Steel Manufacturing Giant, Metropolitan Steel Corporation Limited, under Scrutiny for Alleged Violations
Metropolitan Steel Corporation Limited (PSX: MSCL): A Deep Dive into Its Financial Journey
Step into the rollercoaster ride that is Metropolitan Steel Corporation Limited (MSCL), a corporate entity deeply rooted in Pakistan's steel manufacturing sector since 1955. Buckle up as we delve into the financial highs and lows of this steel powerhouse, peeling back the layers of its financial history and exploring the factors that have shaped its current trajectory.
Ownership Structures
With a total of 30.978 million shares outstanding held by 3609 shareholders, MSCL's shareholding pattern is surprisingly diverse. However, directors, CEOs, their spouses, and minor children dominate the scene, holding a whopping 75.23% of the company's shares. The local public follows closely with a stake of 24%, leaving a minuscule portion for other categories of shareholders.
Year-on-Year Financial Performance
MSCL's financial performance over the years (2019-24) presents a mix of triumphs and tribulations. The company faced a dip in 2019 and 2020 before experiencing a staggering year-on-year growth in 2021. The growth momentum continued in 2022, although at a much lower pace. However, 2023 saw a dip in net sales, leading to a rebound in 2024. Among all the years under consideration, MSCL managed to post a net profit only in 2021, with significant net losses in the rest of the years.
Breaking Down the Financials
In 2019, MSCL's net sales plummeted by 48.94%, primarily due to imports and reduced cost of sales, but we can't forget about the payments made to K-Electric and SSGC for new connection installations and plant modernization. Administrative charges took a hit due to lower expenses, while selling and distribution expenses saw a significant drop, mainly due to the non-recurrence of certain items in 2019.
2020 brought another dip in net sales, largely due to the global COVID-19 outbreak and its impact on the steel market. However, the company managed to lower costs significantly, particularly in administrative expenses, distribution expenses, and finance costs.
In 2021, MSCL witnessed a remarkable turnaround, recording a year-on-year growth of 238.23% in its net sales. This surge was driven by vigorous demand from the automobile and foaming industries, as well as increased prices of MSCL's products and a depreciating Pakistani Rupee. Despite these positive developments, the company still struggled to post gross profits after two consecutive years of gross losses.
The year 2022 marked another significant loss for MSCL, mainly due to the high cost of sales caused by commodity super cycles in the global market and the Pakistani Rupee's depreciation. Administrative and selling expenses saw a modest increase, while other expenses skyrocketed due to provisions for doubtful debts.
Recent Performance (9MFY25) and Future Outlook
MSCL continued to struggle in 9MFY25, recording a 13.32% year-on-year decline in revenue. This was mainly due to sluggish demand across various sectors. The company incurred a net loss of PKR 20.08 million, representing a 43.19% decrease compared to the previous year.
Looking ahead, a gradual economic recovery and rebound in key industries such as automobiles, white goods, and construction are expected to boost the demand for steel. However, the performance of the local steel sector will also depend on factors such as rebar prices, the exchange rate, and international demand.
In conclusion, MSCL's financial journey has been marked by challenges and recoveries, but its ability to navigate these complexities and turn the tide will be key to its long-term success. The company's future hinges on its capacity to improve revenue, reduce losses, and enhance operational efficiency, while maintaining investor confidence and addressing concerns about its corporate governance and strategy.
- Metropolitan Steel Corporation Limited (MSCL) has seen a significant shift in its financial trajectory, with a mix of growth and setbacks in the years between 2019 and 2024.
- The diversified shareholding pattern of MSCL reflects a dominant 75.23% ownership by directors, CEOs, and their family members.
- Despite the growth experienced in 2021, MSCL recorded only one net profit in the years under consideration, with the rest sporting significant net losses.
- The decline in net sales in 2023 welcomed a rebound in 2024, signifying the company's resilience in the face of adversity.
- Investments in infrastructure and plant modernization, alongside higher demand from the automobile and foaming industries, contributed to MSCL's impressive growth in 2021.
- Inflationary pressures and commodity super cycles in the global market led to increased costs of sales, causing a substantial loss for MSCL in 2022.
- In the recent period of 9MFY25, MSCL faced a 13.32% year-on-year decrease in revenue, resulting in a net loss.
- The future success of MSCL relies on its ability to improve revenue, reduce losses, and boost operational efficiency, while addressing concerns in corporate governance and strategy, all while maintaining investor confidence.
