Press Release

JCR-VIS Assigns Initial Ratings to Crescent Steel and Allied Products Limited

Karachi, July 03, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘A+/A-2’ (Single A Plus/A-Two) to Crescent Steel and Allied Products Limited (CSAPL). Outlook on the assigned ratings is ‘Stable’. The proposed 12 month commercial paper of Rs. 1billion has been assigned a rating of A-2 (A-Two).

Ratings of CSAPL are underpinned by the company’s consistent conservative financial policy which has been manifested through its leveraging profile. Improving liquidity and profitability indicators alongwith favorable demand dynamics which has resulted in healthy order flow during 2016 and 9MFY17 and expected continuity in the same are also positive rating drivers. Overall corporate governance framework is supported by strong board composition and oversight, a professional management team and focus on transparency and disclosures.

The Company’s flagship operations in the steel segment are characterized by high business risk given the cyclical nature of the industry, volatility in steel prices and competition from Chinese manufacturers; partly mitigated by tariff protection. Volatility in sales is reflected in significant historical variation in turnover and margins. However, in the backdrop of planned pipeline infrastructure projects, sales order pipeline is expected to remain healthy over the medium term. As the major large diameter spiral pipe manufacturer in the country, the company is well-positioned to capture a sizeable chunk of the new orders. Ratings going forward would be constrained by a material weakening in margins, change in sales outlook and delay in implementation of key projects.

CSAPL is a diversified concern with operations across the engineering (steel), textiles, capital markets and power sectors. Steel division remains the major driver of revenues and profitability. It has expanded in 2016 from 90,000 tons to 200,000 tons (OD:30”;WT:1/2”). CSAPL also has sizeable investment in subsidiaries and associates representing around two-third of the company’s own equity. Limited funding support from subsidiaries is expected over the rating horizon. However, dividend income from strategic investments is expected to support cash flows.

CSAPL plans to raise an additional Rs. 1billion through a commercial paper (CP) to fund working capital requirements. Given the healthy order pipeline, company’s projected cash flows are sufficient to meet repayment of CP.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.

Javed Callea

Applicable Rating Criteria: Industrial Corporates (May 2016)

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 2017 VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to VIS.

JCR-VIS Credit Rating Company Limited