Growing stronger – the Amreli Steels story

COO and CFO Fazal Ahmed sits down with Profit in this one-on-one interview

Profit: To start off with, how has your journey at Amreli Steels been like and what, in your opinion, has been the greatest achievement(s) by Amreli Steels.

Fazal Ahmed: It has been a phenomenal journey and a dream come true for me. I was able to put all my knowledge and skills to use initially as the CFO of the Company and then as the COO (Operations) along with being the CFO. I was lucky to play an instrumental role in the rapid transformation of this company in all facets of business, which helped us grow exponentially in the last thirteen years. This growth cannot be attributed to a single defining achievement. It is the culture of excellence in Amreli Steels which brings out the best in everyone and enables us to push the envelope of what is possible every day.

Our revenue has grown from PKR 4 Billion in 2009 to PKR 39 billion in 2021. We sold 69,000 tons in 2009 and 367,000 tons in FY 21. This translates into a compounded annual growth of 21% in value and 15% in volume over a period of 12 years. This is an exceptional growth given our product category and the kind of unfair competition we face from the undocumented sector.

Almost all departments have experienced an extraordinary transformation. Starting from Finance, IT, Sales, Marketing, Supply Chain, HR to the composition and working of the Board of Directors. I can safely say that we have one of the best human resource ensemble a company can wish for – people who are expertly guided by a very seasoned and diverse Board of Directors.

The Sponsors showcased a great amount of flexibility in the devolution of power which was pivotal in the fast transformation of this company from a typical private limited organization to one of the best listed companies of Pakistan. By the grace of Allah, Amreli Steels is considered to be a benchmark in Technology, Transparency, Disclosures, Efficiency and a Brand leader for all stake holders. Amreli Steels has a home grown Vision & Mission Statement and deeply imbued Core Values. The CEO of the Company was instrumental in making this possible.

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The extraordinary growth and success story is also well reflected in Credit Rating of the Company which has never gone down below the category “A” since inception of its rating by PACRA, six years ago.

Profit: What do you think was the major turning point for Amreli Steels, in reversing its losses of Rs 1.126 billion with an EPS of Rs -4.18 to massive profits amounting to Rs 1.368 billion with an EPS of Rs 4.61.

Fazal: First and foremost, it was the full year of operation in FY 21 vis-a-vis ten months in FY 20 which made a big difference. In FY 20, we lost two full months of operations due to covid-19 related lockdown. The full year of operations in FY21 helped us in increasing capacity utilization available at hand. The demand picked up as a result of stimulus package offered by the Government. In FY 21, the construction industry was dubbed as the most favored industry of Pakistan. Pent up demand also played a role as our sales grew by 34% in terms of volume touching 367,000 tons – the highest ever sales quantity in the history of Amreli Steels. The miscalculated hike in interest rates introduced in 2019 to contract the economy was rationalized and brought down by 50% which reduced the financing cost substantially.

A lot of planning and adjustment also went in across the operational spectrum of the company. Days receivable which had soared to 66 were brought down substantially and a tight inventory management enabled an efficient utilization of the working capital.


Profit: How has the change in import taxes, customs duties, currency devaluation and logistic costs impacted the raw materials import of Amreli and in-turn the prices.

Fazal: Increased Sales Tax @ 17% instead of 14% at import stage of raw material has negatively affected the cash flows and in turn, the financing cost. Unfavorable Custom Duties on import of HMS has limited the purchase options and the bargaining power. Currency devaluation affects us the most as it increases almost all costs. Not all of these increased costs can be passed through to the consumers which results in the company taking a hit on its profitability. This is very obvious from the fact that the GP margins for the company, which used to be in the vicinity of 19% from 2014 to 2018 went down to less than 9.5% between 2019 and half year 2022.


Profit: What impact has the shortage of vessels caused on the production activity at Amreli steels? Are there irregularities in imports? If yes, are there any operational discrepancies because of this?

