873216c6-8639-48f4-9253-496de41015cf-141215085530-conversion-gate02.pdf

FERTILIZER INDUSTRY ANALYSIS

Submitted to:

Mr. Hafiz Waqar

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Table of Contents INTRODUCTION TO PAKISTAN FERTILIZER INDUSTRY ................................................................................. 4

THE COMPANIES ORDINANCE, 1984 ....................................................................................................................... 5

PRODUCTS: ...................................................................................................................................................................... 10

Urea: ............................................................................................................................................................................... 10

Di-Ammonium Phosphate (DAP): ...................................................................................................................... 10

Calcium Ammonium Nitrate (CAN):.................................................................................................................. 10

Ammonium Sulphate (AS): ................................................................................................................................... 10

Single Super Phosphate: ........................................................................................................................................ 10

Nitro phosphate (NP):............................................................................................................................................. 10

Sulphate of Potash: ................................................................................................................................................... 10

BRANDS: ............................................................................................................................................................................ 11

GEOGRAPHICAL LOCATION:..................................................................................................................................... 11

WAREHOUSES: ............................................................................................................................................................... 11

TOTAL EMPLOYMENT: ............................................................................................................................................... 12

FAUJI FERTILIZERS: ..................................................................................................................................................... 12

VISION: .......................................................................................................................................................................... 12

MISSION:....................................................................................................................................................................... 13

CHAIRMANS REVIEW: ........................................................................................................................................... 13

FATIMA FERTILIZERS ................................................................................................................................................. 15

Profile of Company: ................................................................................................................................................. 15

Vision: ............................................................................................................................................................................ 15

Mission: ......................................................................................................................................................................... 15

CORE VALUES: ........................................................................................................................................................... 15

CHAIRMAN REVIEW: .............................................................................................................................................. 16

DAWOOD HURCLES ...................................................................................................................................................... 17

Vision: ............................................................................................................................................................................ 17

Mission: ......................................................................................................................................................................... 17

Business Ethics & Core Values: ........................................................................................................................... 17

Vision Statement: ...................................................................................................................................................... 18

Brief History: .............................................................................................................................................................. 18

Core Values: ................................................................................................................................................................ 18

CEOs Message: .......................................................................................................................................................... 18

Economic Impact of the industry: ........................................................................................................................... 21

HUMAN RESOURCE ISSUE IN INDUSTRY:........................................................................................................... 22

HURDLES IN MARKETING: ........................................................................................................................................ 22

IMPACT OF POLITICAL PARTIES: ........................................................................................................................... 22

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TRADE ISSUES ................................................................................................................................................................ 22

HUMAN RESOURCE REQUIREMENTS ................................................................................................................... 23

SWOT ANALYSIS: ........................................................................................................................................................... 23

STRENGTHS: ............................................................................................................................................................... 23

WEAKNESSES: ............................................................................................................................................................ 24

OPPORTUNITIES: ...................................................................................................................................................... 24

THREATS: ..................................................................................................................................................................... 24

Recommendation: ......................................................................................................................................................... 24

Limitations: ...................................................................................................................................................................... 26

ADDRESSES & EMAILS OF THE COMPANIES: ................................................................................................... 27

DAWOOD HERCULES .............................................................................................................................................. 27

FATIMA GROUP: ........................................................................................................................................................ 27

ENGRO: .......................................................................................................................................................................... 28

Fatima Fertilizer Company Ltd: .......................................................................................................................... 28

Financial Analysis .......................................................................................................................................................... 29

ENGRO FERTLIZER .................................................................................................................................................. 29

Interpretation: ........................................................................................................................................................... 30

Fatima Fertilizer ........................................................................................................................................................ 32

Interpretation ............................................................................................................................................................. 32

Fauji Fertilizer ............................................................................................................................................................ 34

Interpretation ............................................................................................................................................................. 34

Hercules ........................................................................................................................................................................ 36

Interpretation ............................................................................................................................................................. 36

Conclusion: ....................................................................................................................................................................... 38

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GROUP MEMBERS FERTILIZERS INDUSTRY

1. Muhammad Jawad-ul-Hassan

2. Arooj Rehmat

3. Shumaila Rafique

4. Sadaf Manzoor

5. M. Khalil Bakhsh

6. M. Waqas Sheikh

7. Sikandar Salamat

8. Kamran Khurshid

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PAKISTAN FERTILIZER INDUSTRY

INTRODUCTION TO PAKISTAN FERTILIZER INDUSTRY The fertilizer products are variations of three primary soil nutrients, namely nitrogen

(N), phosphorous (P) and potassium (K). It is the suitability of a nutrient for crop that

determines the usage of a particular fertilizer product. Pakistans soil is deficient in

nitrogen and phosphate; thereby an optimal combination of these nutrients is necessary

to achieve higher yield levels. However, the availability and price of a product at a given

point in time impacts the demand pattern. For instance, lower prices of Urea and DAP

on nutrient basis, being partial substitutes of CAN and NP respectively, are likely to

affect the demand of these products. Moreover, lack of awareness among farmers also

plays a role in determining the use of fertilizers. Not realizing the benefits of an optimal

NP ratio, farmers tend to favor products available in the market at cheaper rates. On the

other hand, considerable growth potential remains for the product which could be

tapped by continuous education of the farmer community. Considering the importance

of agriculture in Pakistan, government support to the fertilizer sector remains critical in

ensuring smooth availability of products at affordable prices. In this regard, import of

duty free rock phosphate and subsidy on natural gas are major support measures on the

part of the government. Natural gas is an essential input in fertilizer contributing

around80% to the total production cost as fuel and feedstock. As the energy crisis

deepened in early 2010 it posed some business risk to the fertilizer sector in the shape

of curtailment in feedstock gas supply. However, companies kept their margins intact by

passing on the impact to consumers through increasing the per bag price of fertilizer

products. The prevailing economic conditions along with mounting budget deficits have

put pressure on the government to reduce/discontinue subsidy to different sectors.

