Bloomberg News

Fatima Fertilizer Plans $1 Billion Africa Plant to Grow Overseas

March 13, 2012

Fatima Fertilizer Co. (FATIMA), Pakistan’s third-biggest maker of the farming ingredient, plans to build a new factory in Africa at an investment of about $1 billion to tap international markets.

The company expects to finalize plans this year to set up the factory, Fawad Ahmed Mukhtar, chief executive officer, said in a telephone interview from his Lahore head office. The fertilizer maker may consider forging a partnership by investing $200 million, he said, without elaboration.

Fatima registered its American Depositary Receipts in New York in March 2011 to raise its profile and expand overseas, aiming to overcome a chronic gas shortage at home. Pakistani fertilizer makers including Engro Fertilizer Ltd. and Fauji Fertilizer Co. get as much as 50 percent less gas than they need to run their factories, curbing production, according to Foundation Securities Pvt. in Karachi.

Fatima’s planned Africa factory may have a capacity to produce more than 1 million tons of fertilizer because the company expects to get “the best gas rates,” Mukhtar said.

“Besides local sales, we are also looking to export from there to Pakistan, Brazil and the markets in Africa,” Mukhtar said yesterday. To set up the plant Fatima is considering countries including Nigeria, Algeria, Tanzania and Mozambique, where there is “enough gas, which means that they will offer us good rates and good terms,” he said.

Fatima rose 1.6 percent to 24.90 rupees at the close in Karachi yesterday. The stock has almost doubled in the past 12 months, compared with a 10 percent gain for the Karachi Stock Exchange 100 Index.

Diversifying Risks

Companies in Pakistan including Lucky Cement Ltd., the nation’s biggest producer of the building material, are expanding overseas to cut dependence on their home market. Lucky will begin construction of a cement factory in Congo by June through a joint venture.

Expanding overseas will help companies including Fatima to diversify risks, according to Taha Khan Javed, manager research at Foundation Securities.

“Pakistan is facing a severe shortage of gas, so that takes away the feasibility to establish a plant here,” said Javed. “From Africa they can export anywhere in the world.”

The company will rely on a mix of its own cash, bank loans and investment from partners to fund the new plant, Mukhtar said. Fatima posted a net income of 4.12 billion rupees ($45 million) in the year ended Dec. 31, the first annual profit in four years after it started commercial operations in July.

The Danish Industrialisation Fund for Developing Countries and Haldor Topsoe AS, a Denmark-based maker of catalysts, have agreed to partner Fatima and will also help arrange funds, Mukhtar said, without specifying if they will collaborate on the African factory.

ADR Trading

“We are looking at projects internationally for setting up new plants and starting production in two to three years,” said Mukhtar. Depending on the “opportunity at hand,” Fatima may set up more than one plant overseas, he said.

Fatima Fertilizer’s ADR, each representing 50 local shares, may begin trading in the over-the-counter market in New York by June, Mukhtar said. Bank of America Corp. is the market maker, Bank of New York Mellon Corp. is the depositary, and Standard Chartered Plc is the custodian bank, he said.

The listing will build the company’s profile among overseas investors and help it raise funds for expansion, Mukhtar said.

To contact the reporter on this story: Khurrum Anis in Karachi, Pakistan at kkhan14@bloomberg.net.

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net


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