Karachi, Mughal Iron and Steel Ltd. (MUGHAL) and Amreli Steels Limited (ASTL), two key players in the long steel sector, are expected to report subdued earnings for the third quarter of fiscal year 2024, As per recent previews. The sector has been affected by high electricity costs and a lack of inventory gains, alongside a general slowdown in construction activities. However, there is a potential for volume improvement in the upcoming June quarter.

According to JS Global, Mughal Iron and Steel is poised to release its third-quarter results on April 30, 2024, with anticipated earnings per share (EPS) of Rs1.1, marking a 52% decrease from the previous quarter. The decline in gross margins to approximately 10% is attributed to higher power costs and lower volumes from the Non-ferrous division due to the Chinese holidays. Additionally, the company’s operating margins are expected to decrease by 0.5 percentage points quarter-over-quarter to 8.6%, with finance costs estimated at Rs1.5 billion.

Amreli Steels is expected to continue its recent trend of losses, forecasting a loss per share (LPS) of Rs2.1 for the third quarter, which will be discussed in a board meeting scheduled for April 26, 2024. Despite some growth in top-line revenue, gross margins are expected to remain at 9.6%, with continued financial burdens contributing to the losses. The company is also projected to incur a turnover tax based on expected revenues of approximately Rs12 billion. No dividends are anticipated for any quarter this year due to the weaker cash flow situation.

Both companies are navigating a challenging environment marked by rising electricity tariffs and subdued demand, which are expected to continue pressuring profitability. JS Research suggests that a reduction in interest rates could provide some relief for the steel industry, potentially easing the financial strain on these companies.