Karachi, June 25, 2021 (PPI-OT):VIS Credit Rating Company Ltd. (VIS) has reaffirmed the entity ratings of Crescent Steel and Allied Products Limited (CSAPL) at ‘A-/A-2’ (Single A Minus/A-Two). The long term rating of ‘A-’ signifies good credit quality; Protection factors are adequate. Risk factors may vary with possible changes in the economy. The short-term rating of ‘A-2’ signifies good certainty of timely payment; Liquidity factors and company fundamentals are sound. Access to capital markets is good. Risk factors are small. Outlook on the assigned ratings is Stable. The previous rating action was announced on April 8, 2020.
The assigned ratings incorporate CSAPL’s diversified revenue streams including exposure to steel, textile, capital markets and power sector coupled with low leveraged capital structure. The ratings are constrained by business risk of the steel segment which comprises sizeable proportion of the company’s revenues. The steel division exhibits inherent cyclicality since business performance largely depends on infrastructure projects, especially pipeline augmentation projects of gas utility companies.
With slowdown in public sector infrastructure projects, overall topline decreased in FY20 vis-à-vis FY19. Moreover, imposition of lockdown due to COVID-19 resulted in supply chain disruptions and less absorption of fixed costs due to halt in production of some business divisions. Ease in lockdown, increase in business activity and initiation of the projects of the gas utility companies have contributed to improvement in profitability profile of the company during 9M’FY21. Given the sizeable quantum of orders in hand, profitability profile is expected to improve going forward. However, delay in public sector and pipeline augmentation projects of gas utility companies continues to remain a key risk factor. Improvement in profitability profile is considered important to commensurate with the assigned ratings.
Accounting for dividend income from associates, net cash inflow available for debt payments is considered adequate. Nevertheless, liquidity remains contingent on continuation of high value pipeline projects to ensure generation of sound cash flows. Leverage indicators are conservative and are expected to remain at manageable levels going forward. Ratings will continue to be dependent on maintenance of leveraging profile and cash flow coverage within benchmarks for the assigned ratings.
For more information, contact:
Director Compliance and Rating Analytics,
VIS Credit Rating Company Limited
VIS House, 128/C, 25th Lane off Khayaban-e-Ittehad,
Phase VII, DHA, Karachi, Pakistan
Tel: +92-21-35311861-72
Fax: +92-21-35311873
Email: bilal@jcrvis.com.pk
Website: https://www.vis.com.pk/