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The Pakistan Credit Rating Agency Limited
Press Release

Date
21-Aug-19

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 Maintains Entity Ratings of Pak Arab Fertilizers Limited

Rating Type Entity
Current
(21-Aug-19)
Previous
(19-Feb-19)
Action Maintain Maintain
Long Term A- A-
Short Term A2 A2
Outlook Developing Stable
Rating Watch Yes Yes

The company leverages on its ownership strength derived from Fatima Group and Arif Habib Group. Sponsor patronage in the shape of a turnaround plan has come to the rescue. As per the group level strategic plan, Fatima Fertilizer has acquired major operating plants of its associated Company Pak Arab Fertilizers; including Ammonia, Urea, Nitric Acid, NP, CAN and clean development mechanism. The first tranche (consideration from Fatima Fertilizer) in this regard has been given to the company while the complete roll-out is expected over short horizon. On the other hand, Fatima Fertilizer’s plan to amalgamate its wholly owned subsidiary into itself is yet to materialize - awaiting regulatory approvals. Moreover, Fatima Group is in process to venture an undertaking to secure gas supply to Pak Arab's plant by laying gas pipeline - which is in last phase of its completion. Persistent gas curtailment - a major hurdle - coupled with country’s current economic downturn added pressure to Pak Arab Fertilizer's risk profile. The Company's financial profile is reflected by a thin topline, majorly secured through DAP trading. Post-acquisition, Pak Arab Fertilizer is expected to develop a small yet a sustainable business model. Revenue stream would majorly include income from DAP trading, Carbon Dioxide plant activity, and other non-core activities, these income stream alongside consideration for acquisition from Fatima Fertilizer should enable the company in meeting its financial need.
The rating are kept under 'Rating watch' with 'Developing' outlook in anticipation to surveil the complete roll-out of the acquisition plan. The ratings would be updated once the evolving position is settled and financial statements for 2018 are finalized.

About the Entity
Pak Arab Fertilizer Limited is owned by a consortium between two major business groups in Pakistan namely Fatima Group and Arif Habib Group. Arif Habib Group ranks amongst the prominent financial services group in Pakistan and holds interests in securities brokerage, investment and financial advisory, investment management, commercial banking, commodities, and private equity, cement and fertilizer industries. Fatima Group is one of the leading corporate groups in Pakistan, engaged in trading of commodities, manufacturing of fertilizers, textiles, sugar, mining and energy. Currently, Pak Arab's fertilizer complex is located in Multan with a nameplate capacity of 846,900 MTPA, whereas the company's head office is situated in Lahore.

The board comprises eight members; equally represented through Arif Habib and Fatima Group. Mr. Fawad Ahmed Mukhtar is the Chief Executive Officer of the Company. He possesses vast business acumen spanning over three decades and has been associated with the company since
2005.

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.