Business Recorder
Ittefaq Iron Industries Limited (PSX: ITTEFAQ) was incorporated in Pakistan as a private limited company in 2004 and was previously known as Ittefaq Sons Private Limited. The company was converted into a public limited company in 2017 and changed its name to the current one in the same year. The company is engaged in the manufacturing of Iron bars and Girders. Pattern of Shareholding As of June 30, 2025, ITTEFAQ has a total of 144.34 million shares outstanding which are held by 4891 shareholders. Local general public has the majority stake of 87.52 percent in ITTEFAQ followed by Directors, CEO, their spouse and minor children holding 8.16 percent shares. Around 4.29 percent of the company’s shares are held by joint stock companies. The remaining shares are held by other categories of shareholders. Historical Performance (2019-25) ITTEFAQ’s topline plunged thrice during the period under consideration i.e. in 2020,2023 and 2024. The company also posted net loss in those three years. In 2025, the company’s topline posted growth, however, its bottomline couldn’t recover from net loss. ITTEFAQ’s bottomline and margins which were falling until 2020 significantly rebounded in 2021 only to slump back in the subsequent years. The detailed performance review of the period under consideration is given below. In 2019, ITTEFAQ’s topline posted 9.87 percent year-on-year rise to clock in at Rs.6,809.79 million. The company had an installed capacity of 120,000 MT for the rolling mill and 160,000 for the structural mill. During 2019, ITTEFAQ achieved 62 percent of its rolling mill capacity and 23 percent of its structural mill capacity versus 67 percent and 0 percent capacity utilization achieved in the previous year. Low capacity utilization of the rolling mill was in line with the market demand during the year which was greatly suppressed on account of political instability, steep hike in policy rate, Pak Rupee depreciation and rising inflationary trend. This had put industrial and infrastructure development activity in the country on a standstill, resulting in tamed demand of steel. Due to the similar reasons quoted above, the cost of ITTEFAQ’s sales grew by 10.61 percent year-on-year. This, although, resulted in 3.19 percent year-on-year growth in gross profit, GP margin fell from 10 percent in 2018 to 9.39 percent in 2019. Distribution expense massively grew to the tune of 54 percent in 2019 which was the result of extensive advertising undertaken during the year. Higher rebates and commission as well as payroll expense also contributed to an overall growth in distribution expense in 2019. 51 percent spike in administrative expense in 2019 came on account of increased human resource headcount during 2019 as new furnace and re-modification rolling was plant installed during the year. Lower provisioning for WWF and WPPF culminated into 20.84 percent year-on-year plunge in other expense in 2019. Other income also slipped by 24.92 percent year-on-year in 2019 on account of lower return on deposit accounts. Operating profit declined by 2.51 percent year-on-year in 2019 with OP margin nose-diving to 7.43 percent from 8.37 percent in 2018. Finance cost grew by 76.64 percent year-on-year in 2019 on account of high discount rate coupled with increased borrowings. However, increase in the company’s equity due to 13.12 million bonus shares issued at the end of the year resulted in a dip in debt-to-equity ratio from 51 percent in 2018 to 38 percent in 2019. ITTEFAQ’s bottomline posted 36.68 percent year-on-year slash in 2019 to clock in at Rs.198.19 million with NP margin of 2.91 percent versus NP margin of 5.1 percent posted in 2018. EPS also dropped from Rs.2.17 in 2018 to Rs.1.37 in 2019. In 2020, ITTEFAQ’s net sales crashed by 50.29 percent year-on-year to clock in at Rs. 3,385.12 million. This was because the local as well as global economies were jolted by COVID-19. A massive cut in government spending on PSDP coupled with lackluster LSM activity contributed to subdued steel turnover in 2020. Widespread lockdowns imposed during the year coupled with tamed demand translated into a fall in ITTEFAQ’s capacity utilization of rolling mill as well as structure and melting mill to 28 percent and 18 percent respectively. Cost of sales dropped by 45.42 percent in 2020. This translated into 97.25 percent lower gross profit recorded by the company in 2020. GP margin drastically fell to 0.52 percent in 2020. Excessive advertisement didn’t let the distribution expense show any respite in 2020 which grew by 62.21 percent year-on-year in 2020. Conversely, administrative expense slumped by 11 percent year-on-year in 2020 due to lesser payroll expense incurred during the year. Zero provisioning for WWF and WPPF resulted in 1.44 percent dip in other expense in 2020. Other expense would have been much lower had the company not booked provision worth Rs.23.98 million against doubtful debts owing to deteriorating business fundamentals amid COVID-19. Other income slid by 29 percent year-on-year in 2020 due to high-base effect owing to the gain earned on the disposal of property, plant and equipment in 2019. The company posted operating loss of Rs.128.03 million in 2020. Finance cost dwindled by 79.82 percent year-on-year in 2020 due to lower long-term borrowings and also because the discount rate started sliding down