Press Release

VIS Maintains Entity Ratings of Frontier Foundry Steel (Pvt.) Ltd

Karachi, June 22, 2023: VIS Credit Rating Company Limited has maintained the entity ratings of Frontier Foundry Steel (Pvt.) Ltd. (FFSL) at ‘A/A-1’ (Single A/A-One), with revision in outlook from ‘Rating Watch – Developing’ to ‘Stable’. The long-term rating of ‘A’ denotes good credit quality with adequate protection factors. Moreover, risk factors may vary with possible changes in economy. Short-term entity rating of ‘A-1’ indicates high certainty of timely payment, excellent liquidity factors and good company fundamentals. Risk factors are minor. Previous rating action was announced on March 31, 2023.

The revision in the assigned outlook takes into consideration the Company’s strategy to improve the supply-side challenges faced by the steel sector as a consequence of ongoing import restrictions. Efforts to shift towards local supply of key raw materials through expansion of procurement teams across the country, digitization of purchasing processes and enhancement of import quotas are viewed positively. Additionally, long-term construction contracts for public projects, strong business relationships with large corporate entities and growth of retail sales channels ensures revenue visibility over the rating horizon.

Financial risk profile during the ongoing year remained relatively sound as compared to peers despite current macroeconomic deterioration. Topline uptick was based on higher sales prices with revenue diversification into exports non-ferrous (copper) products. Growth in gross margins were attributable to transfer of rising input costs to customers and inventory gains, however, high financing costs in line with policy rate hikes dragged bottom-line profitability, impacting net margins; albeit remains stable. Liquidity profile remained satisfactory with improvement in cash flow coverages whereas debt-servicing capacity, though lower vis-à-vis FY22, continued to be sufficient for the assigned ratings. Gearing, however, depicted an increase owing to higher debt levels in line with growing working capital requirement. Going forward, the ratings will be sensitive to the Company’s ability to address supply-side issues to meet existing demand requirements whilst maintaining range-bound profitability, liquidity and capitalization indicators.

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

Javed Callea

VIS Entity Rating Criteria: Corporates (May 2023)

VIS Issue/Issuer Rating Scale:

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