Karachi: In its fiscal year 2024 briefing, Mughal Steel announced a record revenue of PKR 92.4 billion, marking a 37% increase from the previous year, driven largely by higher sales volumes. Despite this achievement, the company faced significant challenges, including a steep decline in gross margins to 8.4%, down from 14.4% in the previous fiscal year, attributed to falling finished product prices and rising energy costs.
According to AKD Securities Limited, the company's profitability faced further pressure due to higher financing rates, resulting in a 43% decrease in profit to PKR 2.0 billion, translating to an earnings per share of PKR 5.96. The company reported a notable increase in production volumes, with re-rolling production reaching 245.6 thousand metric tons, a 30% year-over-year rise. Non-ferrous production volumes were recorded at 570 thousand tons for melting and 56 thousand tons for recycling.
Despite a recent correction in international copper prices by US$1,000 per ton, the simultaneous decrease in the cost of compressor scrap helped mitigate potential margin impacts. The management remains optimistic about a recovery in local market volumes and has maintained its domestic market share amidst challenges in the steel sector.
The briefing highlighted the company's strategic acquisition of Mughal Energy Ltd, a coal-fired captive power plant, to enhance energy efficiency with a fuel mix of 50% imported coal and 50% alternative sources. The company also reaffirmed its plans for a non-ferrous recycling plant, aiming for an initial annual capacity of 80,000 to 90,000 tons.
Management emphasized ongoing discussions between the IMF and local authorities regarding a construction stimulus package, which could potentially benefit the sector. Furthermore, the company has plans for a major upgrade of its re-rolling facility into a dual-purpose rolling mill to diversify production capabilities.
Mughal Steel has successfully managed to maintain a reduced average import supply chain time of 40 to 45 days, compared to the industry's average of approximately 80 days, through strategic supplier relationships. The company dismissed the possibility of diversifying into the sugar industry, citing operational challenges in managing both a steel plant and a sugar mill simultaneously.