International Steels Limited (ISL) has announced on Friday, its result for the financial year 2015. During FY15, ISL faced factors beyond its control. Due to a sharp and persistent downturn in the prices of steel products, ISL faced inventory losses and deteriorated margins and profitability. Additionally, removal of tariff barrier against Chinese imports of CRC/HDGC intensified competition and resulted in lower sales during FY15. All, these factors contributed towards a loss of 16 percent in top line, year-on-year.
ISL also faced an issue of higher cost during FY15. The government has imposed 5 percent import duty on HRC, the raw material for producing the steel. The cost of goods sold has decreased by 14 percent year-on-year, however, in terms of net sale it has gone up by 300 bps to 91 percent. The loss of sale due to the lower price of steel, inventory losses, increase in competition, and the higher cost has decreased the gross margin by 300 bps in FY15.
Going forward, ISL has a robust outlook because the decline in steel prices and inventory losses are unlikely to continue into FY16 and in January 2015 the government also imposed a tariff barrier on Chinese imports. The expansion plans of ISL on course and will create a volumetric growth for the company due to the shortage of CRC/HDGC in the Pakistani market. Also, the expansion will also increase the proportion of value-added products in the sales mix of ISL.
Source: Business Recorder
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