Fazal: There haven’t been any production disruptions due to the shortage of vessels so far. There were some irregularities in delivery time though, which has prompted us to increase the safety stock levels. The supply chain disruption has increased the cost of raw material substantially. Procurement of capital items has been affected the most due to the non-availability of containers and vessels.


Profit: What has been Amreli’s export strategy, and does the company plan to enhance its exports to hedge its risk against currency devaluation? If so, then how?

Fazal: I say this with great regret that no rebar manufacturer in Pakistan including Amreli Steels exports steels rebar. There are three simple reasons for the lack of competitiveness in the global market for our locally produced rebars: the lack of economies of scale, high cost of electricity and lack of availability of local scrap or a substitute raw material.


Profit: As per Amreli Steels’ financials, despite a major rebound in the company’s profitability in FY2021, it has not declared dividends, especially since the past three years. Please shed some light on this, and explain why Amreli Steels is offering low to no dividends to its shareholders?

Fazal: The dividends declared up till 2018 were from the profits earned from the operations of our old plant. The funds generated through listing were deployed in increasing capacities which came online at the beginning of FY 19.

FY 2019, as we all know, was a year of contraction by design. Base rate interest was jacked up by more to 14% which also resulted in more than 100% increase in banking spreads. PKR devalued by 37%. The cost of energy also increased many folds. Documentation drive was triggered simultaneously. Too many buttons were pressed at the same time which weakened the consumer confidence and suppressed demand. Our company, therefore, could hardly manage to breakeven after tax. However, loss before tax was to the tune of PKR 67 million.

The fiscal tightening continued in FY 20 and the problems were compounded many folds when the pandemic broke out across the globe and prompted Pakistan, like many other countries, to put strict and complete lockdowns. Amreli Steels remained closed for 60 days with zero production and zero recovery of receivables. The only thing that continued to remain in full force was the INTEREST that put huge constraints on the resources of the company. However, the sponsors of the company did not ever consider lay-offs. Even the contractual and daily wage earners at Amreli Steels were retained and full salaries were paid without any deductions. The company incurred a loss of PKR 1.9 billion before tax. The year 2021 was the year of recovery and company recorded a profit before tax of Rs. 1.4 billion.

One can see that the losses accumulated in FY 19 and 20 has barely been recovered in FY 21 and First half of FY 22. Declaring dividend was, therefore, not an option for the company in FY 21.

Profit: Has Amreli incorporated integrated technology into its workflow? If yes, then how?

Fazal: Investment in state-of-the-art manufacturing and associated technologies is a key part of our mission statement. Just like we have always introduced the latest steel manufacturing technologies in Pakistan, we have also pioneered the integration of technology in our business operations. Amreli Steels is the first steel rebar company to invest in SAP. We are the first steel rebar company and the 5th company in Pakistan to invest in SAP Successfactors. Most of our administrative processes have been digitalized through the integration of Microsoft Sharepoint. Every month, our trade marketing’s field staff audits our entire retailer network across Pakistan on a “Trade Eye” mobile application that is linked to our database in SAP. Our retailers have been given access to a web-based and mobile-based “Business Partner Portal” where they can check the status of their orders, track their deliveries and check their outstanding payments. We are the first steel rebar company to have a dedicated business application development team with the sole purpose of optimizing our business processes through digitalization. We aim to become completely paperless by 2025.


Profit: In the context of current Ukraine-Russia looming around, what impact do you perceive it will have on the cost and hence the profitability of Amreli Steels

Fazal: It’s a very complex and a discouraging situation. The sanctions being imposed on Russia by Europe and the West and the measures Russia is taking to salvage itself has already set off an economic chain reaction because of the countless economic interdependencies between these countries and the rest of the world. Supplies of Energy, particularly gas, food (wheat, sunflower, corn), metal (Steel both Flat and Long, Iron Ore,) are all at great risk especially to the European countries. Ship owners may soon avoid using the Black Sea as a preferred route that will further increase the cost of transportation for the rest of the world.

