Press Release

VIS Upgrades Entity Ratings of Fauji Fertilizer Bin Qasim Limited

Karachi, March 16, 2021: VIS Credit Rating Company Limited (VIS) has upgraded the entity rating of Fauji Fertilizer Bin Qasim Limited (FFBL) from ‘A+/A-1’ (Single A Plus/ A-One) to ‘AA-/A-1’ (Double A Minus/ A-One). Long term rating of ‘AA-’ signifies high credit quality, and strong protection factors. Risk is moderate but may vary slightly from time to time because of economic conditions. Short term rating of ‘A-1’ denotes high certainty of timely payment, excellent liquidity factors supported by good fundamental protection factors. Risk factors are minor. Outlook on the assigned ratings is ‘Stable’. The last rating action was announced on August 27, 2019

The rating assigned to FFBL takes into account profile of major sponsor, i.e. Fauji Fertilizer Company and Fauji Foundation, which is a diversified conglomerate with strategic stakes in a wide variety of sectors including fertilizer, cement, food, power generation, gas exploration, LPG marketing and distribution, financial services, and security services. Furthermore the rating also incorporates FFBL’s revenue base diversification. Over the past 3-year period, other revenues from subsidiaries/associates, recorded as ‘other income’, comprised an average of a third of the revenue base (gross profit + other income).

In 2020, the company did well in recuperating the topline and the gross margin, which had undergone significant contraction in the preceding year. As a result of which, the financial risk indicators, which had come under stress in 2019, have posted improvement. Furthermore, the bottom line has also benefited from the lower benchmark rates prevailing during the period, translating in lower cost of debt.

The improvement noted in topline & gross margin and future projections have been factored into the upgrade. Even though, cash flow coverage indicators during the rating horizon, including FFO to (net) Debt and DSCR, remain slightly below threshold for the assigned rating band, the availability of sizable liquidity buffer has been taken into consideration. Over the long term, cash flow coverage indicators are projected to become aligned with the benchmark. VIS will track the same going forward, and a drop in the same may create pressure on the rating opinion.

Headquartered in Islamabad, Pakistan, FFBL is the sole domestic producer of Di-Ammonium Phosphate (DAP) fertilizer. It is also the only producer of granular form UREA (in contrast to widely marketed ‘prilled’ variant). FFBL enjoys leadership in DAP fertilizers with market share of 41% in 2020 and is Pakistan’s 4th largest producer of UREA. Fauji Foundation (FF) and its subsidiary Fauji Fertilizer Company Limited (FFC) hold majority shareholding in FFBL. Both FFC and FFBL market their products under one umbrella brand ‘Sona’, which has wide recognition among the farmers’ community.

For further information on this rating announcement, please contact the undersigned (Ext: 207) or Mr. Arsal Ayub (Ext: 216) at 021-35311861-71 or fax to 021-35311872-3.

Faryal Ahmed Faheem
Deputy CEO

Applicable Rating Criteria: Industrial Corporates (May 2019)

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2021 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .

VIS Credit Rating Company Limited