VIS upgrades FFBL's rating to 'AA+'

May 07, 2024 (MLN): VIS Credit Rating Company (VIS) has upgraded the entity ratings of Fauji Fertilizer Bin Qasim Limited (PSX: FFBL) to ‘AA+’ for the long term and ‘A-1+’ for short-term, latest press release issued by VIS showed.

Medium to long term rating of 'AA+' indicates high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions.

Short term rating of 'A-1+' indicates highest certainty of timely payment; Short-term liquidity, including internal operating factors and /or access to alternative sources of funds, is outstanding and safety is just below risk-free government’s short-term obligations.

Moreover, outlook on the assigned ratings remains Stable.

To recall, the previous rating action was announced on August 08, 2023.

FFBL is a public listed company incorporated in Pakistan under the Companies Ordinance, 1984 (now replaced by the Companies Act, 2017 ("the Act") with effect from May 31, 2017). The shares of the Company are quoted on Pakistan Stock Exchange (PSX).

The registered office of the Company is situated at FFBL Tower, Jinnah Boulevard, DHA Phase II, Islamabad, Pakistan while the production facilities are located at Port Qasim, Karachi.

Principal business of the company is manufacturing, purchasing and marketing of fertilizers. The Company commenced its commercial operations effective January 1, 2000.

The upgrade in the ratings takes into account the improvement in the Company's financial risk profile buoyed by profitability growth due to favorable DAP prices.

The coverage and capitalization profiles of the company also improved on account of higher profitability and timely debt repayments.

While the liquidity position remains adequate, the divestment from non-earning investments and projected growth in financial metrics also lend support to the upgradation.

Assigned ratings incorporates the medium to low business risk profile of FFBL supported by low cyclicality, moderate-to-low competition, low technology risk, medium energy sensitivity, and significant market share in the fertilizer industry of Pakistan.

Additionally, ratings are underpinned by ongoing strong sponsor support from the Fauji Foundation (FF) and FFBL's unique market position as the sole producer of di-ammonium phosphate (DAP) fertilizer in Pakistan.

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