Press Release

JCR-VIS Reaffirms Entity Ratings of International Steels Limited

Karachi, April 4, 2018: JCR-VIS Credit Rating Company Limited has reaffirmed the entity ratings of ‘A+/A-1’ (Single A Plus/A-One) to International Steels Limited (ISL). Outlook on the assigned ratings is ‘Stable’. Previous rating action was announced on January 13, 2017.

The assigned ratings to ISL are underpinned by the company’s market leadership position as Pakistan’s largest Cold Rolled Coil (CRC) and the only Hot Dipped Galvanized Coil (HDGC) & Color Coated Coil (PPGI) manufacturer in the country. Ratings also reflect healthy financial risk profile and strong corporate governance infrastructure. Ratings are constrained by high business risk as reflected by significant volatility in HRC, CRC and HDGC margins and threat of dumping. High business risk is partly offset by imposition of anti-dumping duty on imports from China and Ukraine which has also improved pricing power. Continuity of imposed duty and effective implementation of the same will be important rating sensitivities, going forward. Market and competition dynamics post expansion by both flat steel players will also be an important rating driver, going forward.

Over the last three years, a key focus area of the management has been continuous expansion of plant and machinery including enhancement of cold rolling and galvanizing capacity, debottlenecking of pickling line and increase in annealing capacity. Moreover, additional investment is being made in annealing and skin pass facilities which will increase cold rolling capacity by 100,000MT. ISL is also in the process of expansion of its rolling capacity to 1,000,000MT which is projected to come online in the last quarter of the ongoing fiscal year. In terms of product mix, the company continues to focus on higher value added segments with service quality being a key consideration as reflected by plans to invest in service centers. Widespread usage and healthy demand outlook for industries catered to by ISL including automotive, construction and white goods sector has been noted positively.

Financial profile has witnessed noticeable improvement as reflected by increasing profitability, healthy liquidity profile and adequate capitalization indicators. Going forward, profitability is projected to grow based on higher volumetric sales and healthy margins as increased capacity utilization is expected to result in better absorption of fixed cost. Over the last two years, ISL’s gearing levels have improved but continue to remain on the higher side vis-à-vis peer companies. Given the additional borrowings planned to fund expansion plans and growth in equity due to retained profits, leverage indicators are projected to remain within benchmarks for the assigned ratings.

For further information on this rating announcement, please contact Mr. Jamal Abbas Zaidi (Ext: 207) or the undersigned (Ext: 201) at 021-35311861-71 or fax to 021-35311872-3.





Javed Callea
Advisor

Applicable Rating Criteria: Industrial Corporates (May 2016)
http://www.jcrvis.com.pk/docs/Corporate-Methodology-201605.pdf

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