International Industries : Transmission of Quarterly Report for the Period Ended 31-03-2023

for the nine months ended March 31, 2023

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Mr. Kamal A. Chinoy	Rawalpindi Office
2nd Floor, Khyber Heights,
	Rafi Commercial, Bahria Town, Phase # 8,
	Rawalpindi, Pakistan.

Mr. Mustapha A. Chinoy

Mrs. Selina Rashid Khan

Suite 210-5800

Ambler Drive, Mississauga

ONL4W4J4, Canada

INTERNATIONAL INDUSTRIES LIMITED 03

For the nine months ended March 31, 2023

The Directors of your Company are pleased to present the financial statements for the nine months ended March 31, 2023.

Pakistan's economy continued to face serious challenges with rising inflation and high borrowing costs, necessitating increases in discount rates to tackle the twin account deficits, exacerbated by generally dampened business confidence due to tightening of the economy along-with the prevailing political uncertainty. The economic slowdown resulted in a compression of the manufacturing sector, with Large Scale Manufacturing down by 7.6% compared to the same period last year. The central bank increased its policy rate to a two- decade high of 21% in a hitherto unsuccessful bid to curb inflation (currently at 35%) and depreciation of the Pakistani Rupee (currently at PKR 285).

These factors are having major negative ramifications for the local industry, resulting in substantial demand contraction for steel products, mainly from major sectors including automobiles, construction, fluid transmission and general fabrication. Government spending on infrastructure projects also remains subdued. Furthermore, the misuse of tax exemptions on steel imports available for the FATA and PATA regions continued to hamper the Company's sales efforts. Consequently, your Company too faced a sizeable reduction in domestic sales volumes.

Sourcing of raw materials remained extremely challenging due to restrictions imposed on establishing letters of credit and a 100% cash margin requirement. Moreover, the devaluation of the PKR by 55% relative to last year has increased pressures on cost and led to a need for higher working capital. Internationally, steel prices were largely stable through the quarter on the back of steady global offtake, but certain key export markets struggled with sluggish local economies and recessionary headwinds. Furthermore, your Company had to forego sizeable export orders due to raw material shortages brought about by the aforementioned import restrictions enforced by the government. Consequently, export sales were lower by 48% compared to the same period last year. However, the impact of this dip was more than offset by profitable operational results of the Company's overseas subsidiaries and exchange gains resulting from the decline in the value of the Pakistani Rupee.

Unconsolidated sales revenue for the period under review stood at Rs. 20.19 billion, which was 28% lower than the same period last year. As a consequence, overall production for the period under review was 45% lower than the same period last year due to the compression in demand. Your Company was able to partially mitigate the impact of lower sales through its success in improving margins, driving operational efficiencies and rigorous cost control. Effective working capital management resulted in a 26% reduction during the period under review, releasing PKR 8.33 billion in operational cash flows that enabled a reduction in bank borrowings from PKR 15.06 billion to PKR 8.94 billion, providing a much-needed shield against high interest rates.

Unconsolidated Profit after Tax (PAT) for the period under review was Rs. 1.42 billion (EPS Rs. 10.77), compared to Rs. 2.39 billion (EPS Rs. 18.16) for the same period last year. This represents a significant improvement during the quarter under review compared to the end of the first half of the financial year. PAT includes net dividend income of Rs. 925 million from our subsidiary and associate companies.

Our subsidiary, International Steels Limited, reported sales revenue of Rs. 57.82 billion, 18% lower than Rs. 70.56 billion during the same period last year. PAT stood at Rs. 1.58 billion (EPS Rs. 3.62) compared to Rs.5.36 billion (EPS Rs. 12.31) for the same period last year, representing a substantial improvement during the quarter under review compared to the end of the first half of the financial year. Consolidated Group PAT of Rs. 2.02 billion was down 60% from Rs 5.03 billion for the same period last year. EPS attributable to shareholders of the Holding Company was Rs. 9.90, compared to Rs. 20.74 for the same period last year.

INTERNATIONAL INDUSTRIES LIMITED 04