Staff Report:
International Steels Limited (ISL) announced its 1QFY25 results today, reporting earnings of Rs179 million (EPS of Rs0.41), an 84% decline year-on-year. The earnings fell short of expectations due to lower net revenue and reduced gross margins. Gross margins dropped to 6.7% in 1QFY25 compared to 10.1% in 4QFY24 and 12.8% in 1QFY24.

The decline in margins on both a quarterly and yearly basis was primarily driven by lower average HRC prices, which stood at US$488/ton in 1QFY25, down 7.4% QoQ and 11.8% YoY, resulting in inventory losses for ISL. Average HRC-CRC spreads also fell to US$67/ton in 1QFY25 compared to US$72/ton in 4QFY24 and US$83/ton in 1QFY24.Pakistan Economy – SBP reduced policy rate by 200bps.

Net revenue decreased by 30% YoY but increased by 2% QoQ to Rs13.5 billion in 1QFY25, largely due to lower average selling prices. ISL had reduced its average prices by approximately Rs45,000/ton at the end of August 2024. Local flat steel demand also remained weak, reflected in lower refrigerator and air conditioner production and reduced local cement dispatches.

Finance costs surged 55% YoY to Rs304 million in 1QFY25 due to higher borrowings, while the effective tax rate dropped to 15% from 37% in 1QFY24. No cash dividend was announced, in line with market expectations and the company’s historical trend. ISL is currently trading at a price-to-earnings ratio of 8.5x for FY25 and 6.5x for FY26.