Rating Release
Agusto & Co. hereby assigns a “Bbb” rating to African Steel Mills
The rating expires on 30 June 2024.
Agusto & Co. hereby assigns a “Bbb” rating to African Steel Mills (Nigeria) Limited (“African Steel Mills”, “ASM” or “the Company”). The assigned rating reflects improved profitability and satisfactory operating cash flow positions, low leverage and ASM status as one of the leading steel manufacturers in Nigeria. The rating is further strengthened by the Company’s improving operational and cost efficiencies, supported by its backward integration plans to reduce dependence on scrap metals by utilising direct reduced iron (DRI) in its production process and the upgrade of its plants with advanced technology to enhance productivity. In addition, we considered ASM’s stable, qualified and experienced management team, as well as the strong technical and financial support provided by African Industries Group (AIG) in assigning the rating. However, the rating is constrained by the Company’s inadequate working capital, highly concentrated ownership structure and corporate governance framework that requires strengthening in line with best practices.
African Steel Mills is a member of the African Industries Group (“the Group”), a conglomerate with several business interests in Nigeria. ASM specialises in the manufacturing and trading of steel products, including reinforcement bars, steel billets, equal angles and u-channels. The Company predominantly sells its product to construction companies and key distributors in Nigeria and exports smaller volumes to neighbouring African nations. ASM has a fully integrated steel manufacturing plant in Ikorodu, Lagos State, with both melting and rolling production capacity of 225,000 metric tonnes per annum (MTPA).
The opinions expressed in this rating release do not represent any investment or other advice and should therefore not be construed as such. Visit www.agusto.com for further information.
