PACRA Maintains Entity Ratings of Engro Fertilizers Limited
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. Plus, the latest domestic supply/demand scenario is favorable, increased urea prices, provided additional cushion to the business in enhancing its margins. Meanwhile, timely recovery of remaining subsidy remains important. GIDC related developments are expected to crystallize over the shorter horizon, which are likely to provide benefit to industry players generally and Efert particularly. 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.
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 and four independent directors. Mr. Ghias Khan, the CEO of the parent company, is the Chairman of board. Mr. Nadir Salar Qureshi, a seasoned professional enjoying a long association with Engro group, is the newly appointed acting President & CEO of EFert,