Flat Steel Prices Impact International Steel Ltd’s Quarterly Earnings

Karachi: International Steel Ltd (ISL) reported a significant decline in its third-quarter earnings for fiscal year 2025, largely due to reduced flat steel prices and lower gross margins. The company announced a net profit after tax (NPAT) of PkR417 million, or earnings per share (EPS) of PkR0.96. This marks a 41 percent drop from the PkR706 million, or EPS of PkR1.62, reported in the same period last year.

ISL’s net revenue for the quarter stood at PkR13.9 billion, reflecting a 15 percent year-on-year decrease and a 24 percent decline from the previous quarter. This downturn was attributed to a sharp correction in flat steel prices, which fell to an average of PkR218,000 per ton during the quarter, compared to PkR257,000 and PkR220,000 per ton in the previous quarter and the same period last year, respectively.

The company’s gross margins also experienced a decline, falling to 8.6 percent from 11.7 percent in the same period last year. Analysts suggest that inventory losses on finished goods and weakening hot rolled coil-cold rolled coil (HRC-CRC) spreads, which averaged US$73 per ton (down 17 percent year-on-year), contributed to the reduced margins.

Despite the decline in revenues and margins, ISL managed to reduce its operating expenses to PkR328 million, primarily through a 72 percent year-on-year reduction in distribution expenses. Additionally, the company saw a reduction in finance costs, which fell to PkR127 million, marking a 27 percent year-on-year decrease. This reduction was driven by lower working capital requirements and declining policy rates.

The company’s effective tax rate for the quarter was 39 percent, compared to 16 percent in the same period last year and 42 percent in the previous quarter.

Analysts at AKD Securities Limited maintain a ‘BUY’ recommendation for ISL, with a target price of PkR120 per share by December 2025. The positive outlook is based on several factors, including a recovery in automotive and white goods sales, easing inflationary pressures supporting construction and manufacturing demand, and falling interest rates enhancing profitability.