October 8, 2021 (MLN): International Steels Limited (ISL), a market leader in CRC and GI sheets is planning to set up a Hot Strip Mill with an initial designed capacity of 1.2 million tons (MTs) in Pakistan to localize Hot Rolled Coil (HRC) manufacturing that is to be completed by the end of CY24, the management of the company recently informed the while holding a corporate briefing session.
The technology comprises state-of-the-art Electric Arc furnace technology. The plant will provide low and medium-carbon steel HRC.
Commenting on the arrival of new products, management stated that C and Z purlins are expected to hit the market by the end of CY21. Whereas, the major raw material (HRC) is mostly imported from Japan and Taiwan.
The management also foresees robust growth in exports in FY22 where ISL is expected to export to 30 countries across the globe, as per the briefing takeaways covered by AKD Securities.
The management of the company also discussed the financial performance of the company during FY21 as per which the company posted an astonishing 15x YoY increase in net profits, clocking in at Rs7.46bn. This has been reflected in the company’s earnings per share which moved up from Rs1.14.sh to Rs17.61/sh.
Apprising investors on the financial performance of the company during FY21, the robust earnings were mainly attributable to strong demand from the automobile and construction sector; High CRC-HRC spread; full impact passed on to consumers amidst rising raw material prices, and inventory gains.
In conjunction with the results, the company announced a final cash dividend of Rs7.0 per share i.e., 70% for 4QFY21, taking the total FY21 dividend to Rs10 per share i.e., 100%.
Finance cost reduced by a whopping 65%YoY in FY21 as a result of the company paying off its short-term loans which helped in boosting the bottom line.
The management also informed that local and export sales showed impressive growth of 19%Yoy and 11%YoY in FY21, respectively. Moreover, major export markets of the company during FY21 were Asia, North and South America, and the EU.
The domestic industry volume of flat steel has increased by 32.4%YoY to 1.3mn tons in FY21, comprising 671K tons of CRC and 624K tons of both galvanized and coated steel.
Management believes pipe steel manufacturers will likely contribute around 200k tons to the market in FY22 where ISL is likely to capture 50-55% of the market share. To note, SRO-641 is no longer applicable after the reduction of regulatory duty on HRC to 5% from 13% in the FY22 budget.
As a result, ISL has started selling its product to pipe steel manufacturers.
With regards to the revival of Pakistan Steel Mills (PSM), management informed that it would not pose any material threat to the company’s future plans as PSM capacity will be insufficient to meet domestic demand and availability of required quality will also be an issue. Furthermore, ISL is currently mostly importing HRC from Japan due to quality issues, Usman Arif, Analyst, Foundation Securities said.
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