Press Release

VIS Credit Rating Company Assigns Initial Ratings to Fauji Fertilizer Bin Qasim Limited
 

Karachi, August 27, 2019: VIS Credit Rating Company Limited (VIS) has assigned initial long term entity rating of ‘A+’ (Single A) and short term rating of ‘A-1’ (A-One) to Fauji Fertilizer Bin Qasim Limited (FFBL). Long term rating of ‘A+’ denotes good credit quality and adequate protection factors; risk factors may vary with possible changes in the economy. The short term rating of ‘A-1’ signifies high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’.

Headquartered in Islamabad, Pakistan, FFBL is the sole domestic producer of Di-Ammonium Phosphate (DAP) fertilizer. It is also the only producer and marketer of granular form UREA (in contrast to widely marketed ‘prilled’ variant). FFBL enjoys leadership in DAP fertilizers with market share of 30.7% and is Pakistan’s 4th largest producer of UREA. Fauji Foundation (FF) and its subsidiary Fauji Fertilizer Company Limited (FFC) hold majority shareholding in FFBL. Both FFC and FFBL market their products under one umbrella brand ‘Sona’, which has wide recognition among the farmers’ community. DAP segment represents around three-fourth of the Company’s overall revenues. Seasonality in DAP sales is more pronounced than UREA sales resulting in a seasonal liquidity cycle for the Company.

The assigned ratings incorporate strong financial profile and business acumen of FFBL’s major sponsors -FFC and FF. Rating also reflect FFBL’s leading market position in DAP business, diversified business risk profile and strong corporate governance infrastructure. Ratings also take into account existing financial profile where elevated leverage indicators (to fund long-term investments on balance sheet) and modest coverages are a rating constraint. Gradual improvement in DAP business dynamics, Gas Infrastructure Development Cess (GIDC) settlement and improvement in financial performance of subsidiaries is expected to improve financial profile over the rating horizon. Ratings remain dependent on timely GIDC settlement and materialization of projected dividend income from investments while reprofiling of long-term debt in line with projected cash flows would be an important rating consideration.

As part of company’s strategic vision to offer sustainable returns to shareholders, FFBL carries a sizeable book of diversified investments. Investment portfolio (including TDRs) represented 38.6% of total asset base at end-1Q19. The portfolio features a mix of investment in defensive and growth industries. Dividends from power sector investments are expected to constitute the bulk of the dividend income over the rating horizon.

For further information on this rating announcement, please contact Mr. Talha Iqbal (Ext: 213) at 021-35311861-71 or fax to 021-35311872-3.



Jamal Abbas Zaidi
Advisor

Applicable Rating Criteria: Industrial Corporates (May 2016)
http://www.vis.com.pk/docs/Corporate-Methodology-201605.pdf>

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Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited(Formerly JCR-VIS Credit Rating Company Limited) (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS(Formerly JCR-VIS Credit Rating Company Limited), the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS(Formerly JCR-VIS Credit Rating Company Limited) is not an NRSRO and its credit ratings are not NRSRO credit ratings.VIS(Formerly JCR-VIS Credit Rating Company Limited) is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2019 VIS Credit Rating Company Limited(Formerly JCR-VIS Credit Rating Company Limited). All rights reserved. Contents may be used by news media with credit to VIS(Formerly JCR-VIS Credit Rating Company Limited).

VIS Credit Rating Company Limited (Formerly JCR-VIS Credit Rating Company Limited)