Moody's starts QAFCO coverage with strong rating

12 March 2007 16:21  [Source: ICIS news]

LONDON (ICIS news)--Moody’s investor service on Monday assigned Qatar Fertilizer Company (QAFCO) its first rating, highlighting the firm as a low credit risk with a stable outlook.

 

Moody’s said an Aa3 rating was issued, reflecting QAFCO’s strong operational capabilities, access to cost advantaged feedstock and solid financial profile.

 

QAFCO was thought to be strategically well located to serve the fast growing East Asian and Indian markets, where it particularly benefits from a marketing agreement with 25% owner, Yara.

 

The company also has access to significantly cost-advantaged natural feedstock prices under a long-term purchasing agreement with majority (75%) stakeholder Qatar Petroleum.

 

However, Moody’s pointed out a lack of diversity in the company’s business profile compared to larger fertilizer and chemical groups.

 

“With all its manufacturing facilities located within the Mesaieed Industrial City, the group generates 100% of its revenues from two commodity nitrogen-based fertilizer products, urea and ammonia,” said the Moody’s note.

 

“The respective prices are highly correlated, volatile and affected by natural gas cost swings leading leads to some inherent volatility in QAFCO's earnings and cash flow generation,” it added.

 

Headquartered in Doha, Qatar, QAFCO is a leading producer of urea with revenues of over $800m in fiscal 2006.

By: Mark Watts
+44 20 8652 3214

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