ASL Limited, previously known as Associated Steel Ltd, has been accorded a stable outlook by South African-based Global Credit Rating (GCR), on revenue improvement on the back of contributions from its chemical division.
The firm manufactures stainless steel products, heavy fabrication, wire and cables and is involved in chemicals trading.
ASL is part of the Ramco Group of companies, a conglomerate of 40 firms with presence in East Africa, which has a diverse portfolio in print, hardware, office supplies, manufacturing and services.
GCR in the latest rating affirmed the national scale issuer of BBB+(KE) and A2(KE) in the long and short-term respectively.
The agency also affirmed ASLs commercial paper rating of A2(KE). The ratings are valid until May 2019.
The agency said despite a slowdown in demand due to political instability in 2017, revenue improved.
The chemical division is involved in importing and distributing industrial chemicals for the paint, detergent and cosmetics industries.
However, increased operating expenses related to the group’s expansion activities, resulted in the operating margin declining to 8.8 pc in 2017 from 10.9 pc in 2016.
“The rollout of a new ERP system is expected to boost efficiencies which, coupled with expected recovery in revenue growth, should see the operating margin rebound in 2018. Notably, during the first half of 2018 sales performance has exceeded budget by 10 per cent,” it said.
GCR noted the steady increase in cash generation over the review period but said working capital management remains the key focus of the group, due to its trading nature.
“While ongoing expansion does entail some working capital absorptions, this should be somewhat offset by the improved inventory and debtors management afforded by the new ERP system,” said the agency.