September 26, 2019 (MLN): International Steels Limited (ISL) held it analyst briefing on September 25, 2019, wherein the management of the company discussed the financial performance for the year ended June 30, 2019, along with the future outlook.
To recall, the company reported net profits of Rs. 2.6 billion (EPS: Rs. 6.12) for the Fiscal Year 2019, which is around 39% lower than the earnings of last year. The decline in company’s profit was mainly due to lower than expected volumetric sales during the last quarter. This can be attributed to the increase in prices of Cold Rolled Coil and Hot Dipped Galvanized Coil due to PKR devaluation.
Speaking on the above mentioned results, the management held a number of factors responsible for the dismal performance of the company during the period. These factors include inability of the domestic producers to pass on the impact of PKR depreciation, increase in dumping activities post US-China trade war, higher finance costs as well as reversal of tax credits booked by the company.
The management apprised that it is expecting around 8% decline in volumetric sale, owing to the domestic as well as global economic conditions. Nonetheless, it informed that around 60% demand for CRC is likely to be met by domestic producers, given the recent dumping duties imposed on China and Russia.
Shedding light on the expected decline in demand for steel in domestic markets, the management revealed that the company is now planning to enhance its footprint in overseas markets through higher exports. This strategy would be eased via a number of benefits associated with exporters, such as ERF facility, tax benefits as well as Forex hedging.
With regards to the first service center of the company, the management informed that the facility will be operational in the upcoming quarters, and will mainly cater to auto sector and electric appliances.
The management further opined that the prices of gas are expected to increase further next year, which might strain the earnings of the company.
The entire domestic steel sector had delivered a rather dismal performance during the year ended on June 30, 2019, as most of the companies succumed to adverse economic pressures as well as factors reported by ISL.
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