PPI Original Text (PPI-OT) – Pakistan Credit Rating Agency Revises The Ratings Of Engro Fertilizers Limited

Lahore, May 30, 2012 (PPI-OT): The Pakistan Credit Rating Agency (PACRA) has revised long term entity rating of Engro Fertilizers Limited to “A+” (Single A plus) [previous: “AA-“], while maintaining short-term rating at “A1″ (A One). The ratings denote a low expectation of credit risk emanating from a strong capacity for timely payment of financial commitments.

The rating of the two secured and listed TFCs of PKR 4,000mln and PKR 2,000mln, is “AA-” (Double A minus), while the rating of two privately placed TFCs of PKR 4,000mln and PKR 2,000mln is A+ (Single A plus). Meanwhile, its privatley placed Sukuk, given its short term nature and asset backed security structure, has a rating of AA.

The ratings reflect EFL’s relatively low business risk emanating from a stable urea demand amidst continuing domestic supply deficit, despite expansion in the industry capacity. The dynamics of domestic urea market – supply deficit and significant gap from international prices – and EFL’s diverse production plants coupled with sizeable system share has enabled the company to offset production losses – an outcome of gas shortage – through price raise. Although this supported EFL’s profitability, it came under pressure beginning 2012 due to influx of imports and subsequent off take thereof at a subsidised rate.

This squeezed the risk absorption cushion available with EFL. Nevertheless, the company is expected to retain its ability to meet its financial obligations with adequate cash flow generation and financial flexibility available through short-term lines. Meanwhile, EFL continues to derive strength from association with Engro Corporation – a corporate conglomerate.

For more information, contact:
Hammad Rashid
Analyst
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore – Pakistan
Tel: +9242 586 9504 -6
Fax: +9242 583 0425
Email: hammad.rashid@pacra.com
Web: www.pacra.com

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