Press Release

JCR-VIS Assigns Initial Ratings to International Steels Limited

Karachi, January 13, 2017: JCR-VIS Credit Rating Company Limited (JCR-VIS) has assigned initial entity ratings of ‘A+/A-1’ (Single A Plus/A-One) to International Steels Limited (ISL). Outlook on the assigned ratings is ‘Stable’.

The assigned ratings incorporate ISL’s position as the largest Cold Rolled Coil (CRC) and the only Hot Dipped Galvanized Steel (HDGS) manufacturer in the country. Moreover, the extensive experience and track record of sponsors in the steel sector is also a key rating driver. Financial profile of the company draws support from healthy cash flows in relation to outstanding obligations and improving leverage indicators.

Steel sector is characterized by high business risk given the cyclical nature of the industry, volatility in steel prices and threat of dumping particularly from China. While threat of imports remains sizeable, expansion in capacity, duty benefit vis-à-vis importers, along with ISL’s pricing strategy facilitates in maintaining its leading market position. JCR-VIS will continue to track changes in operating environment and any adverse changes resulting in weakening in financial profile may trigger a rating review.

During FY16, ISL modified its twin stand cold rolling mill which increased cold rolling capacity from 250,000MT to 550,000MT. Addition of a second galvanizing line has also increased galvanizing capacity from 150,000MT to 400,000MT while first ever color coating line in Pakistan was also completed. ISL's current production mix comprises of 20% Cold-Rolled Product, 70% HDGS and 10% Color Coated Steel, which are offered in coil or sheet form. A 19 MW In-house co-generation plant meets the power related needs of the company. Excess power generated is sold to K-Electric Limited.

With raw materials representing a major cost component and significant volatility in prices, efficient procurement, inventory management and volumetric off-take are critical to gross margins. ISL posted significant improvement in profitability during FY16. Going forward, improvement in profitability would be a function of higher volumetric off-take, as capacity utilization increases, and reduction in finance cost.

Overall corporate governance framework is supported by adequate board composition and oversight, stable and professional management team, strong internal control framework and focus on transparency and disclosures.

For further information on this rating announcement, please contact Mr. Javed Callea (Ext: 201) or the undersigned (Ext: 207) at 021-35311861-71 or fax to 021-35311872-3.

Jamal Abbas Zaidi

Applicable Rating Criteria: Industrial Corporates (May 2016)

Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2017 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited