Lahore: The Pakistan Credit Rating Agency Limited (PACRA) has reaffirmed its ‘A+’ rating for the debt instrument (Sukuk) issued by Mughal Iron and Steel Industries Limited, reflecting the company’s resilience in a challenging economic climate marked by subdued demand and increased operational costs.
According to The Pakistan Credit Rating Agency Limited, the reaffirmation of the stable outlook for Mughal Iron and Steel’s Sukuk comes amidst significant sector pressures, including rising power tariffs and finance costs which have affected the broader steel industry. Despite these challenges, Mughal Iron and Steel has leveraged its diverse product range and deep market penetration to maintain a competitive edge.
Mughal Iron and Steel boasts a robust portfolio including girders, T-iron, and rebars, and has an alternative revenue stream through its export-oriented copper ingot production. This diversity has helped the company mitigate import-related issues and maintain steady export growth, particularly to China, which represented approximately 21% of its revenue in FY24.
For FY24, the company reported a significant increase in its top line, reaching PKR 92.383 billion, a growth of about 37% from PKR 67.390 billion in FY23. This surge was driven by both an increase in sales volumes and higher sales prices. However, despite these positive trends, the company experienced a slight dip in gross margins due to ongoing industry challenges.
Moreover, Mughal Iron and Steel’s financial strategy includes making investments in cheaper and alternative energy sources, which are expected to enhance profit margins once they become fully operational. Despite facing higher finance costs which pressured net margins, the company’s leverage ratio increased to around 57% in June 2024, reflecting its continued reliance on banking facilities and debt instruments to support its funding needs.
The stable rating by PACRA underscores Mughal Iron and Steel’s ability to sustain a healthy business profile despite an economic slowdown and elevated operational costs, positioning it well to navigate future market dynamics.