Rating Release
Agusto & Co. hereby upgrades the rating assigned to African Steel Mills (Nigeria) Limited to “Bbb+”
The rating expires on 30 June 2024.
Agusto & Co. hereby upgrades the rating assigned to African Steel Mills (Nigeria) Limited (“African Steel Mills”, “ASM” or “the Company”) to “Bbb+”. The assigned rating reflects the improvement in ASM’s leverage metrics following the substantial reduction in interestbearing obligations, satisfactory profitability despite rising input costs, and healthy operating cash flow positions supported by its favourable trade terms. The rating is further strengthened by the Company’s expanded melting and rolling production capacities and improving operational efficiencies, supported by the backward integration investments in direct reduced iron (DRI) production, which has enhanced its resilience against price volatilities and shortages associated with the use of scrap metal as its primary input. However, the rating is moderated by ASM’s persistent long-term financing need and concentrated ownership structure. In assigning the rating, we also considered the vulnerability of the Company’s future earnings to the deteriorating macroeconomic headwinds, weakened consumer discretionary spending, and foreign exchange risks associated with importing spares and consumables needed for production.
African Steel Mills is a member of the African Industries Group (“the Group”), a conglomerate with several business interests in Nigeria. The Company specialises in the manufacturing and trading of steel products, including reinforcement bars, steel billets, equal angles and u-channels. African Steel Mills predominantly sells its product to construction companies and key distributors in Nigeria and exports smaller volumes to neighbouring African nations.
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.
