VIS Credit Rating Company Maintains Entity Ratings of Aisha Steel Mills Limited - Press Release issued by VIS Credit Rating Company Limited.

Karachi -- October 31, 2019 (PPI-OT)

Following is the text of press release issued by VIS Credit Rating Company Limited

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VIS Credit Rating Company Limited (VIS) has maintained entity ratings of 'A-/A-2' (Single A Minus/A-Two) to Aisha Steel Mills Limited (ASL). Long term entity rating of 'A-' reflects good credit quality, adequate protection factors. Risk factors may vary with possible changes in the economy. Short Term Rating of 'A-2' indicates good certainty of timely payment, sound liquidity factors and company fundamentals. Access to capital markets is good. Previous rating action was announced on October 2, 2018.

The assigned ratings to ASL are underpinned by demonstrated support of the Company's major sponsor, Arif Habib Group. Ratings also incorporate existing industry structure whereby ASL is amongst the only 2 local players in the flat steel industry. Recent commencement of enhanced Cold Rolled Coil (CRC) production capacity along with entry in Galvanized Coils (HDGC) market is expected to improve market position and diversify product offerings.

While financial profile has remained stressed during FY19 and 1QFY20 given weakening in leverage indicators and decline in cash flow coverages, reaffirmation of ratings incorporates limited principal repayment to be made during FY20. Management expects significant uptick in sales volumes and reduction in quantum of working capital borrowings (primarily due to recent sharp decline in international HRC prices) to result in improvement in financial profile during FY20. Ratings remain dependent on materialization of projected sales volumes and margins, reduction in leverage indicators and mismatch on balance sheet and continued sponsor support.

VIS considers flat steels sector to comprise high business risk given the significant volatility in steel prices and HRC- CRC margins and threat of dumping. This along with weak demand dynamics expected to persist during FY20 and increased competition post capacity expansion by...