Overview: Pakistan Steel Fabricating Company Limited (PSFCL), established in 1975, is a leading fabrication industry in Pakistan with extensive experience in complex steel structures. As a wholly-owned subsidiary of Pakistan Steel, PSFCL has significantly contributed to the construction of Pakistan Steel and has diversified its services to other prestigious clients.

Mission:

1. To become a leading steel fabricating, manufacturing and leading Iron Ore Exporter through business collaboration firm that will cater for the manufacturing needs of the Country and the region.
2. To excel especially in the fabrication of flyover bridges, spiral welded pipes, pendestrian bridges, overhead steel car parking lots transmission towers, long & semi-trailers and containers, tank bowsers, heavy vehicles bodies etc.

Financial Highlights: The company has successfully navigated financial challenges through strategic management and diversification, showing a promising increase in income and effective management of liabilities.

Company Description

History: Functioning since July 1976, PSFCL is equipped with modern facilities specializing in the manufacture and fabrication of various steel structures. These include building and process steel structures, storage tanks, trailers, oil tankers, ventilation ducts, non-standard equipment, embedded parts, and a wide range of steel structures. During the construction phase of Pakistan Steel, PSFCL provided approximately 100,000 tons of fabricated structures, embedded parts, and ventilation ducts, demonstrating its critical role in the project's success.

 

Project Highlights and Clientele: PSFCL has successfully completed projects for several esteemed organizations, including WAPDA, PAF, MVRDE of the Pakistan Army, National Highway Authority, KDA/KMC, and Pak Suzuki Motor Company. Key projects have included:

1. Fabrication of low bed trailers for the Pakistan Army.
2. Fabrication of high voltage transmission towers for WAPDA.
3. Provision and erection of galvanized guardrails for the Lahore-Islamabad Motorway.
4. Production of heavy vehicle bodies.

Current Position: As of June 30, 2021, PSFCL's assets were valued at PKR 3.16 billion, with detailed assessments indicating:

• Land and Buildings: Encompassing over 89 acres, valued at approximately PKR 3.43 billion.
• Machinery and Equipment: Worth PKR 151 million, showcasing a significant investment in operational capabilities.

Overcoming Financial Adversities: Post-2015, following the shutdown of Pakistan Steel Mills, PSFCL faced dire financial challenges. Notably, by February 2020, the company grappled with:

• Bank Balances: Plummeted to a critical low of PKR 3.32 million.

Strategic Revival and Growth: Under new management, In response to these challenges, PSFCL embarked on a rigorous turnaround strategy, focusing on.

• Income Diversification: Leveraging assets and partnerships to generate PKR 63.78 million from June 2020 to December 2023.
• Debt Reduction: Successfully reducing outstanding loans from PKR 132 million to PKR 94 million by January 2024.
• Operational Efficiency: Streamlining operations to ensure the regularization of payments and financial obligations, marking a significant milestone in PSFCL's recovery.

Financial Strategy and Progress: PSFCL Overview

Financial Revitalization and Strategic Partnerships: In response to the absence of traditional fabrication business operations, PSFCL adopted a strategic approach focusing on maximizing fund generation through the utilization of available resources. This strategy was supported by Clause 21 of the Memorandum & Articles of Association, which facilitated joint business collaborations under private partnerships. The effectiveness of these efforts is evident in PSFCL's ability to self-fund regular employee salaries starting from October 2020. Subsequently, to mitigate financial strain, only regular employees were retrenched in February 2021, aligning with PSM's broader policy to minimize financial liabilities during periods of inactivity, except for rental income streams.

Funds Generated: June 2020 - December 2023:

Year End	Rent (PKR)	Production Charges (PKR)	Total (PKR)	Remark
June 2020	1,800,000	306,707	2,106,707	01 Company
June 2021	7,380,000	1,460,231	8,840,231	04 Companies
June 2022	11,816,116	307,124	12,123,240	04 Companies
June 2023	23,822,325	2,700,000	26,522,325	08 Companies
Dec 2023	11,685,222	2,500,000	14,185,222	08 Companies
Total	56,503,663	7,274,062	63,777,725

 

Note: A decline in production charges in June 2022 was attributed to a slump in the international market affecting iron ore exports.

