International Steels’ Profits Nosedive in FY20 Due to COVID-19

International Steels Limited (ISL) has reported a profit of Rs. 494 million for FY20, an 81.50% decline as compared to the previous fiscal year.

The company had reported a profit of Rs. 2.66 billion in FY19, according to a notice sent to the Pakistan Stock Exchange (PSX). A drop of 16.35% was witnessed in the sales as they were reported at Rs. 48.08 billion as compared to Rs. 57.48 billion.

According to Topline Securities, the decline in sales was mainly due to depressed demand throughout the outgoing year due to tough economic conditions, and the COVID-19 led lockdown.

However, the cost of sales of the company was also down to Rs. 43.86 billion from Rs. 51.03 billion. ISL’s gross margins decreased due to higher fixed cost contribution due to lower sales and high energy costs.

The financial results were below industry expectations mainly due to higher than expected fall in sales amid the pandemic.

The company’s profitability fell due to the decline in sales volumes due to the lockdown and its inability to pass on the full impact of cost escalation.

The demand for CRC further dwindled in the last quarter of the year as the main demand driving sectors (electronic appliances and automobiles) experienced the heat of COVID-19. Appliances and auto factories remained closed for 1-2 months in the last quarter of the year. Consequently, ISL also observed 25-30 non-production days.

ISL recorded an 80.50% increase in the finance costs which increased to Rs. 2.31 billion from Rs. 1.28 billion. The company’s total debt has increased due to higher working capital requirements amid a decline in sales due to the outbreak of COVID-19.

The company has booked a tax reversal of Rs. 52.68 million during the fiscal year. Earnings per share of the company decreased to Rs. 1.14 from Rs. 6.12.

At the time of filing this report, ISL’s shares at the bourse were trading at Rs. 74.15, up by Rs. 1.04 or 1.42%, with a turnover of 4.17 million shares on Wednesday.

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