in the last quarter of FY20. ITTEFAQ posted net loss of Rs.212.81 million in 2020 with loss per share of Rs.1.47. ITTEFAQ closed 2021 with a staggering 83.18 percent year-on-year growth in its topline which was recorded at Rs.6,200.92 million. The company’s rolling mill plant operated at 46 percent capacity in 2021 to produce 64,708 MT while melting and structure mill operated at 58.8 percent capacity to produce 65,102 MT. The demand recovery was the result of comprehensive project for the construction industry announced by the government coupled with higher PSDP spending. Furthermore, the initiation of Diamer Bhasha dam during the year also buttressed the demand of steel products. Despite 64.95 percent year-on-year cost hike on account of increase in the prices of scrap in the international market, higher demand as well as upward revision in steel prices resulted in 3579.44 percent bigger gross profit recorded in 2021 with GP margin jumping up to its highest level of 10.42 percent. Increased sales volume meant higher packing as well as handling and carriage charges. This culminated into 29.10 percent year-on-year hike in distribution expense in 2021. Administrative expense inched up by 6.15 percent year-on-year mainly due to higher payroll expense incurred during the year. While the company booked considerably lower provision against doubtful debt in 2021 due to improved economic backdrop, higher provisioning for WWF and WPPF pushed other expense up by 45.56 percent year-on-year in 2021. Other income also posted a significant 151.14 percent rise in 2021, however still stayed at 0.15 percent of ITTEFAQ’s net sales. Unlike last year, ITTEFAQ was able to post operating profit of Rs.474.59 million in 2021 with OP margin of 7.65 percent. Finance cost slid by 4.13 percent year-on-year due to monetary easing. The company recorded net profit of Rs.266.76 million in 2021 with NP margin of 4.3 percent and EPS of Rs. 1.85. ITTEFAQ’s net sales posted 81 percent year-on-year growth to clock in at Rs.11,225.26 million in 2022. This was on the back of improved steel prices coupled with higher sales volume. The company operated its rolling mill plant at 50.5 percent capacity and melting plant at 58 percent resulting in the production volume of 70,735 MT and 75,545 MT respectively in 2022. However, 92.91 percent higher cost of sales on account of inflated prices of scrap in the international market, significant reduction in the value of Pak Rupee and steep hike in energy and fuel prices pushed gross profit down by 21.20 percent year-on-year in 2022. GP margin slumped to 4.53 percent in 2022. Higher advertisement and packing material charges resulted in 28.36 percent spike in distribution charges in 2022. Administrative expense inched up by 16.41 percent year-on-year in 2022 which was in line with inflation despite reduced man power. Service cost worth Rs.45.672 million incurred during the year pushed the other expense up by 82.22 percent year-on-year in 2022 despite drop in provisioning done for WWF and WPPF during the year. Higher return on bank deposits translated into 10.89 percent year-on-year rise in other income in 2022. High cost of sales and operating expense drove the operating profit down by 41.95 percent year-on-year in 2022 with OP margin slithering to 2.45 percent. Finance cost grew by 50.36 percent year-on-year due to excessive monetary tightening during the year. This pushed net profit down by 44.62 percent year-on-year to clock in at Rs.147.72 million in 2022 with EPS of Rs.1.62 and NP margin of 1.32 percent. Lackluster LSM growth as well as sluggish overall economic activity kept steel demand under severe pressure during 2023. This resulted in 26.2 percent year-on-year decline in ITTEFAQ’s net sales which clocked in at Rs. 8,284.45 million in 2023. During the year, ITTEFAQ operated its rolling mill at 24.5 percent capacity while it’s melting plant attained capacity utilization of 30.97 percent. Cost of sales also slid by 24 percent year-on-year in 2023. This resulted in 72 percent slippage in gross profit in 2023 with GP margin falling down to 1.72 percent. Distribution expense mounted by 16.82 percent due to higher payroll expense and increase in other miscellaneous charges incurred during the year. Administrative expense also succumbed to inflationary pressure and grew by 20.86 percent year-on-year in 2023. Number of employees also increased from 867 in 2022 to 901 in 2023. Other expense registered 56.65 percent year-on-year plunge in 2023 due to reduced service cost and no provisioning done for WWF and WPPF in 2023. Other income built up by 130.23 percent in 2023 on account of higher return on bank deposits and notional income on re-measurement of mark-up under IFRS-9. ITTEFAQ registered operating loss of Rs.69.95 million in 2023 as against operating profit of Rs.275.51 million in the previous year. Finance cost surged by 41.61 percent in 2023 due to unparalleled level of discount rate. Debt-to-equity ratio slid to 35 percent in 2023. ITTEFAQ recorded net loss of Rs.94.456 million in 2023 with loss per share of Rs.0.65. ITTEFAQ’s net sales registered year-on-year decline of 72.58 percent to clock in at Rs.2,271.68 million in 2024. This was on account of sluggish construction and infrastructure activity in the country due to ill-fated economic and political backdrop. Demand drop was further