AGHA striking gold with homegrown iron ore

November 25, 2023 (MLN): The mighty Mi.Da. Rolling Plant and the ingenious plan to install Blast Furnace for Iron Ore will sculpt a narrative of self-reliance and unparalleled efficiency for Agha Steel Industries (PSX: AGHA), allowing it to become a net exporter in the years ahead, the management of the company revealed in the Corporate Briefing Session held on Friday.

Recently, the Mi.Da plant has been successfully energized, marking the beginning of the initial phase of cold commissioning while the hot commissioning of the plant is expected to commence in next year.

Along with the continuous uninterrupted production cycle from raw material to finished product, and with the extreme compactness of the technological area, Mi.Da will allow the company to be one of the most cost-efficient plants in Pakistan. It requires almost 49% less space and requires 23 hours per day of uninterrupted production.

According to the management, this is the most competitive way to produce Rebars in terms of Capital Expenditure and Operating Expenditure.

AGHA’s management also informed the house that they are considering installing a Blast Furnace, which requires indigenous raw material (iron ore) instead of imported steel scrap.

“We have also started the Iron ore mining business as a pilot project and we will get export orders in the coming months,” the management apprised.

Blast Furnace would also slash the electricity cost significantly thus, management termed this project as a Game Changer.

Post Mi.da and Blast Furnace, the company will not use any fossil fuels, the management underlined.

In FY23, the average grid rate was Rs32-35/Kwh while in 1QFY24 the grid rate was Rs38-39/Kwh.

The management is considering to install an additional solar plant of 3.5 megawatts.

In response to a query, the management said that the current rebar prices are hovering around Rs270,000-275,000 per ton and going forward, the company is expected to increase rebar prices. Meanwhile, domestic scrap is available at Rs170,000-175,000 per ton.

The management also discussed the financial performance of the company. AGHA recorded a gross sales revenue of Rs24.16 billion in FY23 as compared to Rs30bn in the corresponding year.

The gross margins declined to 12.2% as compared to 21.47% in the corresponding year due to the exorbitant increase in international scrap prices and currency devaluation coupled with the steep increase in electricity tariff during the year, restriction on imports, highest discount rates and low purchasing power of consumers in the local market.

 Administrative expenses decreased to Rs311 million owing to the austerity directives of the board despite overall inflation.

Selling and distribution costs also dropped to Rs319m as a result of sluggish demand and low purchasing power of the local market, the management decided to keep a lid on its selling costs.

However, the reduced spending did not curtail the strategy of penetration and exploration of new markets in the trading segments of the industry.

Highlighting the challenges faced by the company during outgoing fiscal year, the management said that the deteriorating macroeconomic and political situation in the country led to unprecedented import restrictions imposed by the State Bank of Pakistan (SBP) impacted the company’s business.

However, the management continues to remain optimistic on its outlook based on the successful completion of the stalled IMF stand-by financing arrangement which remained a key condition to unlock further opportunities for Pakistan to address the ongoing economic crisis.

Copyright Mettis Link News

Posted on: 2023-11-25T12:46:31+05:00

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