Lahore: The Pakistan Credit Rating Agency Limited (PACRA) has maintained its entity ratings for Mughal Iron and Steel Industries Limited, citing the company’s resilience in a challenging economic environment marked by subdued demand and rising operational costs.
According to The Pakistan Credit Rating Agency Limited, Mughal Iron and Steel’s ratings have been reaffirmed at ‘A+’ for the long term and ‘A1’ for the short term, with a stable outlook. This decision reflects the company’s ability to manage industry pressures, including higher power tariffs and increased finance costs, which have impacted margins across the sector.
Mughal Iron and Steel has distinguished itself with a diverse product slate, including girders and T-iron alongside rebars, and a strong distribution network across Pakistan. Additionally, the company benefits from a unique and entirely export-oriented revenue stream from its copper ingot production, which has provided a buffer against domestic import challenges and contributed to approximately 21% of its revenue in FY24.
The company’s innovative approach to overcoming sector challenges includes investments in cheap and alternative energy sources, which are expected to enhance profit margins once fully operational. Furthermore, a significant year-over-year growth in revenue was reported for FY24, with a top line surge to PKR 92.383 billion from PKR 67.390 billion in FY23, driven by increased sales volumes and higher sales prices.
Despite these gains, Mughal Iron and Steel has faced a slight decline in gross margins due to the broader industry challenges, and net margins have been pressured by higher finance costs. The company’s leverage ratio increased to approximately 57% in June 2024, up from 50.6% in June 2023, necessitating reliance on banking facilities and debt instruments to meet funding needs.
The recent board approval of a PKR 2 billion Balancing, Modernization, and Replacement (BMR) project for the existing steel bar re-rolling mill is expected to enhance operational efficiency and support sustained business performance amidst ongoing economic slowdown and cost escalations.