Likewise, readjustments in the fertilizer sector are also on the anvil. On account of

relatively inelastic demand of fertilizers, producers have pricing power through which

they pass on the rising cost of input to the consumers. Recently, the Competition

Commission of Pakistan (CCP) has directed the industry to give explanation before any

further increase in fertilizer prices. There are also proposals to provide direct subsidy to

the farmer as a relief measure rather than routing it through fertilizer companies but in

view of operational difficulties any material progress in this regard seems to be remote.

While the subsidy scheme on phosphate and potassic fertilizers was waived off from

January 2009 onwards, a new scheme on potassic fertilizer at the rate of Rs.500/bag has

been initiated since January 2010.The prevalent demand and supply gap in the market

has triggered setting up of new plants in the country. Notable additions in recent times

include FATIMA with a total capacity of producing CAN, NP, NPK and Urea at 1580

thousand tones, Suraj Fertilizer Industries having a capacity of producing SSP 18

percent at 150 thousand tones and Agritech Limited (formerly Pak American Fertilizer)

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adding 137 thousand tons of Urea. Moreover, Engro has installed a new urea plant with

a significant annual capacity of 1.3 million tones. While the installed capacities have

reduced the import requirements of fertilizer products, the additional capacity of Engro

is likely to create a surplus situation in local market of urea for some time, if the gas

curtailment is taken care of. The future prospects of the fertilizer industry are directly

aligned with growth in the agriculture sector. Availability of water & gas and favorable

government policies will play a pivotal role in determining the viability of the industry.

With the resumption of fertilizer exports from China after relaxation in export tax,

international price trend in fertilizer products is likely to keep a steady profile amid

reduction in the demand and supply gap. However, the local urea prices are still at a

considerable discount to the international prices.

THE COMPANIES ORDINANCE, 1984 (COMPANY LIMITED BY SHARES)

Memorandum of Association of FERTILZERS (PRIVATE) LIMITED.

I. The name of the Company is ABC Fertilizers (Private) Limited.

II. The Registered Office of the Company will be situated in Islamabad Capital

Territory in the Province of Sindh/ N.W.F.P/Punjab/Balochistan.

III. The objects for which the Company is established are all or any of the following:

1. To carry on the business of manufacturers and distributors of manures and

fertilizers, phosphates (give full details of the varieties of the manures and fertilizers

proposed to be manufactured), dips, fats, sprays, vermifuges, fungicides, insecticides,

herbicides, vedicides, liquid fertilizers, pest-medicines, fine chemicals, and all kinds of

agricultural, fruit-growing and other chemical, whether produced from vegetable or

animal matter or by any chemical process and all other by-products (give full details)

which can be needed, devised, invented, utilized and produced with any other material,

substances or goods for agricultural purposes.

2. To carry on the business as a importer, exporter, wholesaler, representatives,

agents or dealers in any legal form for all kinds of pesticides, insecticides, fungicides,

vedicides, germicidal, herbicides, fertilizers, seeds, sprays, perfumed sprays, dyes,

chemicals, chemical compounds and fertilizers of all kinds and other allied products or

by products and the goods, materials, and equipments.

3. And for the purposes of achieving the above objects, the company is authorized:-

(1) To transact such other business as may be proper, necessary and

desirable for or in connection with the objects of the Company or any of

them.

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(2) To set up, erect, construct, purchase, take on lease, run, operate and

administer plants and factories and to carry on all such functions and

business as are necessary and incidental to meet the objectives of the

Company.

(3) To manufacture, import, export, store, process, purchase and sell raw

materials, equipments, machineries, other equipments, spare parts or

other articles of use required for or incidental to the manufacture,

preparation, adaptation, treatment, use or working of the foregoing or the

packing, storing or otherwise for the purpose of carrying on the business

of the Company.

(4) To acquire and undertake the whole or any part of the business, property

and liabilities of any person or company carrying on any business which

the Company is authorized to carry on, or possessed of property suitable

for the purposes of the Company.

(5) To establish laboratories and research and development centers to

perform such research and development as the Company may deem

advisable or feasible.

(6) To train personnel and workers, both in Pakistan and abroad, to obtain

technical proficiency in various specialties connected with the objects of

the company or any of them.

(7) To apply for, purchase or otherwise acquire any patents, brevets

invention, licenses, concessions, and the like, conferring any exclusive or

non-exclusive or limited right to use, or any secret or other information as

to any invention which may seem capable of being used for any of the

purposes of the Company or the acquisition of which may seem calculated

directly or indirectly to benefit the Company, and to use, exercise,

develop, or grant licenses in respect of, or otherwise turn to account the

property, rights or information so acquired.

(8) To enter into partnership or into any arrangement for sharing profits,

union of interest, co-operation, joint venture or reciprocal concession,

with any person or company, local or foreign, carrying on or engaged in

any business or transaction which this Company is authorized to carry on

or be engaged in, or otherwise assist any such person or company, and to

take or otherwise acquire shares and securities of any such company, and

to sell, hold, re-issue with or without guarantee, or otherwise deal with

the same, except doing business as an investment company.

(9) To take, or otherwise acquire, and hold shares in any other company,

having objects altogether or in part similar to those of this Company, or

carrying on any business capable of being conducted so as directly or

indirectly to benefit this Company, but not to act as an investment

company.

(10) To enter into arrangement with any Government or authorities, supreme,

national, municipal, local, railway, or otherwise, public or quasi-public

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bodies, or with any other persons, in any place where the Company may

have interest that may seem conducive to the objects of the Company or

any of them and to obtain from any such Government, authorities or

persons any rights, privileges and concessions which the Company may

think fit to obtain, and to carry out, exercise and comply with any such

arrangements, rights, privileges and concessions.

(11) To establish and support or aid in the establishment and support of

associations, institutions, funds, and conveniences calculated to benefit

employees of the Company or the dependants or connections of such

persons, and to grant pensions and allowances, and to make payments

towards their insurance.

