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JCR-VIS Credit Rating Company Limited reaffirms entity ratings of Pakarab Fertilizers Limited - Press Release issued by JCR-VIS Credit Rating Company...

May 20, 2014



JCR-VIS Credit Rating Company Limited reaffirms entity ratings of Pakarab Fertilizers Limited - Press Release issued by JCR-VIS Credit Rating Company Limited

Following is the text of press release issued by JCR-VIS Credit Rating Company Limited

Quote

JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the entity ratings of Pakarab Fertilizers Limited (PFL) at 'AA-/A-1' (Double A Minus/A-One). The rating assigned to the privately placed TFC issue of Rs. 6.5b has also been reaffirmed at 'AA' (Double A). Outlook on the ratings is 'Stable'.

The ratings take into account PFL's association with renowned and well established business groups of the country. The sponsors' commitment to meet financial obligations on time is a key rating factor.

Prevailing energy crisis in relation to the supply of natural gas to the fertilizer industry had severely impacted the production profile of all fertilizer plants on the Sui Northern Gas Pipelines Limited (SNGPL) network, including PFL. Capacity utilization of PFL was marginalized in CY13 on account of acute gas curtailment. Accordingly, profitability and internal cash generation were adversely impacted.

Despite such difficulties, PFL made timely payments on its debt obligations during CY13. Realization of receivables from an associated company facilitated PFL in meeting its obligations. Moreover, a loan of Rs. 3b was also made available from a group concern, evidencing sponsor support. Given the recent discussions with sponsor's representatives, there is a strong likelihood of support from sponsors/group concerns, going forward as well. Given the outstanding debt of PFL and the resources available with the group, PFL expects to be able make timely payment on its debt obligations.

Two of the four fertilizer plants previously on SNGPL network have shifted to other gas field operators while PFL continues to be reliant on supply from SNGPL. The management of PFL is expecting better gas supply during the ongoing year. Up till now, the company has received gas for one month. Meanwhile, the company has undertaken trading in DAP fertilizer. During CY13, the management is expecting improvement in internal cash flows based on the aforementioned factors. Availability of gas feedstock remains critical for the long term sustainability of the local fertilizer industry.

For more information, contact:

Ms. Sobia Maqbool

CFA

JCR-VIS Credit Rating Company Limited

Tel: at 021-35311861-70

Fax: +9221 35311872-3

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Source: Pakistan Press International


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