Karachi, 11 Oct 2023:In the fiscal year 2023, ISL managed to harness a profit after tax (PAT) of PkR3.5bn, albeit mitigated by a retrospective super tax of 10% which hampered an otherwise PkR4bn total, according to a corporate briefing held by the company and documented by AKD Securities Limited. While capacity utilization plummeted to 35%, ISL utilized several productivity initiatives, allowing the company to regulate business costs and still turn a profit. ISL saw its cost of doing business ascend due to various factors such as higher interest rates and sharp currency depreciation during the period.

ISL commissioned a new Electrolytic Cleaning line with the objective of streamlining cold rolled capacity and augmenting efficiency in Tin Mill Plate production. This new line might also enable the company to explore export opportunities for these grades. Despite the economic strains, ISL successfully navigated through import restrictions, attributed largely to a successful allowance of LCs, bolstered by their robust export footprint.

Managing their operational activities with a focus on working capital, ISL generated a potent cash flow of PkR22.3bn in FY23, also managing to deleverage its long term and short-term borrowings by PkR16.8bn. The company’s debt, which mostly comprises concessionary financing, including TERF, LTFF, and EFS-based loans, reduced notably from PkR22.5bn last year to PkR4.7bn at the end of FY23.

The FY23 saw a dip in domestic sales, clocking in at PkR64bn, a fall from PkR72bn in FY22, attributed to plummeting international prices and regressed volumes. Nevertheless, ISL maintained strong gross margins at 13.8%, indicating firm control over expenses and stringent discipline regarding working capital. Regarding raw materials, 80% are sourced from JFE, Japan’s second-largest steel producer, which ensures premium quality, supply reliability, and cost-efficient raw material with main import venues stationed in Japan, China, Turkey, and a fraction from Vietnam.

ISL, considering the sheer scale of its business, deemed backward integration into the manufacturing segment unfeasible, given a hefty requirement of $350mn worth of LC establishment needed for in-country material sourcing. Engaged in regulatory dialogues, ISL has addressed the matter of sales tax exemption in FATA and PATA regions with the Government of Pakistan (GoP), resulting in an extension for another 12 months until June 2024.

Noteworthy is ISL’s dependency on both gas and grid for their power needs, given that their plant consumption stands at 21MW while available space for solar plant installation is capped at 3MW, rendering it an inadequate solution. With the solar plant only operable for 12 hours/day and natural gas supply being unreliable, the management foresees a sustained reliance on gas and grid for their energy demands. While no growth in CRC is anticipated, the company expects their market share to remain stable moving forward.