(12) To amalgamate with any other company whose objects are and/or

include objects similar to those of this Company, whether by sale or

purchase (for fully or partly paid-up shares or otherwise) of the

undertakings, subject to the liabilities of this or any such other company

as aforesaid, with or without winding up or by sale or purchase (for fully

or partly paid-up shares or otherwise) of all or a controlling interest in

the shares or stock of this or any such other company as aforesaid, or by

partnership, or any arrangement of the nature of partnership, or in any

other manner.

(13) To sell or dispose of the undertaking of the Company or any part thereof

for such consideration as the Company may think fit and, in particular, for

shares, debentures or securities of any other company having objects

altogether or in part similar to those of this Company.

(14) To purchase, take on lease or in exchange, hire or otherwise acquire, any

movable or immovable property, and any rights or privileges which the

Company may think necessary or convenient for the purpose of its

business and, in particular, any land, buildings, easement, machinery,

plant and stock-in-trade.

(15) To construct, maintain and alter any buildings or works, necessary or

convenient for the purposes of the Company.

(16) To construct, improve, maintain, develop, work, manage, carry out, or

control any manufactories, warehouses, shops, stores, and other works

and conveniences which may seem calculated directly or indirectly to

advance the Companys interests.

(17) To sell, improve, manage, develop, exchange, lease, mortgage, enfranchise,

dispose of, turn to account, or otherwise deal with, all or any parts of the

property and rights of the Company.

(18) To invest and deal with the money of the Company, not immediately

required, in such manner as may from time to time be determined, but not

to act as an investment, finance, or banking company.

(19) To advance money to such persons or companies and on such terms as

may seem expedient and, in particular, to customers and others having

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dealings with the Company, but not to act as an investment, finance, or

banking Company.

(20) To borrow or raise funds by means of loans or secure the payment of

money from shareholders, directors, commercial banks and government

approved agencies in such manner as the Company shall think fit for its

manufacturing, trading and allied business and, in particular, by the issue

of debentures or debenture-stock, perpetual or otherwise, charged upon

all or any of the Companys property and other assets, both present and

future, including its uncalled capital, and to purchase, redeem, or pay any

such securities, but not to act as an investment, finance, or banking

company.

(21) To guarantee the performance of contracts, agreements, obligations or

discharge of any debt of the company or on behalf of any company or

person in relation to the payment of any financial facility including but

not limited to loan, advance, letter of credit or other obligations through

creation of all types of mortgages, charges, pledges, hypothecation, on

execution of the usual banking documents/instruments or otherwise

encumbrance on any or all of the movable and immovable properties of

the company, either present or future or both and issuance of any other

securities or sureties by any other means in favor of banks, Non-Banking

Finance Companies or any financial institutions and to borrow money for

purposes of the company on such terms and conditions as may be

considered proper.

(22) To open, close and operate banking accounts of the Company with any

banker.

(23) To draw, make, accept, endorse, discount, execute and issue promissory

notes, bills of exchange, bills of lading, warrants, debentures and other

negotiable or transferable instruments, but not to act as an investment or

banking company.

(24) To adopt such means of making known the products of the Company as

may seem expedient, including, in particular, by advertisement in the

press, circulars, purchase and exhibition of works of art or interests,

publication of books and periodicals, and grant of prizes, rewards and

donations.

(25) To subscribe or contribute or otherwise to assist or to guarantee money

to charitable, benevolent, religious, scientific, technical, national, public,

or any other institutions, for its objects or purposes or for any exhibition.

(26) To apply for and obtain any provisional order or Act of legislature or any

consents, permissions and licenses from the Government, central or

provincial, and any agencies of the Government for enabling the Company

to carry on any of its objects into effect, or for effecting any modification

of the Companys constitution, or for any other purpose which may seem

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expedient, and to oppose any proceeding or application which may seem

calculated, directly or indirectly, to prejudice the Companys interests.

(27) To sell any patent rights or privileges belonging to the Company or which

may be acquired by it, or any interest in the same, and to grant licences

for the use and practice of the same or any of them and to let or allow to

be used or otherwise deal with any inventions, patents or privileges in

which the Company may be interested, and to do all such acts and things

as may be deemed expedient for turning to account any inventions,

patents and privileges in which the Company may be interested.

(28) To expend money on experimenting upon and testing and improving or

securing any process or processes patent, or protecting any invention or

inventions which the Company may acquire or propose to acquire or deal

with.

(29) To distribute among the members of the Company, in kind or otherwise,

any property of the Company and, in particular, any shares, debentures or

securities of other companies belonging to this Company, or of which this

Company may have the power of disposing.

(30) To create any reserve fund, sinking fund, insurance fund or any other

special fund, whether for depreciation or for repairing, insuring,

improving, extending or maintaining any of the property of the Company

or for any other purpose conducive to the interests of the Company.

4. Notwithstanding anything stated in any object clause the company shall obtain

such other approval or license from competent authority as may be required under any

law for the time being in force to undertake a particular business.

5. It is hereby undertaken that the Company shall not engage in banking business

or any business of investment company or non-banking finance company or insurance

or leasing or business of managing agency or in any unlawful business and that nothing

contained in the object clauses shall be so construed to entitle it to engage in such

business directly or indirectly and the Company shall not launch multi-level marketing

(MLM), Pyramid and Ponzi schemes.

IV. The liability of the members is limited.

V. The Authorized Share Capital of the Company is Rs. 1,000,000/- divided into

100,000 ordinary shares of Rs. 10 each with the rights, privileges and conditions

attached thereto, with power to increase and reduce the capital of the Company and to

divide the shares in the capital for the time being into several classes and attach thereto

respectively, subject to the provisions of the Ordinance, such preferential, deferred,

qualified, or special rights, privileges or conditions and to vary, modify or abrogate any

such rights, privileges, or conditions in such manner as may for the time being be

provided by the regulations of the Company.

