International Steels’ profit drops 16% to Rs841m

Cost of sales rose which squeezed profit margins

LAHORE/ KARACHI: International Steels Limited’s (ISL) profit dropped 16% to Rs841 million in the first quarter of the current financial year 2018-19 compared with earnings of Rs1 billion in the same period of previous year.

Earnings per share (EPS) dropped to Rs1.93 in the Jul-Sept 2018 quarter as compared to Rs2.31 in the corresponding period of last year, which was lower than market expectations.



According to a research report of Taurus Securities, net sales revenue increased 5% mainly due to the rise in average selling price.

“However, gross profit fell 8% for the period as cost of sales rose 8%, which squeezed gross margins to 14.42%. This decline of 2.1 percentage points was mainly due to rupee devaluation, lower-than-expected volumes and rise in hot-rolled coil (HRC) prices by 7%,” the report said.

The company’s finance cost rose a massive 153% due to increase in borrowings for expansion while tax payments fell 24%.

On a sequential basis, ISL’s profit for the Jul-Sept quarter declined 26% on a quarter-on-quarter basis with EPS of Rs1.93 compared to Rs2.6 in the fourth quarter of financial year 2017-18.

It was mainly due to lower volumetric sales, caused by competition from cheaper imported cold-rolled coils (CRC), which flooded the market during the caretaker government’s tenure.



According to Topline research analyst Shankar Talreja, risks for the company include downward revision in the duty structure, volatility in commodity prices, dumping from countries not protected by anti-dumping duties and devaluation beyond assumptions.

Published in The Express Tribune, October 17^th, 2018.

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