AVN 67.30 Increased By ▲ 0.65 (0.98%)
BOP 9.82 Increased By ▲ 0.07 (0.72%)
CHCC 128.31 Decreased By ▼ -1.64 (-1.26%)
DCL 11.26 Increased By ▲ 0.06 (0.54%)
DGKC 111.92 Decreased By ▼ -0.93 (-0.82%)
EFERT 61.68 Increased By ▲ 0.93 (1.53%)
EPCL 44.78 Increased By ▲ 1.03 (2.35%)
FCCL 21.12 Increased By ▲ 0.07 (0.33%)
FFL 17.77 Increased By ▲ 0.32 (1.83%)
HASCOL 21.87 Increased By ▲ 0.91 (4.34%)
HBL 133.11 Increased By ▲ 1.36 (1.03%)
HUBC 82.00 Increased By ▲ 1.78 (2.22%)
HUMNL 8.10 Decreased By ▼ -0.01 (-0.12%)
JSCL 29.90 Decreased By ▼ -0.81 (-2.64%)
KAPCO 27.88 Increased By ▲ 1.39 (5.25%)
KEL 4.21 Increased By ▲ 0.05 (1.2%)
LOTCHEM 12.67 Increased By ▲ 0.17 (1.36%)
MLCF 39.49 Decreased By ▼ -0.17 (-0.43%)
OGDC 105.49 Increased By ▲ 1.16 (1.11%)
PAEL 37.30 Increased By ▲ 0.35 (0.95%)
PIBTL 13.58 Increased By ▲ 0.33 (2.49%)
PIOC 97.80 Decreased By ▼ -0.70 (-0.71%)
POWER 9.52 Increased By ▲ 0.14 (1.49%)
PPL 93.69 Increased By ▲ 0.58 (0.62%)
PSO 207.25 Increased By ▲ 5.75 (2.85%)
SNGP 64.41 Increased By ▲ 0.60 (0.94%)
STPL 14.17 Increased By ▲ 0.27 (1.94%)
TRG 55.33 Increased By ▲ 0.73 (1.34%)
UNITY 18.39 Increased By ▲ 0.29 (1.6%)
WTL 1.20 Increased By ▲ 0.01 (0.84%)
BR100 4,351 Increased By ▲ 4.52 (0.1%)
BR30 22,127 Increased By ▲ 43.68 (0.2%)
KSE100 41,855 Increased By ▲ 48.93 (0.12%)
KSE30 17,660 Increased By ▲ 1.07 (0.01%)
COVID-19 TOTAL DAILY
CASES 309,015 798
DEATHS 6,444 7

Amreli steel (PSX: ASTL) is in losses now; but that should change very soon if everything goes according to plan. That is not to say that the loss of over a billion rupees during FY20 is anything to scoff at. But several factors were not working in the company’s favour — demand being a dominant one, but certainly not the only one.

In the nine-month period, Amreli’s top line had recorded a growth of 14 percent year on year. This revenue growth became negative as rest of the year rolled in. Total revenues fell 7 percent noticeably due to the covid-19 related plant shutdowns and a pronounced halt to construction activities across the country— which, to be clear, were pretty subdued throughout the year to begin with.

Amreli is a major supplier of reinforcing bars in the country which are used in the construction of buildings and dams. Both private and public sector development feed into demand for steel which have over the past year remained flat as the economy stayed in the doldrums.

The company remained pretty much on the same level as last year on the margins front primarily because of improved downward scrap prices. Global scrap prices - on average - have come down 16 percent from last year which may have shielded the company from incurring a heftier loss. There may have been some impact of the rupee depreciation which resulted in a slight decline of gross margins.

Another cost factor was higher electricity charge compared to last year due to the withdrawal of the Industrial Support Package Adjustment (ISPA) from Jul-19 and Fuel Charge Adjustment (FCA). The real culprit, however, was the borrowing cost for the company which ballooned due to double-digit interest rates and company’s high leverage position. Finance costs during the year stood at 9 percent of the annual revenue against 4.4 percent last year. Administrative and other expenses also grew — 5 percent of revenue in FY20 against 4 percent last year.

Despite the less than desirable balance sheet for the year, the upcoming months may change the company’s fortunes. For one, the PM has announced a construction package which is expected to bring together a large number of new projects in the industry over the next two years, in addition to the much-touted Naya Pakistan Housing Program which is building at least 100,000 houses over the coming year — again, if all goes according to plan (read more: “Time to steel”, Sep 10, 2020). Dam construction is already taking place while PSDP related expenditure in infrastructure will also boost demand. As the economy grows, and sweet incentives stay, private sector money will start to flow into the industry which will feed building materials manufacturers.