Karachi: Amreli Steels Limited is navigating significant financial and operational challenges, leading to a downgrade in its credit rating by The Pakistan Credit Rating Agency Limited. The company, operating in the high-risk steel sector, has seen its rating slide from "A-" to "CCC" since May 2024, reflecting a very high level of credit risk.

The steel industry has been under pressure due to weak demand, currency depreciation, high financial costs, and rising input prices. For Amreli Steels, these industry-wide challenges are compounded by operational issues, including elevated energy and financing costs and restricted access to working capital.

Amreli's capacity utilization has plummeted, causing a severe decline in its financial position. The company's gross margins fell from 13.1% in FY23 to 2.6% in the first nine months of FY25, with operating margins turning negative for the first time. This has led to a net loss of approximately PKR 2.9 billion for the nine-month period ending in FY25.

In response, Amreli's management is implementing a strategic turnaround plan focused on debt restructuring. The plan includes a grace period on interest and principal payments, divestment of non-core assets, and a PKR 1 billion equity injection by the sponsor. These steps aim to improve liquidity, stabilize operations, and gradually recover capacity utilization by the end of FY25.

Despite these efforts, the credit rating downgrade underscores the ongoing financial strain and the urgency for Amreli to secure critical financial support and revive operations. Management remains hopeful that these measures will lead to operational improvements and potential credit rating enhancements in the future.