Pakistan & Gulf Economist

Financial review of three steel firms in Pakistan

[dropcap]I[/dropcap]nternational adepts revealed that the international steel production grew to 977.32 million ton during the first 7-month of 2017, up 4.6 percent from 933.97 million ton in the corresponding period last year. During July 2017, international steel production reached at 143.24 million ton, showing an increase of 6.3 percent over 134.79 million ton in the corresponding period last year. They also said that out of this China, the world’s premier steel producer registered an output of 74.02 million ton last month, up 10.3 percent over July 2016, when the country had produced 67.12 million ton. Furthermore, India’s crude steel output increased 3.5 percent to 8.36 million tone in July this year. India’s steel output reached at 8.08 million ton in the corresponding period last year.

India which strode past the US to become the third largest steel producer is poised to emerge as the world’s second largest steel producer replacing Japan. The latter recorded a fall in its steel production by 4.3 percent to 8.58 million ton against 8.97 million ton a year ago while the US produced 7.07 million ton, up 5.6 percent from 6.69 million ton earlier.

On the other hand experts have predicted that the Pakistani steel companies expect to gain supply deals linked to the upcoming infrastructure projects under China-Pakistan Economic Corridor (CPEC) while Orange Line, Karachi-Lahore Motorway and Neelum-Jehlum hydropower projects among others to favour. They have mentioned that Pakistan’s steel demand is predicted to increase at a 3-year (FY2017-2019) combined annual growth rate (CAGR) of 15 percent as against to the last 3-year’s CAGR of 14 percent. Considering that presently almost 45 percent of Pakistan’s steel requirement is met by imports, domestic steel players have significant room for organic growth. Presently in Pakistan, the Pakistani economists have proposed to increase sales tax for steel sector by 17 percent to Rs10.5 per unit of electricity for the next fiscal year 2017-18.

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Steel sector is currently paying sales tax on the basis of consumption of electricity at the rate of Rs9 per unit of electricity. However, Finance Ministry has proposed to increase the sales tax for the steel sector by 16.6 percent or Rs1.5 per unit of electricity.

AISHA STEEL MILLS LIMITED (ASML)

During the third quarter ended March 31, 2017, ASML’s sales quantity achieved, in the January-March quarter was recorded 60,086 tons as against to 57,994 tons for the same period previous year, a rise of 3.61 percent. The company financial experts mentioned that the total production for the period was recorded 55,131 tons as against to 58,350 tons, explaining a decline of 6 percent. The capacity utilization was 100 percent and 106 percent, respectively.

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The revenue generated during the quarter under review was recorded 4,381 million as against to 2,938 million achieved in 2015-16, explaining a rise of 49 percent. Higher selling rates achieved in the domestic market enhanced the bottom line. The management registered an after-tax-profit of Rs421 million in the period under review as against to Rs70 million in 2015-16.

MUGHAL IRON & STEEL INDUSTRIES LIMITED

During the 9-month period closed March 31, 2017, Mughal Iron & Steel Industries Limited’s sales revenue declined to Rs13,265.817 million as against to Rs14,739.291 million in the same period despite of rise in sales volumes. The financial experts also recorded that the gross margin also declined from Rs1,529.200 million to Rs1,344.821 million during the period under review. As a percentage gross margin declined from 10.37 percent to 10.14 percent. The distribution costs rose by 41.23 percent.

Administrative expenses grew by 12.67 percent as against to the corresponding period. Resultantly, the company registered an after-tax-profit of Rs726.933 million as against to Rs652.251 million in the same period previous year. Earnings per share (EPS) for the period reached at Rs5.78 as against to EPS of Rs5.18 in the same period last year.

AMRELI STEELS LIMITED

In the financial year 2015-2016, the Amreli Steels made lower revenue of Rs12.40 billion as compared to Rs14.41 billion in the last financial year. The drop in revenue was attributed 57 percent and 43 percent drop in quantity and price respectively of Amreli Rebars.

Despite the overall revenue drop the company registered the highest ever profit-after-tax of Rs1.27 billion recording a growth in profit-after-tax of 26.46 percent against the last financial year.

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