AISHA Steel Mills Limited — a new player on the ‘steel’ block — was incorporated on May 30, 2005, with the principal purpose of producing and selling cold rolled coils.

It commenced commercial operations on October 1, 2012, when the first cold rolled coils (CRCs) were rolled out by the mills in the downstream Pakistan Steel Industrial Estate, Bin Qasim.

“The company represents one of the largest private sector investments in the steel industry of Pakistan,” Kashif Shah, Chief Executive Officer (CEO) of Aisha Steel Mills, tells Dawn.

He claims that ASML is a state of the art cold rolling complex with a nameplate capacity of 220,000 metric tonnes per year, which makes it “one of the largest supplier of cold rolled steel coils in the country”. Total assets of the company at the last count on December 31, 2013 stood at Rs14 billion.

Besides Aisha Steel Mills Limited, there are two other producers in the CRC business: International Industrial Limited (also a listed company), and the financially bleeding Pakistan Steel Mills.

The aggregate capacity of the three comes to around 38,000 metric tonnes per month, with ASML contributing 18,000, followed by International Industrial (IIL) with 10,000 and PSM with 9,000 metric tonnes.

“Yet, unscrupulous importers flood the market with 40,000 metric tonnes of CRC by mis-declaring,” says Shah. He explains that the government has levied a 10pc customs duty on import of CRC steel to protect the local industry. The importers have, however, found a way around the law, and manage to get CRC into the country by declaring the product as ‘Silicon steel,’ which is duty-free.

The local producers are awaiting action by relevant government bodies to curb mis-declaration and under-invoicing, and to also remove CRC from the foreign trade agreement (FTA) with China, since the product is now locally manufactured.

The CEO says that ASML is using brand new Japanese and Austrian machinery for all its main processes to ensure quality production. The company is said to have managed its teething problems, including arranging for trained manpower. Besides training in other developed markets, around a dozen experienced personnel were hired from Bangladesh, where CRC is a well-established industry.

Metal One Corporation, a subsidiary of Mitsubishi Corporation Japan, is a joint venture partner in ASML. Local institutional and individual investors are the other stakeholders in the company.

ASML had floated 100 million shares of Rs10 each in an initial public offering (IPO) on July 3, 2012. The new offering, rare in recent years, was oversubscribed by 2.7 times. It followed the close of the pre-IPO portion, amounting to Rs234 million, on April 11 of the same year. The ASML stock is currently trading at around its face value on the stock exchange.

For the second quarter of the current financial year, the company recorded gross sales of Rs2.711 billion, which led to its first-time gross profit of Rs32.9 million, and replaced a gross loss of Rs33.9 million in the corresponding period of last year. Its directors declared that “this is a result of lower volatility in the international steel market, which is expected to remain flat in the next quarter as well”.

ASML’s production during the second quarter stood at 30,121 metric tonnes, with sales of 28,810 metric tonnes. This translated into net sales of Rs2.29 billion.

Going forward, ASML is said to be aiming to take advantage of the leadership position, to improve its margins. The company also hopes that the upcoming budget will remove fiscal anomalies faced by domestic CRC producers.

But for all that, ASML is said to be in need of financial restructuring. In this regard, the company is considering various options that could improve its profitability and liquidity position.

On December 31, 2013, the long-term debt on its balance sheet loomed at Rs4.48 billion, with the current maturity amount at Rs1.38 billion. It included Rs200 million and Rs86.67 million that were due on October 21, 2013 and Dec 25, 2013, respectively.

However, subsequent to the balance sheet date, the company paid Rs200 million in respect of ‘Syndicate Term Finance Facility I’. Due to the huge debts, understandable in the company’s first few years, its finance cost for the half year ended December 31 stood at a tall Rs750 million, which ate into the bottom line.

The CEO, Kashif Shah, explains that due to start-up difficulties, the company is negotiating with a syndicate of bankers “to match the repayment plans with the company’s cash flows”. Shah is hopeful of a favourable outcome.