Lahore, December 28, 2020 (PPI-OT): The ratings reflect Siddiqsons Tin Plate Limited’s (“Siddiqsons Tinplate” or the “Company”) established foothold in the tin plate industry as the first and sole local manufacturer of tin plate in Pakistan with a market share of ~30% in the local market. The demand for the Company’s products has shown growth in the recent past due to increased hygiene consciousness of the public at large and higher use of processed food. The major contribution for the increased sales as compared to Jun’19, is the exponential growth in export sales. On the other hand, local sales are down by 22% due to economic slowdown, tax related matters and uncertain business conditions induced by lockdown.
On the overall basis, the cost of sales increased by 10% but the impact could not pass on and sales revenue recorded an increase of only 4%. Resultantly, the gross margins took a dip at 5.1% during FY20 (FY19: 9.8%). The capacity utilization of tinplate segment remained low at ~20% (FY19: 17%) but lately improved in quarter end on Sep’20 on the back of rising demand. The Company is in process of establishing a Cold Rolled Coil (CRC) steel manufacturing complex to streamline its raw materials supply through backward integration.
However, delays in COD are expected, as the supplier didn’t provide machinery within the contractual time frame. The Company is in process of negotiating the procurement of CRM plant from other international suppliers and expecting a favourable outcome. The Company’s financial risk profile is considered adequate characterized by moderate leveraging, good coverages and improved working capital. The Company has funded expansion with equity so far, without taking any long term debt. The ratings take comfort from the financial strength of the Siddiqsons group and demonstrated support from sponsors. Going forward, the Company is also focusing on its export window.
The ratings are dependent upon translation of capital investments into growing profits, holding sustained operations and improving margins. The maintenance of coverages during expansion phase will be critical. External factors and continuity of anti-dumping duty is considered crucial for the sustainability of the Company.
For more information, contact:
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
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