Karachi: Jamal Pipe Industries (Pvt.) Limited, a family-run business with a four-decade history in the pipe manufacturing sector, has had its entity ratings reaffirmed by The Pakistan Credit Rating Agency Limited (PACRA). The company's diverse product line and established market presence contribute to its stable ratings despite the volatile steel pipe industry.
According to The Pakistan Credit Rating Agency Limited announcement issued on 03 July 2024, Jamal Pipe Industries' product range includes black and galvanized line pipes, various poles, and guardrails, with poles making up 24% of the revenue and the remaining from pipes and guardrails. The diversification in its product slate is seen as a strength, particularly as the company aims to further enhance revenue from each segment to mitigate business risks.
The steel pipes and tubes industry, where JPI operates, faces significant challenges such as economic cyclicality, exchange rate fluctuations, and variations in international steel prices. Additionally, the industry contends with issues like low capacity utilization due to decreased demand, high financing costs, currency depreciation, and increasing energy expenses. Despite these factors, JPI has managed to maintain a comfortable order book, thanks to longstanding relationships with major corporate clients.
For the first half of fiscal year 2024, JPI reported sales revenue of approximately PKR 1,596 million, with a gross profit of 9.9% and a net profit of 3.6%. These figures are slightly down from the previous fiscal year but show resilience in a tough economic environment. The easing of import restrictions has also allowed JPI to source raw materials more cost-effectively than before, which was previously procured locally at higher prices.
The company's financial strategy includes managing working capital through a mix of internal cash generation and short-term borrowings, with leveraging at 29.7% as of 6MFY24. PACRA notes that JPI's policy of avoiding long-term debt and relying solely on short-term borrowings aligns with the inherent needs of its business model.