As a result of the ongoing conflict, commodity prices have already skyrocketed. Cost of Scrap has shot up by almost USD 100 in 10 days. Prices of coal and oil are also on the rise. The oil import bill will put more pressure on PKR and I suspect faster devaluation in the coming days. With the increased trade deficit and the balance of payment, targeting GDP growth of 5% will be a huge challenge. As the markets heat up for growth, it is highly probable that SBP will hike the interest rates to curb the imports. Cost of construction will go up further as the manufacturers, especially that of construction steel sector who work on a very thin margins, will have no choice but to pass through the increased costs to the consumers. This cycle will subdue the demand of construction steel, which will obviously reduce the profitability of the company in FY 22 below the projections at the beginning of the year.


Profit: How do you hedge your risk against fluctuating commodity prices such as oil & gas?

Fazal: The impact of increases in the prices of oil and gas is felt in the cost of energy used to convert scrap (raw material) to rebars (finished goods). The energy cost generally constitutes to about 10% to 12% of the total cost of goods manufactured. Any increase in the cost of production, in the absence of export of construction steel, cannot be hedged, except by investing in renewable energy. However, it is a great challenge in itself to run a steel plant on renewable energy. Studies are being carried out to explore possibilities of using renewable energy in steel making.


Profit: How do you see Amreli Steels’ future outlook and where do you see it in the next 10 years?

Fazal: Amreli Steels has done well in the first half of the current financial year. The Post-Covid prices of scrap had apparently become less volatile for the first time in 4 years. This fact can be gauged from the standard deviation in scrap prices, which came down from 78 in 2021 to 14 by February 2022. The stability in scrap prices increased the consumer confidence and with robust demand, capacity utilization also increased. The company was looking at a volumetric growth of 8 to 10% in FY22 as compared to FY21, with a record expected profit.

However, the Russia-Ukraine crisis has thrown all forecasts and estimates out of the window. The world has once again returned to a period of great uncertainties similar to the first wave of Covid. USA and the West have already imposed heavy sanctions on Russia. Europe has decided to stop the import of steel from Russia. A supply chain crises is already unfolding. Ukraine, with an annual steel production of 25 million+ tons, is the 13th largest steel producer in the world. It was exporting 80% of its total production out of which 65%-70% went to countries like Italy, Turkey, Egypt, Poland, Bulgaria, Algeria, Iraq, UK and even Russia, and the remaining to the rest of the world. With 44 to 45 million tons of iron exports, Ukraine is the 5th largest iron ore exporter in the world. The conflict has already disturbed this equation. Who fills this void remains to be seen. The iron ore importing countries will now require more scrap than ever before or a balancing act could be the slowing down of global economy.

In my opinion, FY23 could be more challenging than FY22 as 8 months of the current financial year has already passed and major raw material purchasing for the last month of FY 22 has already been secured.

However, in the medium to long term, I see a very bright future for Amreli Steels because of our brand image, more than 50 years of experience in steel business, our distribution network, national presence, under-utilized capacity at hand, a fantastic team of professionals running the show with complete succession planning in place, and the able leadership of a relatively young but a very dynamic CEO.  Amreli Steels is also working on addressing its cost of energy and is continuously striving to improve efficiencies where ever possible. The Company is also considering product diversification. With a check on the cost of energy, increased capacity utilization of around 80% and some diversification, I see Amreli Steels becoming a debt free company in five years starting from the date the efficient energy comes into our system.


Profit: Amreli steels recent performance vis-a-vis competitors?

Fazal: By the grace of Allah and due to the relentless efforts of our team members, Amreli Steels is the leading brand in the steel rebar category. We are at the undisputed leader in terms of Sales Volume, Sales Value and Profit after Tax for rebars. We are easily the most recommended brand for all architects, structural engineers, consultants and contractors.


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  1. MashaAllah Amreli Steel doing great and set bar high in terms of quality product and foresee that its growth will continue with all economic challenges present.

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