Fitch ratings elevates OCP’s credit rating to BBB-

Fitch ratings elevates OCP’s credit rating to BBB-

Renowned credit rating agency Fitch Ratings has upgraded Morocco’s Cherifan Phosphates Office’s (OCP) credit grade from   from BB+ to BBB-. 

This adjustment in the rating signifies a vote of confidence in OCP’s financial strength and operational excellence.

The upgrade is attributed to OCP’s impressive performance and its unwavering commitment to excellence. Fitch believes that OCP’s ongoing expansion efforts and the flexibility of its assets position the company for structurally higher earnings in the future..

Among the key points that emerged from this credit rating upgrade is that OCP is actively expanding its production capacity, with plans to add an additional 3 million tons in the short term, of which 1 million tons were recently put into operation in May 2023. 

This expansion solidifies OCP’s position as a global leader in the fertilizer market. What’s more, this expansion enhances OCP’s ability to produce various types of phosphate-based fertilizers, including the highly sought-after triple superphosphate (TSP), which doesn’t require ammonia.

OCP’s significant capacity and operational flexibility, combined with its cost advantage on the global cost curves, bode well for achieving higher EBITDA (earnings before interest, taxes, depreciation, and amortization) in the future.

OCP’s strength also lies in its access to the world’s largest phosphate deposits, accounting for approximately 70% of global reserves. 

This strategic advantage supports OCP’s expansion plans, especially in a global context where other regions are grappling with the depletion of long-term resources.

OCP’s fully integrated production facilities, cost-effective operations, and the potential for renewable energy utilization from group and kingdom investments all contribute to the company’s competitive edge.

OCP also maintains a strong financial position, aligned with a ‘BBB-‘ (Investment Grade) Standalone Credit Profile. A notable indicator is the high operating cash flow margin, typically at 20-21%, which reinforces OCP’s capacity to reduce debt.

The flexibility in adjusting capital expenditures during revenue declines enhances OCP’s financial stability. It’s also worth noting that, historically, during periods of lower fertilizer prices, like in 2019-2020, OCP managed to maintain a robust profit margin of around 30%, showcasing its competitiveness in the sector.

In terms of spending, OCP employs a strategy that allows it to adapt to market conditions, financial leverage, and liquidity levels. Fitch predicts that capital expenditures for growth will largely match the cash flows generated by operations, even if the overall free cash flow remains negative due to recurring dividend payments.


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