VIS Maintains Stable Outlook on International Steel Limited’s Credit Ratings

Karachi: VIS Credit Rating Company Limited (VIS) has reaffirmed the credit ratings of International Steel Limited (ISL) at ‘A+/A1’, indicating good credit quality and a strong likelihood of timely repayment for short-term obligations. The medium to long-term rating reflects an adequate protection factor with the potential for variability due to economic changes, while the short-term rating highlights the company’s excellent liquidity.

According to VIS Credit Rating Company Limited, the ratings are supported by ISL’s stable profitability and sound liquidity despite ongoing economic challenges. The company, incorporated in Sindh, Pakistan, on September 3, 2007, and publicly listed on June 1, 2011, operates under the umbrella of International Industries Limited (IIL), holding a 56.34% ownership stake. With its manufacturing base in the Landhi Industrial Area of Karachi, ISL produces a range of steel products including cold-rolled, galvanized, and color-coated steel.

The steel sector, to which ISL belongs, is highly sensitive to economic cycles and subject to risks from exchange rate fluctuations, given its reliance on imported raw materials. Steel demand is closely linked to macroeconomic conditions and industries such as construction and automotive. Current challenges in the sector include inflation, currency depreciation, rising energy costs, and high-interest rates, all contributing to subdued steel consumption and limited demand due to reduced government spending on infrastructure projects.

Despite these pressures, ISL’s profitability in FY24 has remained stable, supported by deleveraging measures taken in the previous year. The company has managed higher conversion costs driven by an increase in energy tariffs while maintaining sound liquidity and a healthy current ratio. The debt coverage profile is comfortable with improved debt service coverage ratios.

Looking ahead, VIS anticipates that while product margins may remain strained due to reduced commodity margins, ISL’s investment in a solar power project could enhance cost efficiencies and help mitigate future energy price risks. However, profitability will continue to be influenced by demand dynamics within the sector.

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