PACRA Maintains Entity Ratings of Fauji Fertilizer Company Limited

FFC is one of the largest player of fertilizer industry. Its Sona brand has a urea market share of around 40-45% over the years. Historically the local fertilizer industry almost fully meets the demand of urea and other products of Country thus contributing effectively towards national food security, both in terms of provision of essential fertilizer and savings of precious foreign exchange, whereas selling the urea at a discount to the international urea prices. In 2023, the domestic fertilizer market remained steady, with urea demand at ~6.6MT, driven by improved farm economics and a substantial discount compared to imports. Urea production rose to 6.4MT. FFC holds strong position in production capacity and product offtake for Urea while also markets the products of its associated company FFBL which is a sole manufacturer of DAP. The Company's production facilities are secured by a dedicated and uninterrupted gas supply line from the Mari fields. The ratings of Fauji Fertilizer Company Limited (‘FFC’ or ‘the Company’) draws comfort from FFC's strong governance and organizational structure designed to oversee its business and the strategic direction of its subsidiaries and also incorporates the strong sponsor profile of Fauji Foundation, a leading conglomerates having business interests in various diversified sectors. The Company has five subsidiaries, four associated companies and a JV. In addition, the ratings also reflects the stable growth in revenues, margins and profitability. Assigned rating also incorporates flexible growth strategy, implemented by a conservative financial policy. Credit challenges include significant exposure to natural gas prices, both as a feed and fuel stock. On financial risk profile side, the Company has moderately leveraged capital structure which is characterized by a combination of short-term financing raised to finance the working capital needs and long-term facilities aimed at expanding overall capacity and capex projects. Additionally Board of Directors of FFC have granted approval to evaluate potential amalgamation of FFBL to unlock synergies which are likely to add value to the combined enterprise, thereby potentially increasing future returns to shareholders.
The ratings are dependent on the sustainability of operations and maintaining its market share. Sustainability in the performance of subsidiaries, stable dividends, and effective management of financial profile is important.

About the Entity
Fauji Fertilizer Company Limited ('FFC' or 'the Company') is a public listed company, incorporated in 1978. FFC is engaged in the manufacturing and marketing of fertilizer products. The Company sells Urea, DAP, SOP, MOP, Boron, and Zinc. The Company has three Urea production facilities with a production capacity of ~2.05mln MT. The utilization level stood at ~123% during CY23. Fauji Foundation owns majority stake of FFC at ~44%. Rest of the ownership is shared between general public, foreign companies, public sector companies, & financial institutions. The Company's Board is chaired by Lt Gen Anwar Ali Hyder, HI(M) (Retired), whereas, Mr. Jahangir Piracha heads the Company as the Chief Executive Officer. He is aided by a team of professionals.