logo
The Pakistan Credit Rating Agency Limited
Press Release

Date
27-Jul-18

Analyst
Raniya Tanawar
raniya.tanawar@pacra.com
+92-42-35869504
www.pacra.com

Applicable Criteria

Related Research

Disclaimer
This press release is being transmitted for the sole purpose of dissemination through print/electronic media. The press release may be used in full or in part without changing the meaning or context thereof with due credit to PACRA

PACRA Upgrades Entity Rating of Engro Fertilizers Limited

Rating Type Entity
Current
(27-Jul-18)
Previous
(30-Dec-17)
Action Upgrade Maintain
Long Term AA AA-
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

The ratings take into account sustained operations of the company; capacity utilization at both plants remained high on the back of continued gas supply from Mari and other. The risk of gas curtailment has diminished with strengthening of local reservoirs and continued import of RLNG. The company has been able to secure sustainable gas supply. Efert is benefiting from the incentivized gas pricing of 70 cents under the fertilizer policy 2001.
Efert was facing challenge due to oversupply in the domestic market. This challenge was met by exploring export market. Plus, the domestic supply demand scenario is now favourable, owing to the shutdown of LNG based fertilizer plants that borne negative margins on RLNG. The industry has been able to raise the price of urea as well. Meanwhile, timely recovery of remaining subsidy is important. The financial risk profile of the company is characterized by moderate leveraging. EFert continues to derive strength from its association with Engro Corporation – a corporate conglomerate.

The ratings are dependent on sustainability of operations and profitability, resulting in sustained risk profile of the company. Any constraint to perceived ability to keep business and financial risk in respective matrix may impact the ratings.

About the Entity
EFert is 56% owned by Engro Corporation Limited (ECorp), a corporate conglomerate with a consolidated asset base of PKR 324bln and revenue base of PKR 129bln at end-Dec17. ECorp is majority (45%) owned by Dawood Group (DG).
EFert's urea plants (base 975k MT, Enven 1,300k MT) and NPK plant are located at Daharki and Port Qasim, respectively. EFert's board comprises three Engro executives, one DG representative, and four independent directors. Mr. Ghias Khan, the CEO of the parent company, is the Chairman of board. Mr. Ruhail Muhammad, the CEO of EFert, is a seasoned professional enjoying a long association with Engro group.

The primary function of PACRA is to evaluate the capacity and willingness of an entity to honor its obligations. Our ratings reflect an independent, professional and impartial assessment of the risks associated with a particular instrument or an entity. PACRA's comprehensive offerings include instrument and entity credit ratings, insurer financial strength ratings, fund ratings, asset manager ratings and real estate gradings. PACRA opinion is not a recommendation to purchase, sell or hold a security, in as much as it does not comment on the security's market price or suitability for a particular investor.