Amreli Steels’ margins decline despite volumetric growth from capacity enhancement: PACRA

March 26, 2019 (MLN): Pakistan Credit Rating Agency has maintained entity ratings of Amreli Steels Limited at ‘A’ for long-term and ‘A1’ for short-term, with a stable outlook assigned to the company. The ratings reflect Amreli Steels' good business profile on account of the company’s market positioning in the industry.

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.

Going forward, upholding business profile remain vital for the ratings.

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