The management of Amreli Steels Limited held a corporate briefing session on 16th Nov’23 to discuss the financial result of FY23 and future outlook.

Brief Takeaways

• To recall, the company posted a loss after tax of PKR 678mn (LPS: PKR 2.28) in FY23 vis-à-vis a profit of 1,325mn (EPS: PKR 4.46), mainly due to depressed demand in tandem with higher borrowing cost.
• Rebars sold during FY23 were 218,279 tons. Currently, rebar is trading at PKR 268k-270k per ton.
• Current scrap price (CNF) on average is ~USD 415-417 per ton. Bundle and shredded scrap price (CNF) are trading USD 430/ton, USD 405/ton, respectively.
• In 1QFY24 the company used 80% of shredded and 20% bundled scrap.
• The company maintains 15-16 days of inventory of rebar and 90 days inventory for scrap.
• The consumption requirement for melting is about 640-650 kWh, and for rolling, it is 130-140 kWh.
• The electricity tariff surge to PKR 29/unit from PKR 21/unit in FY23.
• K-Electric contributes about 95% of the energy requirement, while the remaining 5% is sourced from the solar plant which has installed capacity of 7MW.
• The company plans to install a 9-mw wind power plant by the end of FY25, which will help in mitigating the risk of rising electricity tariffs.
• The demand outlook for steel looks flattish in the ongoing FY24, approximately 2.5% growth as per management,
• The incremental units advantage (a.k.a winter package) has ended, which will increase the demand for larger players as smaller players will not be able to compete.
• Aluminum project is temporary put on hold, amid higher working capital requirements. However, the company has started a test phase in non-ferrous segment (copper). All other capex plans are put on shelves due to unstable economic situation
• The market share in FY23 for the company was recorded at 6%. Whereas, in South the market share is 20-25%.

Courtesy- AHL Research