Amreli Steels eyes major boost in production capacity

Second phase of expansion

KARACHI: Amreli Steels Limited, a country’s leading steelmaker, on Thursday unveiled its plan to increase its annual production capacity of reinforcement bars to 750,000 tonnes within the next two years.

“The expansion will further enhance the footprint of Amreli Steels Limited across the country by supplying quality rebars for infrastructure development and fulfilling needs of retail customers across Pakistan,” Shayan Akberali, managing director of the steelmaker said in a statement. “Technical consultants of international repute have been invited to submit their bid for final selection within the month of May 2017 to commence the technical feasibility on phase two of the expansion as early as possible.”

The company’s board approved phase two of the expansion plan presented by the management in line with its long-term vision of being the country’s first million-ton quality rebars manufacturer.

The board approved, in principle, the second phase of expansion, which is subject to the approval of technical feasibility and successful financial close of the proposed transaction.

The phase-II expansion plan is in addition to the current phase-I expansion, already being carried out by the company and is expected to come online later this year.

Under the new plan, the company planned to raise its steel melting capacity at Dhabeji for making billets to 600,000 tonnes a year from 400,000 tonnes. The project is expected to complete in 2017/18. Rebar production at the site would also increase to 425,000 tonnes a year from 300,000 tonnes. This expansion is also expected to complete by 2018/19.

The board also approved an increase in its rolling mill production capacity at SITE industrial area to 325,000 tons per annum from 180,000 tonnes. The project is expected to complete in 2018/19. After expansion, the company will boast a total rebar capacity of 750,000 tonnes a year.

The company decided to embark on the phase-II of capacity expansion in view of the growing construction activity around the country that is believed to sustain high levels of growth over the next decade.

Phase two of the expansion plan will come at a much lower capital expenditure and earlier gestation period as existing assets installed in phase-I will be upgraded rather than establishing new green field facilities.

With multiple production facilities, upgrading capacity will not hamper production as the company can utilise maximum capacity.  More than 100 steel makers are operating in the country, while steel is also imported to meet the demand of construction sector. 

Meanwhile, Amreli Steels Limited has announced a net profit of Rs819 million for the nine-month period ended March 31, 2017, which is 11.2 percent lower than the profit of Rs922.029 million during the same period of the last year.

The EPS for the period under review stood at Rs2.76 as against Rs3.61 last year. The company did not announce any payouts along with the corporate announcement.

Sales revenue during nine months increased 17 percent to Rs10.14 billion as against R8.64 billion last year, driven by improved volumes, despite falling selling prices.

“Due to depressed selling prices coupled with increased scrap costs, gross margins dropped 5.71ppts to 17.15 percent,” a report issued by Taurus Securities said, adding, “The finance costs fell 32 percent, as the company continues to de-leverage its balance-sheet.”

For the quarter ended March 31, 2017, Amreli Steels announced a net profit of Rs337.139 million, translating into the EPS of Rs1.14 as compared to the profit of Rs372.366 million and the EPS of Rs1.25 last year.