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MSC registers returns growth of 92% in first half of year as attractive venture capital rises

Hardworking ad committed staffers of Mobarakeh Steel Company (MSC) have set a new record in the first half of this year (March 21 – September 22, 2018) by producing 3.65 million tons of different products, of which 3.58 million tons – valued at around 10 trillion tomans – has been shipped to the market.
The comment was made by Amir Hossein Naderi, MSC’s chief economic and financial officer, who further said MSC aims to increase sustainable and added-value dividends for its shareholders who are the company’s main beneficiaries, adding despite the problems caused by sanctions the company has managed to fare brilliantly. 
He went on to credit the following for the company’s achievements: wise management, the staff’s valuable expertise and technical knowhow, balanced development of production lines, and corporate measures to increase cost-effective production and bring about constant profitability.   
As statistics show, he said, an increase of 27 percent in the sales of hot-rolled steel products this year – which followed the inauguration of a development project at Saba Steelmaking and Continuous Casting Plant and the rise of the plant’s production capacity to 1.6 million tons from a previous 750,000 tons – and the sale of slabs produced by the Casting Machine No. 5 have contributed to the company posting a 46 percent growth in sales in the first half of this year compared with corresponding period last year. “On top of growing production, rising global prices of steel products which were followed by their growth on the Commodity Exchange have remarkably helped raise the company’s revenues.” 
Naderi said Mobarakeh Steel Company has always given top priority to meeting local market demand, adding MSC has worked out plans to supply as much as 80 percent of its products on domestic market this year (which ends March 20, 2019).   
The Commodity Exchange has adopted a sound strategy which removes restrictions on supply-and-demand-related fluctuations of prices, he said, describing it as a key step toward narrowing the gap between the prices offered on the exchange and the ones outside, and stopping rente-seeking.
He said MSC’s market value and stock returns have grown. “In light of the fact that capital market has welcomed the offering of metal and mining sector as a key industry in the stock market index, MSC’s stock price has grown substantially. The company’s stock price soared to 5,260 rials in late September from 2,870 rials in late March 2018. In its annual general assembly, the company calculates and pays stockholders’ dividends (250 rials for each share). In the first half of this year (the six months to September 22, 2018), MSC posted a 92 percent rate of return, and the figure is projected to stand above 120 percent in the 30 days to October 22, 2018.”       
Naderi said the stock market index which is the main indicator of capital market surged from 96,425 points in late March 2018 to 160,538 points in late September, registering a 66 percent increase, adding with a rate of return of 92 percent, what Mobarakeh Steel Company has achieved for its shareholders is 1.5 times the average market growth.  
He went on to outline the way the company divvies up dividends and thanked shareholders for their cooperation with MSC and said there is always an inverse correlation between the company’s growth rate (g) and the dividend yield. “There are companies which divide the lion’s share of dividends in their general assembly and work out no development plan, their profitability growth rate declines over time. But offering lower dividends brings about profitability growth and pushes up stock prices on the Exchange. This will ultimately raise the rate of return for shareholders.”    
The market value of MSC’s capital has surged to 40 trillion tomans, he said. “Given the rising rate of dollar, the company’s replacement value and assets will naturally increase. On the other hand, construction of a giant complex such as Mobarakeh Steel is very difficult in current circumstances. The growth in the value of the company’s fixed assets comes as its long-term investments have grown dramatically, something which may have escaped the attention of stockholders and capital market players. The current value of MSC’s stock basket on the exchange is somewhere in the neighborhood of 14 trillion tomans, up 180 percent over its cost price which stands at 5 trillion tomans. In other words, in case the value of the company’s stock basket is divided by the number of its stocks, each share of Mobarakeh Steel Company will earn 1,860 rials.”       
As for MSC’s capital, he said there should be a meaningful correlation between the company’s profitability, assets value and its capital. “In light of the fact that MSC has made valuable investment in expansion projects and has bought the stocks of other metal and mining companies, it needs to supply long-term financial resources in line with the matching principle [which requires a company to match expenses with related revenues in order to report its profitability during a specified time interval]. On the other hand, due to the fact that banks do not have enough financial resources and capital to grant loans – which come with high interest rates – the best way forward for the company to get long-term finances is through the capital market and issuance of new shares.”   
Currently Mobarakeh Steel Company is the largest listed company in the country in terms of capital (MSC’s capital has hit 75 trillion rials), he said. “MSC is studying a plan to increase its capital to 130 trillion rials (73 percent) by tapping into undivided profits. Since the company’s undivided profits which have been accumulated over the years now stand at 57,738 trillion rials (that is 770 rials in dividends per share), it can fully increase its capital by tapping the undivided profits. This will accelerate the registration process, and shareholders will find it attractive.”       
He went on to lay out the capital increase process and said it is a time-consuming process in listed companies. “It usually takes up to nine months to complete, because these companies have to secure licenses from the Stock Exchange and their own auditors.”
In conclusion, Naderi said the feasibility report on the capital increase has been submitted to the company’s auditor. “The report will be sent to the Stock Exchange to secure a license when the auditor’s report is out. The company will convene an ad hoc meeting of the general assembly immediately after the Exchange approves the report. The capital increase is projected to become a reality before yearend (March 20, 2019).”    

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