PACRA Maintains Entity Ratings of Mughal Iron and Steel Industries Limited

Lahore, March 25, 2019 (PPI-OT): Mughal is a known name in the steel industry. The Company’s profiling has significantly improved post listing on PSX, few years back. Governance framework strengthened by induction of independent oversight on board. The Company has diversity in its product slate; Rebars, T-Iron and Girders etc. Furthermore, establishment of strong brands like ‘Mughal Supreme’ gives competitive edge to the Company’s products. The company has attained formidable market share by penetrating retail segment. The strategic realignment executed over the last few years by channeling 60% volumes (previous: 10% of sales mix) to retail market has been fruitful.

The capacity expansion project (planned COD: Jun-19) will further enable Mughal to increase its efficiency and market presence. The established distribution network and knowledge of management on supply chain dynamics is a positive contribution to Mughal. Going forward, management is eying backward integration.

The business profile witnessed continuous improvement in recent periods. However, margins witnessed slight reduction – an industry wide phenomenon – primarily attributable to global increase in prices of raw material (scrap, iron) and depreciation of Pak Rupee. The general industry dynamics reflect weakening. The ratings incorporate Mughal’s good financial risk profile which has sustained over the years. The short term borrowings (net of cash) are largely aligned with the working capital requirements. Going forward, with increased working capital requirements post expansion prudent management of cash flows remain essential for the ratings.

The ratings are dependent upon the company’s ability to sustain its healthy business profile amidst strong competition, herein, effective and prudent management of financial risk indicators remain important. Moreover, upholding of governance framework is vital.

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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