Press Release

VIS Maintains Entity Ratings of Naveena Steel Mills (Pvt.) Limited

Karachi, July 09, 2024: VIS Credit Rating Company Limited (‘VIS’) maintains entity ratings of Naveena Steel Mills (Pvt.) Limited ('NSML’ or 'the Company’) to 'A-/A-2' (‘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 'A-2' indicates good certainty of timely payment. Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings has been changed from ‘Stable’ to ‘Negative’. Previous Rating action was announced on July 25, 2023.

NSML is a Private Limited Company incorporated on 15 February 2017. The principal business of the Company is the manufacture and sale of steel bars and billets. It is a wholly owned subsidiary of Naveena Group (Pvt.) Limited (‘NGPL’), with the Group companies (‘the Group’) having exposure in the textile, energy and construction sectors. The registered office of NSML is located at B-21, Block 7/8, Banglore Town, main Shahrah-e-Faisal, Karachi.

Assigned ratings incorporate the high business risk profile attributed to the long steel industry in Pakistan. This risk is underscored by the sector's exposure to economic cyclicality, foreign exchange rate fluctuations, volatility in international steel prices, and a challenging competitive environment. The review period witnessed a challenging economic landscape marked by floods, inflation, currency depreciation, and dwindling foreign reserves, leading to a contraction in the GDP and reduced market size in the sector.

Change in outlook reflects constraints in the Company's profitability profile, resulting in stress on the coverage profile. Higher margins supported cash flow from operations in FY23; however, increased financial charges and a contraction in the topline exerted pressure on coverages. In 3QFY24, further pressure on coverages was noted as margins eroded due to ongoing cost pressures while selling prices remained stagnant. Meanwhile, the capitalization and liquidity profiles remain adequate despite slight deterioration during the period under review. While the management expects to recoup margins and coverages, given the economic challenges it may take some time.

Going forward, ratings will remain sensitive to the Company’s ability to recover its profitability and coverage profile to be commensurate with assigned ratings. Moreover, ratings will also remain underpinned by the availability of the Group support to NSML to readily bridge its coverage gap.

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




Applicable Rating Criteria: Corporates:
https://docs.vis.com.pk/docs/CorporateMethodology.pdf

VIS Issue/Issuer Rating Scale
https://docs.vis.com.pk/docs/VISRatingScales.pdf

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 2024 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .