Amreli Steels Limited (ASTL) posted NLAT of PKR4.8Bn (LPS: PKR16.18) for 4QFY24, 4.9x and 6.2x the losses in QoQ and YoY respectively. The result was much lower than our estimate, as the company posted negative gross margins. This takes FY24 NLAT to PKR6.1bn (LPS: PKR20.56), down 7.8x YoY.

Key highlights from 4QFY24:

§  Net sales halved QoQ and YoY to PKR5.3bn. Sales came in much lower than our expected value of PKR9.8bn, where the sharp sequential contraction suggests limited volumetric sales.

§  Gross margins fell to -18.2%, well below our estimate of 7.7%. We believe this was due to low fixed-cost absorption and high electricity costs, which led to negative margins. We are awaiting detailed financials for further insight.

§  Finance costs rose 12% YoY to PKR1.2bn, indicating increased reliance on borrowings

§  The company recorded a tax of PKR1.8bn, adding to the pre-tax loss of PKR3.0bn.

ASTL’s results are concerning, reflecting weak demand in the steel market. This quarter’s PKR4.8bn loss will wipe out the accumulated profits portion of equity, leading to a PKR747mn accrued loss. High energy costs and a weak demand outlook suggest challenges may persist despite easing interest rates.

Courtesy – IMS Research