IGI Securities Limited – Flash Note

Karachi, April 16, 2019 (PPI-OT): Result Review – International Steels Limited – Depressed margins slash 3QFY19 earnings by 42%YoY to PKR 1.41/share

International Steels Limited (ISL) announced its 3QFY19 financial results with earnings clocking in at PKR 611mn (EPS: PKR 1.41) down by 42%YoY as compared to PKR 1.05bn (EPS: PKR 2.42) in the same period last year. On a cumulative basis, this brings 9MFY19 earnings to PKR 2.36bn (EPS: PKR 5.42) down by 27%YoY as against PKR 3.23bn (EPS: PKR 7.43) in the corresponding period last year.

Net Sales of the Company during the quarter increased by +25%YoY, largely owing to deeper penetration in the domestic market in the back of enhanced capacity.

Gross margins of the Company reduced drastically to less than 10% as against 16% reported in the similar period of the preceding year, largely owing to curtailed CRC-HRC margins, greater discounts offered by the Company and enhanced cost structure of the Company owing to PKR devaluation and notional cost of depreciation.

Finance cost of the Company leaped up by 3.3x, largely representing unwinding of interest costs to the income statement post capitalization of new Cold Rolling Mill (CRM) plant.

The effective tax rate of the Company fell by 500bps to 24% likely on account of application of tax credits available on recently inaugurated CRM facility of the Company.

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