GIDC related developments likely to benefit EFERT: PACRA

January 29, 2019 (MLN): Pakistan Credit Rating Agency (PACRA) has maintained entity ratings of Engro Fertilizers Limited (EFERT) at 'AA' for long-term and 'A1+' for short-term. Moreover, PACRA has also maintained debt instrument rating of Engro Fertilizers Limited|Sukuk-III at 'AA' for long-term.

Outlook on the assigned ratings are stable.

The ratings take into account sustained operations of the company; capacity utilization at both plants remained high on the back of continued gas supply from Mari and other.

The risk of gas curtailment has diminished with strengthening of local reservoirs and continued import of RLNG.

The company has been able to secure sustainable gas supply. EFERT is benefiting from the incentivized gas pricing of 70 cents under the fertilizer policy 2001. Plus, the latest domestic supply/demand scenario is favorable, increased urea prices, provided additional cushion to the business in enhancing its margins.

Meanwhile, timely recovery of remaining subsidy remains important.

GIDC related developments are expected to crystallize over the shorter horizon, which are likely to provide benefit to industry players generally and EFERT particularly.

The financial risk profile of the company is characterized by moderate leveraging. Efert continues to derive strength from its association with Engro Corporation – a corporate conglomerate.

The ratings are dependent on sustainability of operations and profitability, resulting in sustained risk profile of the company.

Any constraint to perceived ability to keep business and financial risk in respective matrix may impact the ratings.

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