Fatima Fertilizers’ acquisition of Pakarab Fertilizer to create a prolific business model: PACRA

February 20, 2019 (MLN): Pakistan Credit Rating Agency (PACRA) has maintained entity ratings of Fatima Fertilizers Company Limited at ‘AA-‘ for long-term and ‘A1+’ for short-term, with a stable outlook forecast.

The ratings reflect strong business profile of the company on the back of diversified product mix. Secure supply of gas from Mari field together with lower feed stock price (under fertilizer policy -2001 up till 2021), represents inherent strengths of the company compared to its peers. Overall capacity utilization continued to exceed 100% (previously: 90% - 98%) based on ammonia debottlenecking.

In view of discontinuation of urea subsidy scheme, the industry has increased the prices of fertilizers as well. GIDC related developments are expected to crystallize over the course of time, of which the impact will be clear once materialized.

Eyeing for a prolific business model, Fatima Fertilizer has proposed merger with its wholly owned subsidiary - Fatimafert along with the acquisition of production and operating plants of its associate - Pakarab Fertilizer Limited including Ammonia, Urea, Nitric Acid, NP, CAN and clean development mechanism. Both mentioned transactions are at an advance stage of being materialized.

Post-acquisition, Fatima Fertilizer tends to become a prominent supplier of CAN & NP with the overall nameplate capacity of 2,572,400 Metric tonnes/year.

Fatima Group has also ventured an undertaking to secure gas supply to Pakarab by laying gas pipeline. The leveraging is expected to move up yet would remain aligned with the risk profile of the entity. Given strong cash flows, financial risk remain comfortable.

The ratings are dependent upon the company’s ability to absorb debt profile of the proposed acquisitions. Revival of Pakarab's plants, acquired by Fatima Fertilizer is underway.

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