PACRA retains A1 short-term rating of Mughal Iron & Steel

October 19, 2026 (MLN): Mughal Iron & Steel Industries Limited (PSX:MUGHAL) has had its entity ratings maintained at ‘A+’ for the long term and ‘A1’ for the short term with a stable outlook, according to the Pakistan Credit Rating Agency Limited (PACRA).

The ratings were unchanged from the previous review on October 15, 2025, and no rating watch was assigned.

PACRA said the sector worked in a two-phased environment during FY26. Macroeconomic stabilization and easing financial conditions supported business activity for most of the year, while renewed inflationary pressure and heightened geopolitical uncertainty slowed momentum later on.

The agency noted that the sector still relies on imported raw materials and faces elevated energy costs and regulatory changes, although structural housing and infrastructure needs continue to support steel demand.

Against this backdrop, Mughal strengthened its position in the domestic ferrous segment, where sales volumes rose on higher production at its melting furnaces and rolling mills.

Capacity utilization improved to around 59% and 52% respectively, compared to 51% and 48% in FY25. Major balancing, modernization and replacement (BMR) work on the bar re-rolling mill has been completed, and PACRA expects the upgraded mill to improve operational efficiency and product flexibility.

The non-ferrous segment was temporarily suspended due to volatility in international commodity markets and related risks, which led to lower export volumes. As a result, net sales fell to Rs77.96bn in FY26 from Rs89.41bn in FY25, mainly on lower average selling prices and reduced exports. The ferrous segment contributed around 91.5% of revenue.

Despite the lower topline, gross margin improved to 11.1% from 9.1% on a favorable sales mix, operational efficiencies and disciplined inventory management. Net margin rose to 3.2% from 1.08% as finance costs eased amid declining interest rates. Working capital management remained sound, backed by a strong liquidity position.

Borrowings increased to Rs38.07bn from Rs28.01bn, mainly on fresh long-term financing for permanent working capital and the BMR of the bar re-rolling mill, which lifted leveraging to 51.2% from 49.3%.

After the year end, the company’s subsidiary achieved the Commercial Operation Date (COD) of the main 31.50 MW turbine of its 36.50 MW captive hybrid power plant, effective August 31, 2026.

PACRA expects the plant to reduce energy costs and further improve operational efficiency.

The agency said the ratings depend on the company’s ability to sustain its business profile amid changing sector conditions, including the regulatory environment, housing and infrastructure demand, and movements in raw material prices and energy costs.

Management has described the suspension of the non-ferrous segment as temporary, and PACRA will monitor any resumption for its effect on sales and profitability, given the segment’s relatively higher margins.

PACRA added that maintaining the gains in revenue and margins, together with timely servicing of the higher debt, remains important.

Working capital discipline, particularly receivable collection, successful commissioning of the BMR project and a reliable energy supply from the hybrid captive power plant are also key considerations.

Mughal Iron & Steel Industries Limited, a public limited company incorporated in 2010, is primarily engaged in manufacturing and selling mild steel products in the ferrous segment. It has a melting capacity of 590,000 MT, rerolling capacity of 630,000 MT and non-ferrous recycling capacity of 90,000 MT.

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