Press Release

VIS Reaffirms Entity Ratings of Crescent Steel and Allied Products Limited

Karachi, June 25, 2021: VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings of Crescent Steel and Allied Products Limited (CSAPL) at ‘A-/A-2’ (Single A Minus/A-Two). The long term rating of ‘A-’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies 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 is Stable. The previous rating action was announced on April 8, 2020.

The assigned ratings incorporate CSAPL’s diversified revenue streams including exposure to steel, textile, capital markets and power sector coupled with low leveraged capital structure. The ratings are constrained by business risk of the steel segment which comprises sizeable proportion of the company’s revenues. The steel division exhibits inherent cyclicality since business performance largely depends on infrastructure projects, especially pipeline augmentation projects of gas utility companies.

With slowdown in public sector infrastructure projects, overall topline decreased in FY20 vis-à-vis FY19. Moreover, imposition of lockdown due to COVID-19 resulted in supply chain disruptions and less absorption of fixed costs due to halt in production of some business divisions. Ease in lockdown, increase in business activity and initiation of the projects of the gas utility companies have contributed to improvement in profitability profile of the company during 9M’FY21. Given the sizeable quantum of orders in hand, profitability profile is expected to improve going forward. However, delay in public sector and pipeline augmentation projects of gas utility companies continues to remain a key risk factor. Improvement in profitability profile is considered important to commensurate with the assigned ratings.

Accounting for dividend income from associates, net cash inflow available for debt payments is considered adequate. Nevertheless, liquidity remains contingent on continuation of high value pipeline projects to ensure generation of sound cash flows. Leverage indicators are conservative and are expected to remain at manageable levels going forward. Ratings will continue to be dependent on maintenance of leveraging profile and cash flow coverage within benchmarks for the assigned ratings.

For further information on this rating announcement, please contact the undersigned (Ext. 202) or Ms. Sara (Ext: 207) or at 021-35311861-70 or email at .

Faryal Ahmad Faheem
Deputy CEO

Applicable Rating Criteria: Corporates (April 2019)

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 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited