Press Release

JCR-VIS Reaffirms Ratings of Saudi Pak Industrial and Agricultural Investment Company Limited at AA+/A-1+

Karachi, June 29, 2011: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the medium to long-term entity rating of Saudi Pak Industrial and Agricultural Investment Company Limited (SAPICO) at ‘AA+’ (Double A Plus) with a ‘Stable’ Outlook. Short-term rating has also been reaffirmed at ‘A-1+’ (A One Plus).

The ratings of Saudi Pak Industrial and Agricultural Investment Company Limited (SAPICO) incorporate joint venture holding of two sovereigns i.e., Government of Pakistan and Kingdom of Saudi Arabia. Ratings draw comfort from the strong financial risk profile of the Kingdom of Saudi Arabia, evident from the sovereign ratings of ‘AA-/Stable/A-1+’ assigned to it by a global credit rating agency.

Given the difficult operating environment for the secondary market borrowers, the company restricted expansion during FY10 and the trend continued in 1Q11. The company shifted some of its liquid investments partly towards advances portfolio and partially to repay its borrowings and COIs. Following a strategy to reduce investment in both listed and unlisted equities, the company decreased exposure in quoted equities, reducing it further during the ongoing year. Recently, the company has also concluded an agreement for sale and purchase of shares with a strategic investor for its shareholding in Saudi Pak Insurance Company Limited with the transfer of management control.

The spreads, which were already under pressure, declined further during FY10. The company booked a significant exchange loss of Rs. 444m (FY09: 61.5m). This along with provision for diminution in the value of investments, which includes provisioning against a leasing subsidiary, resulted in a loss of Rs. 503.9m against a net profit of 418.9m in FY09. During FY11, the company is expected to book further exchange losses beyond which time the agreements will mature, eliminating related losses.

Liquidity reserves declined in relation to borrowings though still adequate. Nevertheless, access to diversified funding source is desirable for growth. Meanwhile, the management needs to focus on improving MIS.

For further information on this rating announcement, please contact Ms. Sabeen Saleem (Ext: 510) at 0213-5311861-72 (12 lines) or fax to 0213-5311873 or Mr. Maimoon Rasheed at 0423-6610681-84 (4 lines).



Javed Callea
Advisor

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