Karachi: VIS Credit Rating Company Limited has reaffirmed the entity ratings of Frontier Foundry Steel Limited (FFSL) at 'A/A-1', indicating a stable credit outlook despite a challenging economic environment. The ratings reflect the company's adequate protection factors and high certainty of timely payment, tempered by sector-specific risks and economic volatility.

According to VIS Credit Rating Company Limited, the assigned ratings take into account the high business risk profile inherent in the long steel industry, which is subject to economic cyclicality and external factors such as exchange rate fluctuations and international steel price volatility. Despite these challenges, FFSL's financial health remains stable with good liquidity and protection factors, although the company faces increased pressure from rising input costs and finance charges.

FFSL, which transitioned from a private to a public unlisted company in September 2023, operates multiple facilities across Pakistan, focusing on the manufacture and sale of steel bars and operating auxiliary copper extraction and ingot casting facilities. The company has navigated a tough economic landscape marked by inflation and currency depreciation, which have squeezed profitability and extended the cash conversion cycle due to delayed collections.

The outlook for FFSL hinges on its ability to manage these operational and financial challenges, including maintaining top-line performance and managing capital and liquidity effectively. VIS notes that proactive management strategies to improve system controls and address financial obligations will be crucial for sustaining the current ratings in a fluctuating economic environment.