S&P: OCP Group Expected to Remain Resilient in Face of Market Downturn

Rabat – Morocco’s giant fertilizer manufacturer OCP is set to remain resilient in the face of a market downturn, as fertilizer prices drop in 2023, S&P Global Ratings, an American rating agency, said in a report.

The report indicates that the OCP Group has a strong safety margin to cope with the challenging conditions in the international fertilizer market, according to an S&P report cited by Le360.

The rating agency argues that the OCP Group “should remain resilient in the face of difficult market conditions, maintaining indicators in line with the standalone rating of ‘BBB-‘ and the overall rating of ‘BB+’.”

The report points out that the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) of MAD 7.7 billion ($750 million) OCP Group reported in the first half of 2023 reflects the decline in phosphate fertilizer prices.

Said decline comes “in a context of cyclical decline compared to the record levels seen in 2022, as well as the weakness in demand and volumes this year,” S&P added.

“The decrease in operating expenses, including key raw materials such as sulfur and ammonia, has only partially offset the pressure on prices and volumes,” the agency added.

Despite an unfavorable international market, S&P Ratings is optimistic about the performance of the OCP Group, expecting a gradual recovery in the current year’s second half.

According to their analysis, the company will record an adjusted EBITDA ranging from MAD 26 billion ($2.5 billion) to MAD 28 billion ($2.7 billion) in 2023 and MAD 40 billion ($3.9 billion) in 2024.

The forecasts are lower than those the rating agency announced in July 2023. The down revising of the profits is taking into account “recovery in phosphate fertilizers during the second half, in a context of rising phosphate prices.”

The rating agency further explains that the expected drop in profitability is due to “overall favorable fertilizer availability, with stable crop prices and a historically low stock-to-use ratio supporting the agricultural economy.”

S&P Global Ratings expects the OCP Group to adjust its investment plans based on sector conditions and reduced profits this year.

The agency expects OCP’s investment expenses to range between MAD 18 billion ($1.7 billion) to MAD 20 billion ($1.9 billion) in 2023, compared to MAD 25 billion ($2.4 billion) to MAD 26 ($2.5 billion).