Fitch Upgrades Outlook for Morocco’s Fertilizer Giant OCP

Rabat – American rating agency Fitch yesterday released a report upgrading its rating for OCP’s long-term issuer default rating from bb to bb+, reflecting the company’s ability to meet its long-term financial obligations.

Yesterday’s Fitch report explains that OCP’s positive outlook is primarily due to the company’s position as a top-three global phosphate fertilizer producer able to offer customers competitive prices.

A second factor underpinning the upgrade of OCP’s outlook is the recent improvement in Morocco’s outlook, as the majority shareholder of OCP at 94%, the report argues.

OCP’s projected record profits are also a major factor underpinning the enhanced outlook. The group’s revenues (EBITDA) are set to reach a record MAD 50 billion ($4.6 billion) on the backdrop of China’s restricting fertilizers export.

While fertilizer prices are expected to stabilize in the upcoming two years, the group plans to increase production more than offsets the drop in prices. Fitch expects OCP’s revenues to reach MAD 40 billion ($3.6 billion) in 2023, and roughly MAD 24 billion ($2.2 billion) in 2024.

Fitch forecasts that OCP is set to strengthen its market position as a leading producer and exporter of phosphate fertilizers. The group’s strategy to focus on providing tailor-made fertilizer while boosting its market footprint would allow the company to maintain long-term stable profit margins.

Noting the company’s strategy in dealing with current supply bottlenecks, Fitch maintains that while rising ammonia and sulfur prices increased the production cost in 2021 and the first half of 2022, high fertilizers prices and low production cost would have cushioned the effect of rising production costs.

OCP historically relied on Russia to secure half of its ammonia requirement. After the start of the Ukraine war, the company turned to the Middle East, Trinidad, and Tobago, and the US, Fitch explains, adding that the recent joint venture agreement with Koch Ag & Energy Solutions would support the company to secure future needs of raw materials.