Lahore, January 23, 2023 (PPI-OT):Incorporated in April 1978, Usman Steels (Pvt.) Limited is engaged in the business of ship breaking. The Company’s site spread over four ship breaking yards, all around costal line of Gaddani Beach, District Lasbella, Balochistan. Usman Steels purchases ships directly from ship owners or through Ship brokers for recycling, to retrieve multipurpose ship steel plates and steel scrap to fulfill rapidly increasing steel raw material demand in domestic market. The South-Asian ship-breaking industry, including India, Bangladesh, Pakistan and Turkey, are countries where majority of the ship-breaking activity has been happening.

Among all, Pakistan ship-breaking yards hold advantages of having favourable geography and weather, cheap manpower making it preferred destination for ship-breaking activities. The ratings are largely supported by the long-standing experience of the group in diversified sectors and company’s sponsor’s, who have nearly three decades of experience in the ship breaking business. The Company’s operations and profitability are highly exposed to the fluctuations in ship prices along with exchange rates and are dependent on prevailing scrap prices, which could result in poor realizations, irrespective of the availability of improved quality of vessels in the market.

Audit for the current year end CY22 is under process. And as per Dec 2021 financial statements company’s exposure to banking lines are solely working capital related and pledged against the inventory – ships. There are no long term specific bank borrowings to date therefore credit risk has already been minimized and secured against the available stock.

The ratings reflect Company’s medium-scale operations, as highlighted by revenue of PKR 10,816mln in CY21 (CY20: PKR 3.5bln). The increase in revenue is mainly driven by rising steel prices along with the increased demand of steel in the local market. Company has taken a short-term borrowing line of ~PKR 6.5bln including, funded and non-funded credit facilities against charge on current assets of the company. The uncertain economic condition and availability of ships considering limited foreign exchange reserves resulting in decline in the scale of operations, is a concern, which is cushioned by the fact that financing requirement also become low in such times.

For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com