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PRODUCTS: 1. Urea

2. Di-Ammonium Phosphate (DAP)

3. Calcium Ammonium Nitrate (CAN)

4. Ammonium Sulphate (AS)

5. Single Super Phosphate (SSP)

6. Nitro phosphate (NP)

7. Sulphate of Potash

8. Zinc Sulphate

Urea: More than 90% of the worlds production is destined for use as a nitrogen-release

fertilizer. Urea has the highest nitrogen content of all solid nitrogenous fertilizers in

common use (46.7%).

Di-Ammonium Phosphate (DAP): It contains 46% P2O5 and 18% N. It is water soluble. It is a good source of P fertilizer

for all crops. Good source for problem soils. Overall, it suits to about 90% soil of the

country

Calcium Ammonium Nitrate (CAN): Calcium ammonium nitrate (CAN) contain 27 % N and 20 % of ground limestone. This

has a rapid as well as permanent effect. The granulation of this fertilizer ensures a quick

and exact dosing.

Ammonium Sulphate (AS): (NH4)2SO4, is an inorganic salt. It is used largely as an artificial fertilizer for alkaline

soils. It lowers the pH balance of the soil, while contributing essential nitrogen for plant

growth.

Single Super Phosphate: Superphosphate is a fertilizer produced by the action of concentrated sulfuric acid on

powdered phosphate rock.

Nitro phosphate (NP): It provides 22% nitrogen, and 20% phosphorus. Nitrogen is a primary nutrient that

really makes plants "grow. Phosphorus is a primary nutrient that encourages rooting,

blooming and fruit production in plants.

Sulphate of Potash: Potassium sulphate (K2SO4)) is a non-flammable white crystalline salt which is soluble

in water. This chemical is commonly used in fertilizers, providing both potassium and

Sulphur.

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BRANDS: 1. Engro Chemical Company Ltd

2. Fauji Fertilizer Company Ltd.

3. Dawood Hercules

4. Fatima Fertilizer Company Ltd.

GEOGRAPHICAL LOCATION: CITIES NUMBER OF FACTORIES

Bin Qasim 2

Sheikhupora 1

Sadiqabad, Rahim Yar Khan 2

Multan 1

Haripur 2

Faisalabad 1

MirpurMathelo 1

Daudkhel 1

WAREHOUSES: MianChunnu

Faisalabad

Khanewal

D.G. Khan

Dera Ismail Khan

Sukuar

Lahore

Karachi

Larkana

Dadu

Thatta

MirpurKhas

Nawabsha

Multan

Sheikupura

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TOTAL EMPLOYMENT:

Direct employment:

31,000 people are directly employed in fertilizer sector.

4139 people /day

Indirectly employment:

Agriculture is the mainstay of Pakistans economy. It accounts for 24 percent of the GDP

and employs 48.4 percent of the total labor force.

INTRODUCTION TO FERTILIZER ORGANIZATION

FAUJI FERTILIZERS: Fauji Fertilizer Company Limited (FFC) is the largest fertilizer producer in Pakistan with

around 60% urea market share in the country.

FFC was established in 1978 as a joint venture between Fauji Foundation, Pakistan and

Haldor Topsoe A/S, Denmark. The first ammonia - urea complex was commissioned in

1982. Since then, the companys growth has been phenomenal, with de-bottlenecking of

Plant-1 in 1992, establishment of a 2nd plant in 1993 and acquisition of a 3rd plant is

2002. FFC now has three plants with a combined nameplate capacity of 5770 MTPD of

prilled urea. Urea and Ammonia technology licensors for all plants are Snamprogetti

Italy and Haldor Topsoe Denmark respectively.

Fauji Fertilizer Bin Qasim Limited, Karachi, Pakistan (FFBL) is another company where

FFC has controlling shmkojoares it produces 1670 MTPD of granular urea plus 1350

MTPD DAP. Ammonia and Urea plants capacity factors right from the plants start-up

have been 100% or more. Indeed, we have had our share of challenges, but with hard

work, determination, and grace of Allah we have successfully overcome many of the

hurdles.

FFC keeps an effective exchange of information with other plant operators that enables

us to take pre-emptive measures to avoid specific contingencies, and solve problems

when we encounter them, in an efficient manner. Today, FFC is also emerging as a

player in the spheres of manpower training and turnaround services provider,

especially within Pakistan and in the Middle East. We have experience of more than 21

maintenance turnarounds and 23 million man hours of safe operation. We also offer

turnaround inspection services including NDT, machinery diagnostics, infrared

thermography etc.

VISION: To be a leading national enterprise with global aspirations, effectively pursuing

multiple growth opportunities, maximizing returns to the stakeholders, remaining

socially and ethically responsible

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MISSION: To provide our customers with premium quality products in a safe, reliable, efficient

and environmentally sound manner, deliver exceptional services and customer support,

maximizing returns to the shareholders through core business and diversification,

providing a dynamic and challenging environment for our employees.

CHAIRMANS REVIEW: As the energy crisis worsens, FFC remains steadfast in

delivering results to its stakeholders; proving yet again our

unfaltering will to evolve, perform and deliver.

It gives me immense pleasure to report yet another hallmark

year in the Companys history, with diversified investments

during the year in financial services sector, and pioneering into

food business through acquisition of an IQF (Individually Quick

Frozen) food technology project. 2013 also marks the

beginning of a new era of renewable energy for the Country

through our pioneer wind farm project FFC Energy Limited,

with supply of over 90.19 GWH (Giga Watt Hours) to the National grid during the

period, post successful achievement of commercial operations in May 2013.

We remain committed towards further alleviating the energy crisis which has gripped

the nation and its economy and towards this end; we are evaluating the potential for

additional investments in the energy sector.

I am confident that in time, these ventures shall become industry leaders, augmenting

our

Shareholders return in a challenging and uncertain economic environment while also

catering to the financial, agricultural, food and energy requirements of our fellow

Pakistanis.

Persistent gas curtailment in addition to escalating gas costs and governmental levies

continue to strain our operations. Despite these challenges, FFC posted a strong

performance with net earnings of Rs. 20.14 billion with a marginal decline of 4% against

last year. Based on the results, the Board is pleased to announce final dividend of Rs.

