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The Pakistan Credit Rating Agency Limited
Press Release

Date
30-Jul-18

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

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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 Fauji Fertilizer Company Limited

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

The ratings reflect FFC's dynamic business profile and financial position while incorporating the sound financial strength of Fauji Group. FFC is one of the largest players in the fertilizers market in terms of its production capacity. The strong business footprint of FFC has enabled the company to build an impeccable brand in Pakistan with "Sona" being a household name in the farming community. The production facilities are secured by uninterrupted supply of gas from Mari field, representing inherent commercial strengths of the company in terms of sustainable business volumes. In line with the industry, FFC also faced urea oversupply situation in 2017. However, the export of excess urea allowed by the Government, provided much relief to the business. The latest domestic supply demand scenario is also favorable, In view of discontinuation of urea subsidy scheme and increasing production costs, the industry has increased the prices of fertilizers as well.
FFC carries a sizable book of diversified investments, both long term and short term, which has been developed to offer sustainable returns to its stakeholders. FFC marked its presence into the financial sector via a sizable stake in Askari Bank (43.15%) in 2013, which has a distinct presence in Pakistan's financial sector: dividend stream from these investments compliments FFC's ratings. Under its diversification strategy, FFC is evaluating investment in offshore fertilizer project, besides investing in the power sector of the Country; leveraging associated with business ventures will require oversight and close attention.

About the Entity
Fauji Fertilizer Company Ltd (FFC), was incorporated in 1978 and commenced operations with a single production plant having a capacity of 570 thousand tonnes, which now stands expanded to 3 production facilities with a combined capacity of 2.048 million tonnes and an annual production of over 2.4 million tonnes per annum, ensuring sustained supply of urea to the farmers. The Company is quoted on the Pakistan Stock Exchange and has achieved first position among the PSX (formerly KSE) Top 25 Companies for consecutively seven time in 2017. Fauji Foundation a Charitable Trust owns 44.35% shares of the company; State Life Insurance holds 9.12%, whereas other institutions and general public hold 22.76% and 23.77%, respectively. FFC has a very large market presence in Punjab constituting around 68% of the company’s sales during 2017

The thirteen-member board of directors includes the Chief Executive & Managing Director (CE&MD), eight non-executive directors including seven representatives of FF and four independent directors including one member each from SLIC and NIT. The CE&MD, Lt Gen Tariq Khan, HI-(M) (Retired) joined the company in March 2018 and is also the CE&MD of the two subsidiaries of FFC.
Lt Gen Syed Tariq Nadeem Gilani, HI-(M) (Retired) joined the FFC’s Board, as Chairman in Jan 2018. He is also the Managing Director-MD of Fauji Foundation and Fauji Oil Terminal & Distribution Company Ltd.

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.