Press Release

JCR-VIS Reaffirms Ratings of Saudi Pak Industrial and Agricultural Investment Company Limited at AA+/A-1+
 

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Karachi, June 29, 2011: JCR-VIS Credit Rating Company Limited (JCR-VIS) has reaffirmed the medium to long-term entity rating of Saudi Pak Industrial and Agricultural Investment Company Limited (SAPICO) at ‘AA+’ (Double A Plus) with a ‘Stable’ Outlook. Short-term rating has also been reaffirmed at ‘A-1+’ (A One Plus).

The ratings of Saudi Pak Industrial and Agricultural Investment Company Limited (SAPICO) incorporate joint venture holding of two sovereigns i.e., Government of Pakistan and Kingdom of Saudi Arabia. Ratings draw comfort from the strong financial risk profile of the Kingdom of Saudi Arabia, evident from the sovereign ratings of ‘AA-/Stable/A-1+’ assigned to it by a global credit rating agency.

Given the difficult operating environment for the secondary market borrowers, the company restricted expansion during FY10 and the trend continued in 1Q11. The company shifted some of its liquid investments partly towards advances portfolio and partially to repay its borrowings and COIs. Following a strategy to reduce investment in both listed and unlisted equities, the company decreased exposure in quoted equities, reducing it further during the ongoing year. Recently, the company has also concluded an agreement for sale and purchase of shares with a strategic investor for its shareholding in Saudi Pak Insurance Company Limited with the transfer of management control.

The spreads, which were already under pressure, declined further during FY10. The company booked a significant exchange loss of Rs. 444m (FY09: 61.5m). This along with provision for diminution in the value of investments, which includes provisioning against a leasing subsidiary, resulted in a loss of Rs. 503.9m against a net profit of 418.9m in FY09. During FY11, the company is expected to book further exchange losses beyond which time the agreements will mature, eliminating related losses.

Liquidity reserves declined in relation to borrowings though still adequate. Nevertheless, access to diversified funding source is desirable for growth. Meanwhile, the management needs to focus on improving MIS.

For further information on this rating announcement, please contact Ms. Sabeen Saleem (Ext: 510) at 0213-5311861-72 (12 lines) or fax to 0213-5311873 or Mr. Maimoon Rasheed at 0423-6610681-84 (4 lines).



Javed Callea
Advisor

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Information herein was obtained from sources believed to be accurate and reliable; however, JCR-VIS Credit Rating Company Limited (JCR-VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. JCR-VIS, the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report. JCR-VIS is not an NRSRO and its credit ratings are not NRSRO credit ratings. JCR-VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2011 JCR-VIS Credit Rating Company Limited. All rights reserved. Contents may be used by news media with credit to JCR-VIS.

JCR-VIS Credit Rating Company Limited