PACRA Maintains Entity Ratings of Amreli Steels Limited

Lahore, March 25, 2019 (PPI-OT): The ratings reflect Amreli Steels’ good business profile on account of the company’s market positioning in the industry. The Company produces two key products: i) steel billets, ii) rebars including a) Grade 60 Deformed Steel bars and b) Xtreme bars (G-500W). The Company has achieved capacity expansion of melting and rebar manufacturing capacity to 400,000 tpa and 605,000 tpa respectively. This will be enhanced to 600,000 and 1,105,000 for melting and rebar respectively. However, focused efforts to vigilantly channel volumes from enhanced capacity amid slow infrastructural activity remains essential for the Company. The general industry dynamics reflect weakening.

Meanwhile, regulatory protection to the finished product (rebar) is an advantage for the sector. The volumetric increase (from recently added capacity) improved topline but margins declined – an industry wide phenomenon – attributable to increased raw material prices, depreciating Pak rupee and significant rise in distribution costs incurred by the company. The financial risk profile deteriorated owing to decline in coverages attributable to sizable increase in finance costs. Going forward, upholding business profile remain vital for the ratings. The ratings draw comfort from strong business acumen of Amreli Steels’ sponsors – Akberali Family.

The ratings are dependent on the management’s ability to uphold its business vis-à-vis financial risk profile. Utilization of enhanced capacity and improved margins are vital. Moreover, prudent management of financial affairs remains important.

For more information, contact:
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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