Current Income & Expenditure Up to 30-06-2023

• Average Monthly Income (from 8 companies): PKR 2,026,914
• Average Monthly Expenditure: PKR 1,659,700
• Monthly Profit/Surplus: PKR 367,214

The expenditure covers salaries, loan installments to PSM, utility bills, and miscellaneous expenses, showcasing a lean operational model that prioritizes financial stability.

Loan Repayment and Financial Milestones

• More than half of the outstanding loan (PKR 94 Million out of PKR 132 Million) has been repaid to PSM through strategic disposal of scrap and generated income.
• Settlement of longstanding dues (approx. PKR 4 Million) with various institutions, alongside tax regularizations, reflects a commitment to financial responsibility and compliance.
• Investment in new accounting software and asset re-evaluation further underline efforts to modernize operations and accurately reflect the company's financial health.

Bank Balance and Investments

• Bank Balance as of 31-01-2020: PKR 3,317,611
• Current Bank Balance as of 24-01-2024: PKR 22,219,087.57
• A strategic investment of PKR 15,000,000 in a PLS Term Deposit is expected to generate an additional PKR 257,500 per month, bolstering the company's ability to cover operational expenses.

Future Projections and Strategic Initiatives

Financial Projections for 2024-2028: Building on the foundation of improved financial health and strategic partnerships, PSFCL is poised for substantial growth in the upcoming years. The management's strategic focus on diversifying revenue streams through business collaborations and export-oriented projects has started to yield positive outcomes.

• Revenue Growth: With the current setup and collaborations, PSFCL anticipates a conservative year-on-year revenue growth of 15-20%. This projection is based on the underutilize areas of the vicinity, we will offer to the market to increase our rental income as increasing demand for crushed iron ore in China and the expected rise in the number of companies operating within PSFCL premises.
• Export Volume: Following the successful export of 100,000 tons of crushed iron ore in 2023, PSFCL aims to increase its contribution to 150,000 tons by 2025 and further to 200,000 tons by 2028, capitalizing on the growing international demand.
• Investment Returns: The strategic investment of Rs. 15,000,000 in PLS Term Deposits is anticipated to contribute significantly to the company's financial stability, with an expected annual return of 20%. This additional income will support operational expenses and enable further investments in technology and infrastructure.
• Cost Management: Despite anticipated revenue growth, PSFCL remains committed to stringent cost management practices. The reduction in the workforce from 23 to 15 employees, alongside the regularization of all outstanding payments, has significantly improved the company's financial health. PSFCL plans to maintain a lean operational model while ensuring competitive compensation for its workforce.
• Capital Expenditure: With the revaluation of assets and investments in new accounting software, PSFCL is set to allocate funds towards upgrading its fabrication and crushing facilities to meet higher production demands. A projected capital expenditure of Rs. 50 million is allocated for the next five years to modernize machinery and enhance operational efficiency.

Strategic Initiatives

• Expansion of Collaborations: PSFCL will continue to explore and establish new partnerships with both local and international firms, aiming to diversify its project portfolio beyond iron ore crushing to include other fabrication and manufacturing activities.
• Sustainability and Innovation: Embracing sustainable practices and innovative technologies will be at the forefront of PSFCL's operational strategy. This includes investments in renewable energy sources to power its facilities and adopting advanced fabrication techniques to reduce waste and improve product quality.
• Enhancing Export Capabilities: To support the anticipated increase in export volumes, PSFCL will invest in logistics and supply chain improvements, ensuring efficient and timely delivery of products to international markets.
• Community and Environmental Responsibility: As part of its commitment to corporate social responsibility, PSFCL will engage in community development projects and implement strict environmental safeguards to minimize its carbon footprint and promote sustainable resource use.

Conclusion

The strategic direction set by PSFCL's management has positioned the company on a path of financial stability and growth. By leveraging its assets, fostering strategic partnerships, and focusing on export-oriented production, PSFCL is not only contributing significantly to Pakistan's exchequer but also setting a benchmark in the steel fabrication and ore crushing industry. The upcoming years are expected to be a period of robust growth, operational excellence, and increased contributions to the national economy.

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