intensified by high transportation charges due to implementation of axle load and also because of Red Sea crisis. During the year, the company operated its rolling plant at 6.58 percent capacity and its melting plant at 7.92 percent capacity. Cost of sales also slid, however, with a lower magnitude of 64.30 percent in 2024 due to heightened energy tariff. This resulted in gross loss of Rs.635.22 million in 2024. Curtailed sales volume translated into lower packing material cost and no freight & handling charges incurred during the year. This coupled with lower advertisement budget resulted in 45.72 percent lower distribution expense incurred in 2024. Conversely, administrative expense inched up by 10.38 percent in 2024 owing to inflationary pressure which pushed up the payroll expense. This was despite reduction in workforce from 901 employees in 2023 to 749 employees in 2024. No service cost incurred by the company resulted in 75.95 percent lower other expense in 2024. Other income also dwindled by 24.69 percent in 2024 as no notional income on re-measurement of mark-up under IFRS 9 was recorded during the year. ITTEFAQ posted a hefty operating loss of Rs.796 million in 2024, up 1037.95 percent. Finance cost surged by 16.63 percent in 2024 due to higher discount rate and an uptick in borrowings. The company posted net loss of Rs.821.688 million in 2024, up 769.92 percent year-on-year. Loss per share stood at Rs.5.69 in 2024. In 2025, ITTEFAQ posted a reasonable 16.74 percent year-on-year growth in its net sales which stood at Rs.2651.94 million. This was due to upward revision in the prices of the company’s products. Conversely, sales volume plunged during the year due to cautious demand from the private sector on account of erosion of their purchasing power, no major PSDP projects announced by the government and slow progress of CPEC. Smuggling of steel products into the country also led to unfair competition in the local steel market. Cost of sales ticked up by only 7 percent in 2025 due to stability in Pak Rupee and a slide in international commodity prices due to lower demand. The government also reduced the electricity tariff for industrial sector. The company’s gross loss declined by 27.70 percent to clock in at Rs.459.26 million in 2025. Lower sales volume and streamlined advertisement budget translated into 50.97 percent thinner distribution expense in 2025. Administrative expense also dipped by 7.94 percent in 2025 due to lower payroll expense as the company streamlined its workforce from 749 employees in 2024 to 649 employees in 2025. Other expense plunged by 50.74 percent in 2025 as the company granted no charity and donations during the year. Other expense was offset by 17.30 percent higher other income recognized during the year which was the result of higher return from non-financial assets. Operating loss dipped by 27.59 percent to clock in at Rs.576.40 million in 2025. Finance cost ticked up by only 0.62 percent in 2025 despite monetary easing. This was due to greater loss recorded on the re-measurement of markup under IFRS-9. ITTEFAQ posted net loss of Rs.657.980 million in 2025, down 19.92 percent year-on-year. This translated into loss per share of Rs.4.56 in 2025. Recent Performance (1HFY26) During the first half of the ongoing fiscal year, ITTEFAQ posted year-on-year decline of 17.26 percent in its net sales which clocked in at Rs.1026.028 million. This was on account of demand destruction and high competitive pressure. Cost of sales plummeted by 18.91 percent in 1HFY26, resulting in 36 percent decline in gross loss in 1HFY26. Gross loss was recorded at Rs.76.531 million in 1HFY26. Petite sales volume translated into 68.54 percent plunge in distribution expense and 1.26 percent dip in administrative expense in 1HFY26. No other expense was recorded during the period under consideration. Other income also deteriorated by 93.28 percent in 1HFY26 likely due to thinner mark-up income as the company’s cash position significantly declined during the period. Operating loss diluted by 28.58 percent to clock in at Rs.155.06 million in 1HFY26. Monetary easing and lesser outstanding long-term borrowings squeezed finance cost by 39.65 percent in 1HFY26. ITTEFAQ posted net loss of Rs.205.959 million in 1HFY26, down 15.19 percent year-on-year. This translated into loss per share of Rs.1.43 in 1HFY26 versus loss per share of Rs.1.68 recorded in 1HFY25. Future Outlook Gradual improvement in the demand of iron and steel products is expected due to reduction in discount rate and inflation. Progress towards CPEC phase-II will drive demand. Private construction may also recover as interest rates have eased. The recovery of automobile and appliances sector, increase in urban housing will also breathe life into the steel sector. However, downside risk persists on the back of the ongoing tension in the Middle Eastern region which has already taken its toll on the global petroleum prices. Since, steel is an energy intensive sector, higher petroleum prices will not only inflate the energy cost but will also push up the transportation charges, stretch lead times leading to greater working capital requirements and disturb the current account position pressurizing Pak Rupee. This would also mean slow PSDP disbursement and shaky private sector spending.
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