigned ratings reflect inherent business risks of the steel sector, which is highly sensitive to economic cycles and exposed to exchange rate fluctuations due to its heavy dependence on imported raw materials. The demand for steel remains closely tied to macroeconomic conditions, driven by cyclical industries including construction and automotive sectors. The sector’s sensitivity to energy price, coupled with the high competitiveness and commodity-like nature of steel products, limits pricing power, thereby constraining profitability. Demand in the steel sector has remained subdued on account of macroeconomic challenges such as inflation, currency depreciation, rising energy costs, and high-interest rates, which has adversely impacted steel consumption. Limited progress on infrastructure projects amid reduced Government spending on development projects has further constrained demand.
Assigned ratings also consider the profitability, capitalization, liquidity, and coverage profile of the Company. Profitability in FY24 remained stable despite pressure on margins due to higher conversion costs driven by an increase in energy tariffs. However, net margins were supported by deleveraging measures initiated in the prior year. Liquidity remains sound, with the Company maintaining a healthy current ratio. The debt coverage profile also remains comfortable with improved debt service coverage.
Going forward, amidst continuing demand pressures in the near time we expect product margins to remain strained on account of reduced commodity margins. While, the Company’s investment in solar power project is anticipated to boost cost efficiencies and mitigate future energy price risks, profitability will remain sensitive to demand dynamics.
For further information on this ratings announcement, please contact at 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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