4.00 per share (40%) bringing the total dividend for the year to Rs. 15.35 per share

(153.5%).

While we are dedicated towards expansion, we remain focused on strengthening our

core competencies. The risks emanating from depleting gas reserves and persistent gas

curtailment are being analyzed for mitigation through potential coal based technologies

in addition to improved efficiencies and economies.

Our contribution to society goes beyond delivering returns to stakeholders and includes

supply of premium quality fertilizer, technical advice to farming community, gainful

employment and savings of foreign exchange in terms of import substitution. However,

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these can only be sustained with supportive Governmental policies, with due regard to

the potential avenues for export of surplus fertilizer output augmenting Countrys

economy and improving its balance of payments.

I take this opportunity to thank our outgoing directors who have, over their tenure,

rendered invaluable services and contribution towards the success of the Company and

achievement of our objectives.

This years achievements are attributable to the bold strategies, successfully executed

by our dedicated employees, who contributed immensely towards a successful year and

I wish them continued growth and success in all areas of activity.

Lt. Gen Muhammad Mustafa Khan:

HI (M) (Retired)

January 29, 2014

Chairman

FUJI FERTILIZER COMPANY LTD FERTILIZERS:

Sone Urea: It most widely used fertilizer in the country. Fertilizer is white in color, free flowing, readily soluble in water and both contain 46% Nitrogen. Because of its

high solubility, it is suitable for solution fertilizers.

Sona DAP:It is the most concentrated phosphatic fertilizer containing 46% P2O5 and18% Nitrogen. It is the widely used phosphatic fertilizer in the world as well as

Pakistan. The solubility of DAP is more than 95%. Its nitrogen to phosphorus ratio (1:

2.5) makes it an ideal fertilizer, to meet the initial requirement of most of the crops.

Sona SOP: This fertilizer is an important source of Potash, which is a quality nutrient for production of crops especially fruits and vegetables. Potash improves the resistance

of the plants against pests, diseases and stresses like water.

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FATIMA FERTILIZERS

Profile of Company: The fertilizer complex is a fully integrated production facility, capable of producing two

intermediate products, i.e. Ammonia and Nitric Acid and three final products which are

Urea, Calcium Ammonium Nitrate (CAN) and Nitro Phosphate (NP) at MukhtarGarh,

Sadiqabad. The Complex is housed on 947 acres of land. The foundation stone was laid

on April 26, 2006 by the then Prime Minister of Pakistan. The Complex has dedicated

gas allocation of 110 MMCFD from Mari Gas Field and has 56MW captive power plants

in addition to off-sites and utilities. Commercial production commenced on July 01,

2011. The Complex hasan annual design capacity of:

500,000 Metric Tons of Urea

420,000 Metric Tons of Calcium Ammonium Nitrate (CAN)

360,000 Metric Tons of Nitro Phosphate (NP)

The Complex, at its construction peak engaged over 4,000 engineers and technicians

from Pakistan, China, USA, Japan and Europe. The Complex provides modern housing

for its employees with all necessary facilities. This includes a school for children of

employees and the local community, a medical Centre and sports facilities. The

Company is listed at all stock exchanges of Pakistan, through a successful Initial Public

Offering (IPO) in January 2010. 200 million Ordinary Shares were offered to the public

bringing the issued Ordinary Share Capital from 1,800 million to 2,000 million shares.

The current paid up capital of the Company is 2,100 million shares as a result of

conversion of Preference Shares into Ordinary Shares.

Vision: To be a world class manufacturer of fertilizers and ancillary products with a focus on

safety, quality and contribution to national economic growth and development. We will

care for the environment and the communities we work in while continuing to create

shareholders value

Mission: To be the preferred fertilizer company for farmers, business associates and

suppliers through quality and service.

To provide employees an exciting, enabling and supportive environment to excel

in, be innovative, entrepreneurial in an ethical and safe working place based on

meritocracy and equal opportunity.

To be a responsible corporate citizen with a concern for the environment and the

communities we deal with.

CORE VALUES:

Integrity:

Our actions are driven by honesty, ethics, Fairness and transparency.

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Innovation:

We encourage creativity and recognize new ideas.

Teamwork:

We work collectively towards a common goal.

Safety, Health, Environment & CSR:

We care for our people and the communities around us.

Customer Focus:

We believe in listening to our customers & delivering value in our products and

services.

Excellence:

We strive to excel in everything we do.

Valuing People:

We value our people as our greatest resource.

CHAIRMAN REVIEW: On behalf of the Board of Directors of Fatima Fertilizer Company

Limited, I am pleased to present the Annual Report and the

audited financial statements for the year ended December 31,

2013 together with auditors report thereon and a brief

overview of the financial and operational performance of the

Company.

ArifHabibChairman

P a g e 17 | 38

DAWOOD HURCLES

Vision: To be the leading investor and wealth creator of value driven businesses

Mission: We will maximize profit by investing in businesses that share our bision and fulfull our

investment criteria to achieve growth and return aspirations on a consistent basis.

We will create irinsic value by incorporating efficiency and capability within our

existing operations and through our investments.

Business Ethics & Core Values: This statement of Business Ethics and Core Values constitutes the basis on which

Dawood Hercules Corporation Limited conducts its business. The Board of Directors

and the employees of Dawood Hercules Corporation Limited are the custodians of the

excellent reputation for conducting our business according to the highest principles of

business ethics.

DAWOOD HERCULES CHEMICALS LIMITED FERTILIZERS:

BubberSher:The Company's principal activity is to produce urea fertilizer. The Company markets its urea under the brand name BubberSher.

Performance Highlight:

ENGRO FERTILIZERS

P a g e 18 | 38

Vision Statement: To be a leader in the fertilizer industry with a global presence, exceeding stakeholder

expectations in the communities we serve.

Brief History: As the nations first branded fertilizer manufacturer, the Company helped modernize

traditional farming practices and boost farm yields, directly impacting the quality of life

for farmers and their families, and for the nation at large. Farmer education programs

increased consumption of fertilizers in Pakistan; paving way for Companys branded

urea called Engro an acronym for Energy for Growth.

