Karachi, VIS Credit Rating Company Ltd. (VIS) has revised the rating outlook for International Industries Limited (IIL) from 'Rating Watch - Developing' to 'Stable', while maintaining its entity ratings at 'AA-/A-1'. This revision reflects IIL's resilience and consistent financial performance despite economic challenges.
According to VIS Credit Rating Company Limited, the medium to long-term rating of 'AA-' indicates IIL's high credit quality and strong protection factors, albeit with slight variability due to economic changes. The short-term rating of 'A-1' denotes high certainty of timely payment, excellent liquidity, and solid company fundamentals. This rating action follows the previous one announced on April 6, 2023.
IIL, a leading producer of steel pipes, stainless steel tubes, and polymer pipes and fittings, operates manufacturing facilities in Karachi and Sheikhupura. The company also has wholly owned subsidiaries in the Americas and Australia and recently established IIL Construction Solutions (Pvt.) Ltd. These subsidiaries enhance IIL's international market access and support its export and local operations.
The assigned ratings reflect IIL's stable financial metrics and consistent performance, even amid the economic challenges of FY23. Pakistan's economy faced foreign exchange shortages, currency fluctuations, and heightened inflation, impacting sectors like construction, cement, and steel. Despite these challenges, IIL managed to sustain its margins due to easing international steel prices and effective pricing adjustments that mitigated the impact of currency volatility on profitability. Sound financial management, including decreased borrowing and cost controls, supported the company's bottom line, although growth was constrained by lower sales volumes.
VIS also noted improvements in IIL's capitalization and liquidity metrics in FY23. Positive trends in gearing and leverage ratios were observed due to reduced debt utilization, although a new long-term facility was acquired for short-term debt restructuring. This restructuring positively impacted liquidity, slightly increasing the current ratio. However, a marginal deterioration in the coverage profile was observed, mainly due to lower funds from operations and slightly higher financial charges, despite overall debt reduction.
Going forward, the ratings will be sensitive to IIL’s ability to manage inventory efficiently, improve its cash conversion cycle, and maintain aligned capitalization and liquidity metrics. The maintenance of sustained profitability and coverage indicators will also be crucial for the company's ratings.