PACRA Affirms Rating of Mughal Iron and Steel Amid Industry Challenges

LAHORE: The Pakistan Credit Rating Agency Limited (PACRA) has maintained its rating of Mughal Iron and Steel Industries Limited, a significant player in the steel industry, as the company continues to navigate industry-wide challenges. Mughal faces subdued demand and rising operational costs but has shown resilience by leveraging its diverse product range and strong distribution network.

The steel producer’s product slate includes girders, T-iron, and rebars, and it boasts a distinct revenue stream from copper ingots, which are fully export-oriented. This export focus has protected Mughal from import-related issues that have affected others in the sector, and its consistent export growth further strengthens its market position.

Despite the uncertain outlook for the steel sector, Mughal’s management is concentrating on increasing volume and margin. The company is investing in cost-effective and alternative energy sources to improve profit margins. Additionally, a potential decline in the policy rate is anticipated to provide some relief to the company’s margins.

In the first half of fiscal year 2025, Mughal’s revenue from copper ingot and granule exports to China accounted for approximately 19% of its revenue, bolstering its top line and providing a sustainable profit source. The company’s revenue slightly increased to PKR 46.825 billion, up from PKR 46.050 billion in the same period the previous year. However, gross margins were affected by sector-wide challenges, and net margins were constrained by rising finance costs.

To enhance operational efficiency, Mughal’s board has approved a PKR 2 billion Balancing, Modernization, and Replacement (BMR) project for its steel bar re-rolling mill. Despite the challenges, the company’s leverage ratio slightly decreased to about 56% in December 2024 from 57% in June 2024, supported by banking facilities and debt instruments.

PACRA emphasizes that the ratings rely on Mughal’s ability to maintain its robust business profile amid the ongoing economic slowdown and rising costs.