Core Values: At Engro, we support our leadership culture through unique systems and policies, which ensure

open communication, foster an environment of employee and partner privacy, and guarantee

the well-being and safety of our employees.

CEOs Message: The path we are now pursuing recognizes the importance of deploying inclusive

business models but also goes beyond it, to encompass all the resources involved in

achieving food security for the country.

FERTILIZER BY ENGRO CHEMICAL PAKISTAN LTD.

NITROGENOUS FERTILIZERS:

Engro UREA is a trusted, high-grade fertilizer which is suitable for all crops on all types

of soils. Engro Urea is an excellent source of Nitrogen for the vast majority of cultivated

soils of Pakistan.

PHOSPHATIC FERTILIZERS:

Engro DAP:It contains 46% P2O5 and 18% N. It is a good source of P fertilizer for all crops. It is an equally good source on problem soils. On an overall basis it suits to about

90% soils of the country.

EngroZorawar:It is one of the highest grade phosphate fertilizers. It is acidic in reaction more than 90% is water soluble. It is a beneficial fertilizer for all crops on all

soils of Pakistan and produces excellent results on alkaline soils, due to its acidic

Engro Phosphate: Itis brown colored mono ammonium phosphate with 11%nitrogen and 52% phosphorus. It is being marketed as relatively cheaper alternate

of DAP.

BLENDED FERTILIZERS:

EngroZarkhez:It is homogenously granulated fertilizer which maximizes crop yield by providing balanced nutrition for a wide variety of crops through the uniform

P a g e 19 | 38

availability of Nitrogen, Phosphorous and Potassium. Fertilizers have low moisture

content, high crush strength; 2mm-4mm granule size and free flowing nature -attributes

which ensure excellent handling and application characteristics.

Engro NP:It provides 22% nitrogen, and 20% phosphorus. ECPL entered into NP business in 2005 to Primary focus area for ENP marketing is South Zone (Sind).

MICRO NUTRIENTS

Zingro: Zinc Sulphate, a highly effective, primarily targets Zinc deficiency in crops like Rice, Potato, and Maize, Sugar cane, Wheat, Cotton, vegetables and fruits.

Zingroincreases crop yield and enhances crop appearance.

Snapshots:

P a g e 20 | 38

P a g e 21 | 38

Economic Impact of the industry: The economy of the country does have considerable impact on the fertilizer industry in

the following ways:

The cost of this industry is quite high which is very difficult for the economy of

the country to support especially in current circumstances.

Natural Gas is the main requirement of this industry and it is very difficult to

fulfill that.

Recently the government has announced the cut in the supply of the Natural Gas

in the shape of load shedding.

P a g e 22 | 38

When there is a boom in the agriculture sector of the economy, the demand of the fertilizers also gets increased which puts positive effects on the industry.

HUMAN RESOURCE ISSUE IN INDUSTRY: There would not be any of such issues in the industry as the educated human resource

is easily available and for further enhancement in performance training should be

conducted in companies both technical and interpersonal.

HURDLES IN MARKETING: Weak competition or shortages may lead to price gouging and/or product

adulteration.

Rigid and slow reaction to market changes.

New entrants discouraged.

Uneducated target market because of this marketing is difficult.

Prices are not same in all over Pakistan.

Ineffective distribution process.

FINANCING EASILY AVAILABLE:

Financing is easily available in this sector. The government is willing to develop this

sector so that it would fulfill the requirements. Recently, two plants are opening; one is

of Fatima Fertilizer and one of Engro Ammonia Plant. In project of Engro Ammonia

Plant there is total investment of $1billion is needed, for which it has signed a syndicate

loan of Rs 18.3 billion.

IMPACT OF POLITICAL PARTIES: As in Pakistan, there is a culture that all of the work related to Government would be

easier only when you have good relationship with these parties. Fertilizer Industry has

too much concern with the Government for availability of Natural Gas and Water,

subsidy, anti-dumping duty, and custom free import and so on. All these factors have

considerable effect on the profitability of the companies and without political parties

help, companies will not be able to get these benefits. In the industry, all companies

have very good and stable relation with the political parties and therefore enjoy benefits

which they want to.

So, we can say that the impact of political parties is positive on this industry.

TRADE ISSUES TRADE ISSUES RELATED TO FERTILIZER INDUSTRY:

1. Agreement is being made that the market forces will be allowed to work, in the

case of fertilizer imports.

2. To stop dumping in fertilizer industry the WTO regulation related to anti

dumping must be applied in the industry for the industry benefit.

P a g e 23 | 38

3. In case of import the fertilizer producing companies are exempted where as the

nonproducing private importers pay 5% of the value on the imported fertilizer

4. The introduction of General Sales Tax on fertilizers should be carefully considered since

it would have serious implications on price relations.

5. Market information and monitoring by the National Fertilizer Development Centre should

be strengthened to serve as a real information center for the fertilizer sector

HUMAN RESOURCE REQUIREMENTS HUMAN RESOURCE REQUIREMENT OF FERTILIZER INDUSTRY:

Hiring quality manpower, keeping them happy, satisfied and motivated are the pillars of

the Human Resources Department; justice, fair play and merit oriented treatment are

some of the ingredients of processing cases by the Human Resources Department. For

Human Resource development, another aspect which receives its due share is training.

The employees are exposed to various kinds of cross training, technical courses,

management courses, workshops and seminars both at home and abroad. Employees

welfare has all along received due consideration by the Management

Handling cases relating to following subjects

Employment/appointment of non-management employees. Temporary /

contract /daily wages according to authorization.

Promotion of non-management employees

Pay and allowances of non-management employees.

Leaves (annual, causal, special, sick) are managed for all employees.

Transfer claims of all employees.

SWOT ANALYSIS:

STRENGTHS: The players operating in this sector are financially strong and they can start

production of new product line. Adding some new unit can enhance the

production capacity of the plants.

