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PACRA Maintains A+ Rating for Mughal Iron & Steel Industries Amid Diverse Product Strength and Export Achievements

SIALKOT, Mughal Iron & Steel Industries Limited has retained its ‘A+’ long-term and ‘A1’ short-term credit ratings, with a stable outlook for its PKR 2 billion Pakistan Power Sector Term Finance Certificates (PPCP), as per the latest review by the Pakistan Credit Rating Agency (PACRA) on November 6, 2023.

According to The Pakistan Credit Rating Agency Limited, the maintained ratings acknowledge Mughal Iron & Steel Industries’ sustained and improving business profile within the steel industry. The company’s governance framework has been reinforced by the addition of independent oversight on the board, contributing to its steady governance quality. Mughal’s diversified offerings include both ferrous products, such as billets, rebars, and girders, and non-ferrous products, primarily copper ingots.

A significant achievement for the company has been its geographical diversification, particularly its successful export of copper ingots and granules to China, which now constitutes approximately 24% of its revenue. This strategic move has not only boosted the company’s top line but also provided a stable profit stream moving forward.

Despite a marked decrease in sales volumes and slight contraction in gross margins due to the incomplete pass-through of increased raw material costs to sales prices, Mughal Iron & Steel reported a top line of PKR 21.032 billion in the first quarter of FY24, as per the management accounts. However, net profit margins are facing pressures from heightened finance costs. As of September 2023, the company’s leveraging ratio stood at around 51.5%. Besides banking facilities, Mughal Iron & Steel is also utilizing privately placed financial instruments to meet its working capital requirements.

The rating agency has emphasized that the rating affirmation is contingent upon the company’s ability to maintain its robust business profile amidst stiff competition. The prudent management of financial risks and the maintenance of its governance framework are deemed crucial for sustaining its creditworthiness.

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