PEFINDO has assigned its idAAA rating to PT Pupuk Indonesia with a stable outlook

(January 25, 2024)--PEFINDO also has assigned its idAAA ratings to PT Pupuk Indonesia (Persero) (PIHC) Shelf-Registered Bond I and Shelf-Registered Bond II, including Shelf-Registered Bond II Phase II Year 2021 Seri A of IDR350.0 billion that will be due on March 10, 2024. PIHC should be able to repay the maturing bond using its internal funds, with reported cash balance of IDR19.2 trillion at the end of September 2023. The corporate rating is mainly driven by PIHC’s very strong support from the government given its important role in providing and distributing subsidized fertilizer in Indonesia. The Company’s standalone credit profile is supported by its very strong position in the fertilizer industry and its integrated operation, but constrained by its moderate capital structure, project execution risk, and exposure to volatility of commodity prices.

The rating could be lowered if we view a material decline in government support, such as an unfavorable change in the subsidy scheme or any changes on regulation framework that unfavorably affect the Company. The rating could also be lowered if there is any unfavorable change in global fertilizer and ammonia prices, which would adversely affect the Company’s revenue and cash flow, or if the Company aggressively finances its expansion with substantially larger debt than projected, without a corresponding improvement in business performance.

PIHC is the largest fertilizer company in the country. It has five subsidiaries producing fertilizers with facilities in East Kalimantan (PT Pupuk Kalimantan Timur in Bontang), Sumatra (PT Pupuk Iskandar Muda in Aceh and PT Pupuk Sriwijaya in Palembang), and Java (PT Pupuk Kujang in Cikampek and PT Petrokimia Gresik in Gresik), and other five subsidiaries engaged in EPC, trading, logistics, energy, and food. As of September 30, 2023, PIHC was wholly owned by the government of Indonesia. (ends)