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Dec 20, 2023

Debt IR: ‘As we’re not listed, we can be objective in our vision of the market,’ says manager of largest phosphate reserve

OCP talks debt IR, geopolitics and US tariffs

Morocco controls around 70 percent of the world’s phosphate, a vital ingredient in the miracle fertilizers that have made modern agriculture possible. Those reserves are managed by state-owned OCP Group, where Ghita Laraki is busy building relationships with ratings agencies and bondholders at the 100-year-old company.

Phosphate is the natural source of phosphorous, an element that provides a quarter of all the nutrients that plants need for their growth and development. Phosphorous – first ‘discovered’ by westerners as a fertilizer in the guano accumulated on the Chincha Islands of Peru – is an essential ingredient in mass agriculture, along with nitrogen and potassium. And OCP is responsible for mining, processing, manufacturing, exporting and maximizing the value of Morocco’s reserves.

To do this, it operates Earth’s longest conveyor belt, a more than 60-mile stretch that runs from the town of Bou Craa across the contested Western Sahara to the port city of El Marsa. From OCP’s Khouribga mine, which opened in 1921, phosphate is transported along a 116-mile slurry pipeline to the processing plant at Jorf Lasfar, then by rail to Casablanca where unprocessed rock is exported around the world. In Ben Guerir, OCP’s active, open-pit mine also serves as a testing site and ‘living lab’ to the scientific community.

Responsible use

Phosphate is a finite resource and OCP says ‘the core challenge facing the industry is how to meet growing demand for phosphate in a sustainable way.’ The United Nations even has an international code of conduct on fertilizer use – in part to make sure this vital ingredient isn’t wasted but also to mitigate the side-effects of run-off – and the industry is investing in what OCP describes as the four Rs: right fertilizer, right rate, right time, right place.

Gita Laraki, head of IR at OCP group
Gita Laraki, head of IR at OCP group

Laraki, OCP’s head of IR, rating agency and business planning, says sustainability more broadly is not a key concern for OCP bondholders because it has been well incorporated into conversations. ‘It was something that came up regularly in the investor landscape for us four or five years ago,’ she explains. ‘Today, it’s part of our business-as-usual discussions with investors.’

In fact, the company published its first sustainability report in 2012, says Laraki, and offers a host of climate targets on its sustainability page, from meeting more than 30 percent of its water needs through non-conventional water by 2018 to the fact it had achieved 86 percent clean energy use by 2019. The company says it is committed to being carbon-neutral by 2040. 

The drivers of volatility

So what are the key topics on OCP investors’ minds? ‘If I had to pick three subjects that investors want to talk about, I would say: our insights and vision, price volatility and geopolitical influences,’ says Laraki.

Phosphate is a vital asset for global agriculture and OCP is the world’s largest fertilizer producer. This means how the company deals with shocks have a wide reverberation.

‘Geopolitical issues, like the war in Ukraine, or other issues in the global supply chain, can have a potential influence on our performance and shape our company’s narrative,’ Laraki continues. ‘For example, when the war in Ukraine started, there were questions asked about our ammonia procurement because we used to buy ammonia from Ukraine and we had to shift our procurement strategy to other markets.

‘Recognizing the interconnectedness of global events with our industry, we approached the discussions with transparency and a forward-looking perspective. Our investors and analysts were asking questions continuously on how we mitigated the risks from the Ukraine war and how we were able to procure the right amounts of ammonia [to avoid] impacting our production.’

For Laraki, the goal is to remain close to OCP investors. If anything, she says the volatility of the pandemic, war in Ukraine and supply-chain challenges have served to make the firm even more transparent. ‘Our strategy revolves around acknowledging the external factors at play,’ she says. ‘We are always trying to articulate a proactive response to the challenges we might face and trying to reinforce our long-term strengths.’

OCP’s position also means it can serve as a bellwether for knock-on issues and Laraki is aware the company’s views are closely monitored.

‘Investors and analysts are keen to understand our strategies for navigating these fluctuations and mitigating associated risks,’ she explains. ‘They like also to hear our view of the market outlook. As we’re not a listed company, we’re able to be more objective: we’re not trying to sell a positive view or impact our stock. We’re really very open and very objective – and this is something investors appreciate a lot.’

Then there is the sector-specific issue of tariffs. In 2020, the US Department of Commerce (DoC) imposed a 19.97 percent tariff on certain OCP fertilizer imports. In November, that was dropped to 2.12 percent, though in a statement OCP maintained its view that ‘there is no justification for any tariffs on our US fertilizer imports’ while also acknowledging ‘those voices representing US farmers who spoke out loudly in opposition to these duties.’

From an IR perspective, Laraki notes that that tariffs ‘were initiated at the behest of a large competitor, based in the US. In the discussion surrounding this, investors want to know how we’re going to act in the US market in the future, how we’re going to adapt to the evolving trade landscape.’ The DoC will next review tariffs in Q4 2024.

From cash manager to debt IR

Laraki joined OCP as cash manager back in 2010 before moving into treasury and risk management. ‘In 2013, we started thinking about raising debt internationally,’ she explains. ‘For that, we had to start with a very important prerequisite – inaugural ratings for the group, which I initiated with Fitch and Standard & Poor’s (S&P).

‘From there, we were able to go to the international market and issue our inaugural bond in 2014, followed by another in 2015. That’s when the IR department was born.’

Today, the company has a BB+ rating and more than 65 percent of OCP bondholders are based in the US. Laraki says she maintains ‘frequent and comprehensive’ engagement with Fitch, S&P and Moody’s, offering regular updates as well as ‘more structured and formal reviews, often referred to as surveillance meetings. These meetings serve as dedicated sessions aimed at providing in-depth insights into our operations, financial health and overall corporate strategy.’

She adds that the current rate environment isn’t an issue for OCP, which she notes ‘generates significant cash flow and has a proven history of accessing diverse funding sources, including development finance institutions as well as local and international banks.’

Still, there remains interest in future debt. ‘During this year’s investor dinner in New York and the subsequent non-deal roadshows in the US and the UK, there was notable investor interest in potential future global bond offerings,’ says Laraki, who looks set to be as busy as ever

Garnet Roach

An award-winning journalist, Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of...