Amreli Steels invites consultancy bids for Rs6.5 billion expansion

KARACHI: Amreli Steels Limited has invited bids from internationally reputed consultancy firms as the Board of Directors of Amreli Steels Limited has approved third phase of expansion plan with an investment of Rs6.5 billion, which would raise existing rolling capacity of the company to 1,105,000 metric tons/annum, a bourse filing said on Friday.
“We are pleased to inform you that the Board of Directors of Amreli Steels Limited has approved third phase of expansion plan of the company as presented by the management for setting up an additional state-of-the-art rolling mill using Pioneering Technology at Dhabeji to further expand its rebar manufacturing facilities,” the notice issued to the bourse said.
This new investment proposal, subject to the approval of technical feasibility and successful financial close, would raise existing rolling capacity of Amreli Steels Limited from 605,000 metric tons/ annum to 1,105,000 metric tons/annum and is expected to complete in three years’ time from financial close.
The estimated cost of the expansion plan is approximately Rs6.5 billion, which will be financed through bank borrowings and internal cash resources.
Internationally reputed consultancy firms have been invited to submit their bids for final selection to commence the technical feasibility of the proposed project. By installation of this new facility, the company will have the largest capacity in Pakistan for producing high quality rebars with economies of scale in terms of conversion cost
Board also had detailed deliberations on the expansion plan regarding revamping of its existing SITE rolling mill, which would have increased production capacity from 180,000 to 275,000 metric tons/annum, which was earlier communicated to the Pakistan Stock Exchange Limited (PSX) in February 2018.
Based on these deliberations, Amreli Steels has decided to rescind the revamping plan of the company’s SITE rolling mill due to the above expansion at Dhabeji. Accordingly, there would be no shutdown for a period of ten months (expected from June 2019 to March 2020) as was earlier intimated.
Taimoor Asif at Pearl Securities said the economic condition would have been improved by the time Amreli Steel’s new capacity will come online i.e. in FY23. “Moreover, the demand prospects of rebars are likely to get affected from the ongoing economic hardships and therefore the company has decided to rescind the expansion plan at SITE rolling mill”.
Analysts believe that the recent Pakistani rupee depreciation and the economic slowdown compelled the management to rethink the expansion of SITE rolling mill. Furthermore, the expected bailout from IMF and the resolve of the incumbent government to take structural reforms is likely to keep the economic growth in check for the next two years.

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