May 23, 2022: VIS Credit Rating Company Limited has reaffirmed the entity ratings of International Steels Limited (‘ISL’ or ‘the Company’) at ‘A+/A-1’ (Single A Plus/A-One).
The long term rating signifies good credit quality with adequate protection factors. The risk may vary slightly from time to time because of economic conditions. Short term rating of ‘A-1’ depicts high certainty of timely payment where liquidity factors are excellent and supported by good fundamental protection and minor risk factors. The previous rating action was announced on March 12, 2021.
The assigned ratings are underpinned by the Company’s market leadership position in the flat steel segment, in terms of both sales and capacities. Established in 2007, ISL has an operational track record of more than a decade in the industry. Ratings are constrained by the high business risk of the flat steel industry, with raw materials constituting the majority of the product pricing. Accordingly, profitability margins depict significant sensitivity to changes in HRC pricing and exchange rate volatility. In addition, the industry is also exposed to the threat of dumping, which is partly offset by anti-dumping duties.
The ratings incorporate the strong cash flow coverages and moderate gearing level of the Company, both of which are aligned with the rating assigned to ISL. In the outgoing year, cash flow coverages have notably improved on the back of superior profitability margins, which were driven by the bullish trend in HRC pricing; nevertheless, these are likely to normalize to long term trend of ISL, as the commodity cycle eases. ISL’s assigned rating is supported by Corporate Governance infrastructure in place at ISL, which is strong given ISL’s operational status as a listed entity.
