Press Release

VIS Assigns Initial Ratings to Ferrous Engineering Industry
 

Karachi, May 23, 2019: VIS Credit Rating Company Limited (VIS) has assigned initial entity ratings of ‘BBB-/A-2’ (Triple B Minus/A-Two) to Ferrous Engineering Industry (FEI). The medium to long-term rating of ‘BBB-’ denotes adequate credit quality coupled with reasonable protection factors. Moreover, risk factors are considered variable with possible changes in the economy. The short-term rating of ‘A-2’ denotes good certainty of timely payments. Liquidity factors and company fundamentals are considered sound and risk factors considered small. Outlook on the assigned ratings is ‘Stable’.

FEI was established by Mr. Muhammad Irshad in 2007 as a sole proprietorship. The principal business activity of FEI is import, processing and sale of hot rolled, cold rolled, galvanized and painted coils. FEI imports aforementioned steel products directly from the manufacturers located in China, Europe, Latin America, CIS and South Africa. It is also involved in the manufacturing and sale of corrugated sheets, steel pipes, sheet piles, scaffoldings guard rails and steel channels. Other business interests of sponsor include a steel & allied products trading company incorporated in the U.K. and a steel services & fabrication unit located in the Kingdom of Saudi Arabia.

The assigned ratings take into account experience of sponsor in commercial steel trading and established relations with some major customers. The ratings draw comfort from the sustained growth in sales and stability in profit margins, with the expanding scale of trading and manufacturing operations. The ratings also factor in adequate liquidity position and manageable leverage indicators in the absence of long-term borrowings. Going forward, FEI intends to establish a steel melting and billet casting unit. The project will be fully funded by owner’s capital thereby positively impacting leverage indicators. However, the ratings are constrained by FEI’s status as a sole proprietorship and its vulnerability to pricing and currency risks, increasing power costs and changing supply-demand dynamics of steel industry amid slowing economic growth. The sole proprietor is planning to convert FEI into a private limited company. The succession risk is considered low as two sons of the sole proprietor are actively involved in day to day business operations.

For further information on this rating announcement, please contact the undersigned (Ext: 201) at 021-35311861-71 or Mr. Maimoon Rasheed at 042-35723411-13.



Javed Callea
Advisor

Applicable rating criterion: Corporates (May 2019)
https://www.vis.com.pk/kc-meth.aspx

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Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited(Formerly JCR-VIS Credit Rating Company Limited) (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS(Formerly JCR-VIS Credit Rating Company Limited), the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS(Formerly JCR-VIS Credit Rating Company Limited) is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS(Formerly JCR-VIS Credit Rating Company Limited) is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited(Formerly JCR-VIS Credit Rating Company Limited). All rights reserved. Contents may be used by news media with credit to VIS(Formerly JCR-VIS Credit Rating Company Limited).

VIS Credit Rating Company Limited (Formerly JCR-VIS Credit Rating Company Limited)