All the fertilizer plants are producing at more than 100 per cent installed

capacity of utilization.

Demand is heavy because, being an agriculture country and due to increasing

awareness about the balanced use of fertilizer, demand for the fertilizer will

increase.

Industry has well distribution centers.

Fertilizer industry peruses an innovative education oriented advertising policy

utilizing electronic/ print media and road side advertisement.

All companies in the industry have developed a well planned network field

warehouses to ensure that fertilizers are available to the farmers uninterrupted.

P a g e 24 | 38

WEAKNESSES: Due to the existence of black market and heavy demand, farmers have to pay

above then the stated price.

Demand is more and capacity of plants to produce fertilizers is less.

Fertilizer sector is backward in technology and also lack in resources.

Low advertising campaigns as growers and farmers are not educated and lives in

villages, so they dont exactly know the balanced use of fertilizer.

OPPORTUNITIES: If the quality is good customer will buy your product. By improving the quality of

products, industry can attract more customers and can retain customers by

satisfying their needs.

There is no quota restriction by WTO since 2005, so there are more chances of

export.

Availability of gas from Iran can increase the production of plants and industry

can fulfill the demands.

Government is giving support to fertilizer sector.

As demand is high comparing to supply, fertilizer sector has an opportunity to

expand the capacity to fulfill the local demand.

As Pakistan is an agricultural country and farmers are getting awareness about

the balanced use of fertilizer, demand of fertilizer has increased.

THREATS: As natural gas is the main raw material, load shedding of natural gas is big threat.

Imported fertilizer is available at cheap prices than local fertilizer.

Unstable political condition in the country is also a big threat to fertilizer

industry.

Prices of fuel and gas have increased enormously.

Global prices of fertilizer products are also increasing which is causing increase

in fertilizer prices in the country.

Bio fertilizer is the main threat to the industry because it is cheap and also

environment friendly.

Government policies are not consistent regarding fertilizer industry.

Recommendation:

But unfortunately, due to different reasons, due attention was not paid to this program.

However, the following suggestion would be fruitful in promoting the balance use and

proper management of fertilizers and increasing crop yields and soil fertility.

Setting up a united network of agricultural extension on fertilizers with

the participation of research institutes, agricultural universities, scientific

P a g e 25 | 38

associations and non-governmental organizations, fertilizer producing

and trading companies.

Surveying the current status of fertilizer use of farmers in all key

agricultural areas in the whole country. The surveyed data will be

processed to find out the advantages and shortcoming in fertilizer use for

some main crops.

Surveying the current status and capacity of fertilizer supply and service

of governmental organizations, collective and private organizations,

evaluating the supply capacity and requirement of each fertilizer kind at

localities according to short- term and medium -term plants.

Setting up the network of stable and long-term field experiment on some

soil types for some crops in all agro-ecological zones in the whole country

in order to exactly assess the nutrient supplying capacity of soils, factors

limiting the fertilizer use efficiency (soils, climate and weather,

management level, intellectual standard of the people), direct and

residual efficiency of main fertilizer to serve as a basis for establishing the

formulae of reasonable fertilization.

Setting up a network of field experiments to assess the environmental

impacts of fertilizers, especially the impacts of fertilizers on soil fertility

and agricultural product quality, besides, through this research system

identifying the relationship between fertilizers and IPM.

Organizing the training courses to provide the local extension workers

with new knowledge and update new knowledge for them.

Organizing the training for farmers on the role of each nutrient,

symptoms of nutrient shortage and method of reasonable and efficient

fertilizer through the farmers field schools using the most simple and

effective methods.

Organizing the information and propaganda on fertilizer use guides as

well as introduction of new fertilizer through mass-media.

Printing the fertilizer use guides. In the short term, apart from specific

information, a new issue of agricultural extension on fertilizers can be

carried out at the periodical of Pakistan Soil Science Society or the

periodical of Department of Agriculture extension.

Working out the regulations on fertilizer quality control aiming at

preparing the fertilizer legislation.

Carrying out the activities of cooperation on agricultural extension on

fertilizers with in-country and foreign organizations as well as testing the

efficiency of new fertilizers manufactured by in-country as well as foreign

companies.

Establishing the technical support fund to help the enthusiastic farmers

having difficulties to form the key farmer class at the grassroots units.

P a g e 26 | 38

Developing the long-term human resource development program to

improve qualifications of researchers and extension workers to PhD level

and also provide for short-term trainings to equip them with knowledge

and skills in important areas. Besides, career structure and incentive

framework may be introduced to reward quality research and extension

work.

Limitations: There are several important limitations to sustainable agriculture and causing low productivity.

They include soil degradation (soil salinity, alkalinity, erosion and soil fertility depletion),

depletion of water resources, mismanagement of irrigation systems, the distribution of the land

holdings and poor farming practices.

The use of farm inputs, particularly of fertilizers, is inadequate and inefficient.

Farm energy use is low. The availability of quality seed is limited.

Agricultural research is lagging behind the new challenges.

Agricultural extension services are not tuned to modern technology.

The flow of information from research to farmers is inadequate.

Coordination between policy, research, extension and farmers could be

improved.

Disbursement of agricultural credit amounts to over Rs.50 billion per annum, but

is less than the requirements and is not reaching small farmers.

An inadequate marketing infrastructure results in high marketing costs and

losses.

The fertilizer recommendations are too general.

Soil testing laboratories are not adequately equipped in terms of manpower and

equipment. As a result, the majority of the farmers become resource-poor and

cannot get benefit and therefore, our crop yields are one of the lowest in the

world.

Declining land productivity with reduced crop yields has been also a major

problem facing our farmers. The major factors contributing to the reduced land

productivity is soil scarcity caused by continuous cropping without addition of

adequate mineral fertilizers and manures.

Negative soil nutrient balances (nutrient removal exceeding nutrient

application) during our cropping history have resulted in general decline of

fertility levels.

There are several problems which are slow down the balance and efficient use of

fertilizers.

These are commonly non-availability of specific fertilizers at right time, rising

prices.

