PACRA maintains Entity Ratings of Amreli Steels Limited
Amreli Steels has good business profile on account of the company’s market positioning in the industry. The Company produces two key products: i) steel billets, ii) rebars including a) Grade 60 Deformed Steel bars and b) Xtreme bars (G-500W). Melting capacity of company is 600,000 tons per annum while its rebar manufacturing capacity is 605,000 tons per annum. The company having significant presence in Rebars market, intends to sustain on its quality and a wide retail and distribution network spread across Pakistan. Exacerbating levels of inflation and political instability has slowed down overall economic growth in Pakistan. Operating in these dynamics, steel industry is grappling with grave challenges like contained demand and raw materials shortages due to imports restrictions. Margins improved in latest quarter due to improvement in price retention. The company reported a loss in 2QFY23, however as the prices picked up, bottom line turned green in 3QFY23. With significant contraction in volumetric sales, company's topline was reported at PKR 34.698 billion in Mar 23 (Mar 22: PKR 42.537 billion). Amreli's financial risk matrix is stretched owing to debt-to-equity ratio of ~60% due to significant reliance on short-term financing for day-to-day working capital requirements. Decision to further expand melting and rebar manufacturing facilities has been shelved due to struggling economic outlook. Management decided to diversify into non-ferrous operations and is establishing a new facility for production of Aluminium ingots. The project is, however stalled currently due to LCs related issues. Going forward, management aims to sustain the current volumetric levels and adopt cost efficiency model through measures like maintaining optimum inventory and receivable levels. Enhanced price retention shall further support company's performance.
The ratings draw comfort from the strong business acumen of Amreli Steels' sponsors - Akberali Family. The ratings are dependent on the management's ability to uphold in difficult times and improve its business vis-à-vis financial risk profile while operating in challenging economic conditions. Retention of its market share, timely repayments of long-term loans and sustained margins are vital. Moreover, prudent management of financial affairs is vital in the sustainability of the Company.
Amreli Steels Limited, incorporated in 1984, obtained listing on Pakistan Stock Exchange on Dec 1st, 2015. The company is majorly owned by Akberali family (~75%), followed by general public (~15%). Sponsoring family carries over six decades of experience in steel and allied business. The seven-member Board, comprising four members of Akberali family provides adequate guidance to the company. Mr. Shayan Akberali, the CEO of the company is supported by an able team. Amreli Steels operates re-rolling mills (capacity: 605,000tpa) and a billet manufacturing plant (capacity: 600,000tpa).