The Pakistan Credit Rating Agency Limited (PACRA) has downgraded Amreli Steels Limited’s entity ratings from “BBB” to “BB” for long-term and “A3” for short-term, with a negative outlook. PACRA highlighted the severe challenges facing the steel industry, including weak demand, PKR depreciation, high financial costs, and record-high power rates, which have caused many mills to operate at minimal capacity, with some nearing closure.
Amreli Steels has faced similar pressures, with a 15pct drop in revenue and a sharp decline in sales for FY24. The company was unable to pass on rising production costs, leading to a halving of gross margins to 6pct and negative operating margins. Relying on short-term borrowings for working capital and long-term loans for capacity expansion has further strained Amreli’s financial position, contributing to a significant net loss.
The downgrade reflects the company’s deteriorating financial condition, weakened debt repayment capacity, and ongoing discussions with financial institutions for debt restructuring, which management expects to finalize by year-end. PACRA noted that a successful restructuring could positively impact the company’s ratings.
Recently, Amreli announced the temporary suspension of operations at its Karachi plant, which accounts for 30pct of its total production capacity, due to ongoing economic challenges.
Amreli Steels has an annual production capacity of 600,000 tons of billets and 605,000 tons of rebar.
