VIS maintains entity ratings of International Industries

November 14, 2023 (MLN): The VIS Credit Rating Company Limited (VIS) has maintained the entity ratings of International Industries Limited (PSX: INIL) at ‘AA-’ for long-term and ‘A-1’ for short-term with a stable future outlook, the latest press release issued by VIS showed.

The medium to long-term rating of 'AA-' denotes high credit quality coupled with strong protection factors. Moreover, risk factors may vary slightly with possible changes in the economy.

The short-term rating of 'A-1' signifies high certainty of timely payment with excellent liquidity and good company fundamentals. Risk factors are minor.

The previous rating action was announced on April 06, 2023.

INIL is a major producer of steel pipes, stainless steel tubes, and polymer pipes and fittings, with manufacturing facilities in Karachi and Sheikhupura.

The company has two wholly owned subsidiaries, INIL Americas Inc and INIL Australia Pty. Inc, and established INIL Construction Solutions (Pvt.) Ltd. as a new wholly-owned subsidiary in FY22.

These subsidiaries give the company access to international markets and give support to its export and local initiatives.

Assigned ratings for INIL consider the company's consistent financial performance and stable metrics, even during economic challenges in FY23.

Pakistan's economy faced difficulties, including foreign exchange shortages that led to currency fluctuations and heightened inflation.

The State Bank of Pakistan implemented measures to stabilize the economy, affecting sectors like construction, cement, and steel, resulting in reduced sales volumes and decreased capacity utilization.

However, INIL managed to sustain its margins due to eased international steel prices while impact of currency volatility on profitability was mitigated by effective pricing adjustments.

Additionally, sound financial management, encompassing decreased borrowing, limited the impact of elevated benchmark interest rates on profitability, with cost controls providing further support to the company's bottom line.

However, overall bottom-line growth remained constrained by lower volumetric sales.

Ratings also take into account changes observed in INIL's capitalization and liquidity metrics in FY23.

Capitalization demonstrated modest improvement as both gearing and leverage ratios exhibited positive trends, influenced by reduction in total debt utilization.

However, the company did acquire a fresh long-term facility for short-term debt restructuring.

The same had a positive effect on liquidity, resulting in a modest increase in the current ratio due to reduced current liabilities.

Meanwhile, there was a marginal deterioration in the coverage profile, mainly on account of lower funds from operations stemming from constrained revenue and slightly higher financial charges, despite a reduction in total debt.

Nonetheless, the Company's overall debt servicing profile remained commensurate with the assigned ratings.

Going forward, ratings will be sensitive to INIL's efficient inventory management and improvement in the cash conversion cycle coupled with overall improved indicators.

The capitalization and liquidity metrics should remain aligned with the assigned ratings, alongside the maintenance of sustained profitability and coverage indicators.

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