Lahore, August 24, 2020 (PPI-OT): The company leverages on its ownership strength derived from Fatima Group and Arif Habib Group. Sponsor patronage in the shape of a turnaround plan has come to the rescue. As per the group level strategic plan, Fatima Fertilizer is in the process of acquiring major operating plants of its associated Company Pak Arab Fertilizers; including Ammonia, Urea, Nitric Acid, NP, CAN and clean development mechanism. Half of the consideration from Fatima Fertilizer, in this regard has been received by the company while the complete roll-out is expected over a short horizon in an installment pattern.
In this connection, Fatima Group has successfully finalized its venture to secure gas supply to Pak Arab’s plant by laying a gas pipeline network from Mari Petroleum, and the gas supply has commenced since Jan’20. Currently, due to a shortfall in the gas requirement, Pak Arab’s plant is producing NP and CAN at full capacity with a very nominal share of urea production. The revenue is currently being recorded on Pak Arab’s book as the Asset Sale Purchase Agreement (SPA) is yet to finalize.
In the former periods, persistent gas curtailment impacting economic inflows – a major hurdle – coupled with elevated borrowing book posed a key threat to Pak Arab’s risk profile. With the finalization of the Asset SPA, the Company’s financial risk profile is expected to relieve in the way that Fatima Fertilizer shall assume the ultimate liability of Pak Arab’s debt obligations in substance, though the borrowing book shall remain on Pak Arab’s balance sheet. Post-acquisition, Pak Arab Fertilizer is expected to develop a small yet a sustainable business model.
Revenue stream shall majorly include income from DAP trading, Carbon Dioxide plant activity, and other non-core activities. These income stream alongside consideration for acquisition from Fatima Fertilizer would enable the company in meeting its financial needs. The rating is kept under ‘Rating watch’ with ‘Developing’ outlook in anticipation to surveil the complete roll-out of the acquisition plan. The ratings would be updated once the evolving position is settled.
For more information, contact:
Analyst,
The Pakistan Credit Rating Agency Limited (PACRA)
Awami Complex, FB1, Usman Block New Garden Town,
Lahore, Pakistan
Tel: +92-42-5869504-6
Fax: +92-42-5830425
Email: hammad.rashid@pacra.com
Website: www.pacra.com