Markets & Finance

S African agency gives Mabati Rolling Mills high rating

manu

MRM is a subsidiary of Safal Group, a pan African steel roofing manufacturer owned by Manu Chandaria (pictured). PHOTO | FILE

Mabati Rolling Mills (MRM) has retained its good rating with South African credit rating agency GCR noting the roofing manufacturer posted better profit last year despite an industry downturn.

“Although the plunge in steel prices had a dampening effect on revenue, MRM was able to maintain margins. The operating margin improved to 11.1 per cent up from 9.9 per cent in 2014. This translated to increased operating profit of Sh1.9 billion from Sh1.6 billion,” reads part of the rating report.

GCR accorded MRM an A+ rating with a stable outlook. MRM is a subsidiary of Safal Group, a pan African steel roofing products manufacturer owned by Manu Chandaria.

A slump in global commodity prices, including steel, saw the industry lose an estimated 20,000 jobs locally as cheap imports crowded out local manufacturers.

Global steel prices touched a 12-year low last year following a slowdown in the construction sector of major economies such as China and Brazil that resulted in a glut.

The National Treasury stepped in during this year’s budget by increasing taxes on imported metals in a bid to protect the local market.

Finance secretary Henry Rotich introduced a specific duty rate of Sh20,000 per metric tonne on steel products during the budget statement read out two weeks ago.

“Our iron and steel mills are closing down due to unfair competition from cheaper imported iron and steel products” said Mr Rotich in justifying the new tax measures.

Data from the Kenya National Bureau of Statistics shows that production of galvanised sheets has dropped in the last three years which has been attributed to uptake of new roofing options such as shingles and tiles.

Industry data shows 256,938 metric tonnes of galvanised sheets was produced last year, compared to 284,509 metric tonnes a year earlier and 306,099 metric tonnes in 2013.

MRM extended its settlement terms to customers while at the same time settling with its suppliers faster, resulting to a Sh2.3 billion increase in working capital demand. GCR said the management had secured Sh2.5 billion financing to fund expected increase in working capital.