PACRA upgrades entity ratings of Fatima Fertilizer

January 26, 2022: Pakistan Credit Rating Agency (PACRA) has upgraded entity ratings of Fatima Fertilizer Company Limited (FATIMA) from AA- to AA for the long-term while it maintained ratings at A1+ for short-term, reflecting the company’s association with strong business groups that include Fatima Group and Arif Habib Group, a press release said.

The company holds the highest market share in NP and CAN. Furthermore, after the acquisition of the Pakarab Fertilizer’s plants (Ammonia, Urea, Nitric Acid, Nitro Phosphate, Calcium Ammonium Nitrate, and Clean Development Mechanism), the company has increased its overall market standing.

The company's topline comprising mainly of Urea, NP, and CAN has witnessed phenomenal growth driven by increased sales volumes during 9MCY21 post the acquisition. The company has maintained healthy margins over the years owing to efficient operations and having a dedicated gas supply line from Mari fields.

Despite the expiration of concessionary gas, its performance is anticipated to remain optimal owing to the volumetric growth. FATIMA has continuously invested in optimizing its production plants and reaps the benefits of having increased utilization and higher run time of its production facilities. Moreover, income from the trading portfolio provides limited support to the company's bottom line.

The company’s financial profile is characterized by modestly leveraged capital structure, very strong coverages, and efficient management of working capital. Ratings draw comfort from business acumen from the sponsors and a strong governance framework.

The ratings are dependent on the company's ability to sustain its margins and healthy coverages while maintaining cushion and adherence to strong financial discipline. Substantial deterioration in margins and profitability would adversely impact the ratings.

Press Release