Karachi: VIS Credit Rating Company Limited (VIS) has reaffirmed the entity ratings of International Industries Limited (IIL) at ‘AA-/A-1’ for medium to long-term and short-term financial obligations, respectively, reflecting a stable and robust credit outlook as of October 22, 2024. This assessment underscores IIL’s high credit quality and strong protection factors, despite the inherent risks associated with the steel and polymer pipes manufacturing sectors.
According to VIS Credit Rating Company Limited, the ratings reflect IIL’s prominent market position within Pakistan’s industrial sector, underpinned by its historical presence and diversified operations. The company, a significant player in the steel industry, benefits from its affiliation with the Amir S. Chinoy Group, which boasts a longstanding involvement in Pakistan’s steel and electrical products markets through entities like International Steels Limited and Pakistan Cables Limited.
IIL operates manufacturing facilities in Karachi and Sheikhupura and maintains subsidiaries such as IIL Americas Inc. and IIL Australia Pty. Inc., which help diversify its market presence. Additionally, IIL Construction Solutions (Pvt.) Ltd. offers local engineering services, further enhancing the company’s operational scope.
The steel sector, to which IIL is closely tied, is described as high-risk due to its dependency on the fluctuating construction and cement industries, making it highly susceptible to economic cycles. The sector’s profitability is often hampered by its exposure to volatile commodity prices, energy-intensive operations, and intense competition, which limits pricing power. The company also faces challenges from reliance on imported raw materials, which are vulnerable to exchange rate fluctuations.
The past year has seen a lackluster performance in the construction, infrastructure, and automobile sectors, primarily due to prolonged import restrictions, high discount rates, soaring inflation levels, and political uncertainty in Pakistan, all of which have dampened steel demand.
Despite these challenges, IIL has managed to increase revenue through higher average prices, though sales volumes have decreased. Export sales were particularly affected by the global economic slowdown. However, profitability has been supported by effective working capital management, margin optimization, and significant dividends from subsidiaries. The company’s liquidity profile remains sound, though it faces challenges from an extended receivable cycle, which has shown year-over-year improvement.
Looking ahead, VIS notes that IIL’s ratings may be impacted by its ability to maintain its financial risk profile amid external economic pressures. Investments in new business initiatives are expected to support future demand and contribute to revenue growth, but managing energy costs and working capital requirements will be crucial for sustaining operational stability.