ASTL expects decline in sales in FY23

Karachi, August 21, 2022: Amreli Steels Limited (ASTL) expects volumetric sales during FY23 to decline by 6-10% in-line with expected decline in cement dispatches.

However, it may be able to retain sales volumes by relaxing terms on credit sales in the local market. In such a scenario, annual sales for FY23 will likely remain flat at 370k tons.

The management expects 1QFY23 to be dull over lower demand but situation is expected to improve from 2QFY23 onward.

It is to be noted that ASTL has increased its share in the Southern market of late. The company operated at c. 61% capacity utilization during FY22.

The management is of the view that finance cost will remain elevated during FY23 and will likely clock in around Rs4-4.2bn.

Also, the management apprised that its non-ferrous business is expected to start contributing from FY24, the project has an estimated capex of around Rs500-600mn.

The LC approval from State Bank will take some time after which it will take around 9 months to complete.

Expected slowdown to restrain demand

Slowdown in global demand and rising inventories have been playing their part to keep international prices in check for steel scrap.

Prices for most ferrous metals have been under pressure due to worries of tight monetary policies in developed economies and a possible slowdown in Europe and the US in the coming quarters.

Similarly, fiscal consolidation will likely slowdown construction activities in our market as well during FY23.

The company has also recently decreased rebar prices by Rs 7,000/ton to remain competitive and protect its market share.

However, as macro clarity emerges, an improving demand outlook could provide ASTL the required room to pass on cost increases to consumers.

It is pertinent to mention here that ASTL posted a loss in 4QFY22 of Rs1.71/share, compared to an EPS of Rs1.49 in SPLY. This takes FY22 EPS to clock in at Rs4.46, -3% YoY.

Despite higher revenue, margins were -2ppt/-1ppt lower on a YoY/QoQ basis due to increase in grid rates, significant increase in scrap prices and rupee depreciation. PAT was lower due to higher finance cost and the one-time 10% super tax charge.

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