PACRA Maintains Entity Ratings of Amreli Steels Limited

Lahore, December 29, 2017 (PPI-OT):The ratings reflect continuous improvement in Amreli Steels’ business profile supplemented by strong local demand fundamentals. Business margins declined in FY17 – a factor of notable decline in local prices due to import of steel re-bars from China. The situation is likely to improve, post imposition of anti-dumping duty. Meanwhile, financial risk profile has depicted sustained improvement supplemented by strong cash flows and low leveraged capital structure; resulting in strong debt service coverages. The company is simultaneously working on two expansion projects which would result in capacity enhancement to 605,000tpa. of re-rolling and 600,000tpa. of billets by Feb-18 and Jun-18 respectively.

Capacity additions by competitors is likely to heat up competition, herein, effective and timely management of capacity expansion remains important for Amreli. The company has stepped up efforts to ensure supportive supply chain to utilize enhanced capacities in a timely manner. Meanwhile, regulatory protection to the finished product (rebar) is an added advantage for the sector; continuation of the same is important to generate good business margins.

The company has streamlined its organizational structure; senior executives with relevant expertise are being engaged to meet needs of growing business, this is likely to bring operational efficiencies. The ratings draw comfort from strong business acumen of Amreli Steels’ sponsors – Akberali Family – and business prospects which directly correlate to expected domestic infrastructure activity.

The ratings are dependent on the management’s ability to sustain its business profile while benefiting from positive demand fundamentals. Effective implementation of upgraded ERP system and strengthening of human resource is vital. Moreover, prudent management of financial affairs remains important.

For more information, contact:
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

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