International Steels FY25 profit drops 57% despite margin recovery
ISLAMABAD: International Steels Ltd (ISL) reported a 57% year-on-year decline in annual profit for FY25, but the result surpassed market expectations due to stronger-than-anticipated gross margins and higher dividend payout.
The company announced net earnings of Rs1.56 billion for the year ended June 30, 2025, translating into earnings per share (EPS) of Rs3.58, compared to Rs8.34 in FY24. The fall in profitability was primarily attributed to weaker international cold rolled coil (CRC) prices and lower annual gross margins, which declined to 8.6% from 12.4% in the previous fiscal year.
In the fourth quarter, however, ISL showed signs of recovery. Quarterly earnings rose 2% year-on-year and 46% quarter-on-quarter to Rs608 million (EPS: Rs1.40). The improvement was driven by stronger local sales and better-than-expected gross margins of 10.68%, compared with 10.15% in the same period last year and 7.78% in the first nine months of FY25. Analysts attributed the sequential margin recovery to the company’s shift towards renewable energy following the commissioning of a 6.4MW solar power project in May 2025, which helped reduce energy costs.
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Net revenue also improved in the quarter, rising 25% year-on-year and 20% sequentially to Rs16.6 billion, led by a rebound in local flat steel demand. However, on a full-year basis, net sales fell 10% to Rs62.31 billion, reflecting pressure from international CRC prices, which averaged US$555 per ton in FY25 compared with US$630 per ton in FY24.
ISL benefitted from easing finance costs in the final quarter, which fell 52% year-on-year to Rs149 million due to lower interest rates. On a yearly basis, finance costs declined 6% to Rs806 million. The effective tax rate for 4QFY25 also came in softer at 35%, compared to 39% in the previous quarter, further supporting the quarterly earnings beat.
Alongside the results, the board announced a cash dividend of Rs2.5 per share, higher than industry expectations, offering some comfort to shareholders amid declining profits. At current levels, ISL is trading at forward FY26/27 price-to-earnings multiples of 8.2x and 6.5x, respectively, with an implied dividend yield of 8–10%.
The steel sector in Pakistan has been grappling with global commodity volatility, exchange rate pressure, and subdued construction demand. ISL’s reliance on international CRC prices has historically made its earnings vulnerable to global steel cycles. In FY24, higher average international steel prices had supported profitability, but the sharp 12% drop in FY25 eroded margins despite stronger domestic demand in the latter half of the year.
Looking ahead, analysts expect ISL’s earnings trajectory to improve if global CRC prices stabilize and energy cost savings from renewable integration continue. The commissioning of captive solar capacity is part of a wider trend among Pakistani industrial manufacturers seeking to reduce dependence on grid power and imported fuel costs. The move is seen as a potential buffer against future margin shocks.
Dividend resilience despite weaker earnings also signals management’s intent to maintain shareholder returns. Market participants are watching whether ISL can sustain revenue recovery into FY26, particularly as construction activity and infrastructure spending are expected to gradually pick up.
International Steels’ FY25 results underline the challenges of operating in a volatile global steel market while highlighting the importance of cost efficiencies and energy diversification. While annual profitability contracted sharply, the earnings beat in the fourth quarter and stronger-than-expected dividend suggest cautious optimism for the year ahead.