The Pakistan Credit Rating Agency Limited
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PACRA Maintains Entity Ratings of Fauji Fertilizer Company Limited

Rating Type Entity
(30-Jul-22 )
(30-Jul-21 )
Action Maintain Maintain
Long Term AA+ AA+
Short Term A1+ A1+
Outlook Stable Stable
Rating Watch - -

Pakistan has an agrarian economy and fulfills around ~ 84% of its fertilizer requirement through local production while the remaining is met through imports. The Country's total fertilizer production capacity stands at around ~ 7mln MT of Urea and CAN and ~ 1.7mln MT of DAP, NP, and NPK. In CY21, Urea’s offtake stood at ~6.3mln MT and DAP’s offtake stood at 1.8mln MT. Whereas in 1HCY22, Urea offtake stood at ~ 3.2mln MT posting a growth of 12%. However, DAP offtake stood at 0.5 mln MT, posting a decline of 10%. Considering the overall urea demand and supply situation and LNG unavailability for the plants, the Economic Coordination Committee (ECC) of the Cabinet has allowed to import 0.2mln MT of urea for second half of 2022. Overall margins of the industry remained healthy and going forward industry’s outlook is expected to remain satisfactory. International market prices fell at the start of quarter due to lower demand and sellers sought to offload barges in crowded markets due to force liquidity. Despite low demand, prices didn’t correct to expected levels due to changing geopolitical situation internationally.
The ratings reflect the robust business and financial position of Fauji Fertilizer Company Limited ('FFC' or 'the Company') while deriving strength from Fauji Foundation (FF). FFC combined with Fauji Fertilizer Bin Qasim Limited (FFBL) has a strong foothold in the production capacity and product offtake of both Urea and DAP. Over the years, a strong business footprint has built 'Sona' into a household name in the farming community, in Pakistan. The Company's production facilities are secured by a dedicated and uninterrupted gas supply line from the Mari fields. Thus ensuring sustainable business volumes. FFC posts a stable production trend and its revenue stream remain the highest among the industry players. The Company has also maintained a growth trajectory in its margins and profits. Strong and stable dividend and interest income further boost the Company's bottom line. FFC financial profile is characterized by a moderately leveraged capital structure and very strong coverages. Moreover, significant liquidity depicts a robust financial profile. The ratings further draws comfort from FFC's strong organizational structure designed to control its subsidiaries' strategic direction and strong governance framework, whereas FFC's various corporate awards testify the Company's sound financial and business practices.
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, out of which two are located in Goth Machhi (Plant I and Plant II) and one in Mirpur Mathelo (Plant III) with a production capacity of ~2.05mln MT. The utilization level stood at ~122%.
FFC is majority owned by Fauji Foundation (~44%). FFC is majority owned by Fauji Foundation (~44%). General public holds ~24%. Rest of the ownership lies with foreign companies (~5%), financial institutions (~20%) and others (~7%). The Company's Board is chaired by Mr. Waqar Ahmad Malik, whereas, Mr. Sarfaraz Ahmed Rehman heads the Company as the Chief Executive Officer. He is aided by a team of experienced professionals.

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.