Home > Corporate results: Amreli Steels’ profit up 301%

Corporate results: Amreli Steels’ profit up 301%

Earnings clock in at Rs1.01b for FY15, company set to raise money in IPO. PHOTO: FILE

Earnings clock in at Rs1.01b for FY15, company set to raise money in IPO. PHOTO: FILE

KARACHI: Amreli Steels – one of the largest makers of reinforcement bars in Pakistan – has reported a net profit of Rs1.01 billion for the fiscal year that ended on June 30, 2015, up by a whopping 301% compared to Rs252 million in FY14.

Earnings per share (EPS) also jumped to Rs4.54 compared to Rs1.13 in the period under review.

The company is set to raise at least Rs1.78 billion in its upcoming Initial Public Offer (IPO) by issuing a total of 74.2 million shares, with a face value of Rs10 each, at the floor price of Rs24 per share.

In the first phase of the IPO to be held on October 7-8, Amreli Steels will sell 55.5 million shares to institutional and high net worth individual clients. The second phase of the IPO, consisting of the sale of 18.7 million shares to the general public, will take place on October 27-29.

The recent promising outlook of the country’s construction sector along with the announcement of China-Pakistan Economic Corridor (CPEC) has spurred the company to raise public equity to expand its manufacturing facilities.

With improving security outlook of the country, construction and other infrastructure related companies in Pakistan expect better economic activities in coming years, and Amreli Steels is no exception.

Amreli Steels is expanding rebar capacity from 180,000 tonnes per year to 480,000 tonnes per year, which will be four times larger than any other steel bar maker in the country.

The company expects economies of scale and new technologies to help cut manufacturing costs, spread fixed costs and as a result improve margins.

This will be the first IPO after the new book building regulations issued by SECP earlier this fiscal year. The new book building regulations are aimed to curb speculative or manipulative attempts during the auction through various measures.

Pakistan remains one of the lowest steel users per capita in the world, with consumption under 20kg per capita, compared to 58kg in India, 219kg in Iran and 515kg in China. The average steel consumption of the world was about 225 kg per capita in 2013, according to the World Steel Association.

Local steel production in Pakistan for FY15 was around 3.65 million tons per annum (up 33.8% year on year) and in order to meet the total demand, 2.49 million tons per annum of iron and steel was imported, rendering a gap in the market for local manufacturers, according to AHL Research released on Monday.

“Given the incumbent government’s interest in infrastructure expansion (demonstrated by Rs700 billion in Public Sector Development Programme (PSDP) Federal allocation in FY16 budget and the $46 billion CPEC), we believe the steel sector could see a potential surge in demand,” the report added.

Published in The Express Tribune, October 6th, 2015.

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