Improper application methods and time, lack of knowledge among farmers

about the need for balanced fertilizer applications, adulteration.

P a g e 27 | 38

Inadequate grant of soft loans especially for the small farmers, constituting 75

per cent of our farming community.

The increase of fertilizer use efficiency is also related to ensuring the fertilizer

quality. At present, apart from some macro fertilizers produced industrially,

there are several mixed macro and micronutrient fertilizers, foliar fertilizers,

plant growth stimulants which are not controlled by the government. They are

circulated with of fertilizer arbitration organizations.

Therefore the farmers are always suffering from losses once having bought the

adulterated or low-quality fertilizers, and the legitimate fertilizer producers and

traders suffer from losses and risks.

ADDRESSES & EMAILS OF THE COMPANIES:

DAWOOD HERCULES

Corporate Head Office:

35-A, Shahrah-e-Abdul Hameed Bin Baadees (Empress Road), Lahore 54000, Pakistan.

Tel: (92-42) 6301601-07

Fax: (92-42) 6364316, 6360343

Email: [email protected]

Dawood Hercules Plant:

28-Km Lahore Sheikhupura Road, Lahore 54000, Pakistan.

Tel: (92-42) 7352762-71

Fax: (92-42) 7313380


FATIMA GROUP: Head Office:

Multan Office 2nd Floor Trust Plaza, L.M.Q Road,Multan.

Tel: +92(61)4512031-2

Fax: +92(61)4511677


Fatima Fertilizer Company Limited:

P a g e 28 | 38

Project Office Plant Site, Pakarab Fertilizers Ltd.Khanewal Road, Multan. MukhtarGarh,

Sadikabad.

Tel: +92(61)9220022 Tel: +92(68)5786910

Fax: +92(61)4553313 Fax: +92(68)5786909

Email: [email protected], Email: [email protected]

Fauji Foundation Head Office:

68 Tipu Road, Chakala, Rawalpindi, Pakistan-46000

Tel: +92-51-595-1821 to 40

E-mail: [email protected] By: Asad Ali Mallah

ENGRO: Engro Chemical Pakistan Ltd. 7th & 8th Floors, The Harbor Front Building HC # 3,

Marine Drive, Block 4, Clifton - Karachi

Tel: 111-211-211

E-mail: [email protected] (for Engro Energy only)

For Engro Chemical fill online form on www.engro.com

Engro Foods:

Engro Foods Ltd. 6th Floor,

The Harbor Front Building HC # 3, Marine

Drive, Block 4,

Clifton - Karachi, Pakistan.

Ptcl: +92-21-5296000

(10 lines)

Fax +92-21-5295961

[email protected]

Fatima Fertilizer Company Ltd:

HEAD OFFICE:

93-Harley Street, P.O Box No. 253, Rawalpindi.

PABX: 9272307-15, 9272318-9

P a g e 29 | 38

TELEX: 5785 FFCRP PK, 54310 FFCRP PK

TELEFAX: (051)9272316, 9272345

Manufacturing Division:

Goth Machhi, Sadiqabad, Rahim Yar Khan.

PABX: (068)5786420-9,(068)5873001-9

TELEX: 42469 FFCGM PK, 42468 FFCGM PK

TELEFAX: (068)5786401

MirpurMathelo, Distt. Gotki Sindh.

PABX: (0723)652301-4, (071)5613001-3

TELEFAX: (0723)651303

Marketing Division:

Lahore Trade Centre

1-Shahrah-e-Aiwan-e-Tijarat, Lahore

PABX: 6365736, 6369137-40, 6308429-30

TELEX: 44843 FFC PK

TELEFAX: (042)6366324

Financial Analysis

Financial Analysis of industry

1. ENGRO FERTLIZER Vertical Analysis

Column1 2013 2012 2013% 2012%

Sales 50129 30627 100 100

Cost of Sales 28008 20766 55.87185 67.80292

Gross Profit 22121 9861 44.12815 32.19708

Distribution Cost 3511 2500 7.00393 8.162732

Administrative Expenses 601 583 1.198907 1.903549

18009 6778 35.92531 22.1308

Finance Cost 8670 10703 17.29538 34.94629

Other Expenses 2060 406 4.109398 1.325628

P a g e 30 | 38

7279 -4331 14.52054

-14.14112

Other Income 1105 379 2.204313 1.23747

Net profit Before Taxation 8384 -3952 16.72485 -

12.90365

Provision for Taxation 2887 -1017 5.759141 -

3.320599

Net profit After taxation 5497 -

2935 10.96571 -

9.583048

Interpretation: During the year 2013, the company recorded sales of Rs 50129 million as compared to

Rs 30627 million in 2012, depicting an increase in sales over recent year. This increase

in sales is attributed to the fact that in order to meet the growing demand of feed for the

growing population, Engro was operating its business at full capacity. The aggregate

utilization of all three plants of the Company during 2013 was 100%. The additional

production compared to recent year was mainly due to De-Bottle Necking (DBN) of

Plant III commissioned in early 2013. The rise in sales volume and turnover of the

Company in 2013 more than offset the 55% increase in cost of sales, mainly due to

increase in gas prices. Consequently, the gross profit increase of 44% in the recent year

2013, and the gross profit margin and net profit margin showed a Year-on-Year growth

of 10.9% and 9.5%, respectively.

ENGRO FERTILIZERS

Horizontal Analysis (Balance Sheet)

Column1 Column2 Column3 Column4

2013 2012 %

EQUITY & LIABILITIES Equity Issued Subscribed & Paid up Capital 12228 10728 13.9821029

Share Premium 11 11 0

Advance Against Issue of Shares 2119 Hedging Reserve -148 -324 -54.320988

Remeasurement of Post Employement benefits -21 Unappropriated profit 10880 5383 102.117778

25069 15798 58.684644

P a g e 31 | 38

NON CURRENT LIABILITIES Borrowings 52896 48482 9.10440988

Subordinated Loan from holding Company 3000 3000 0

Derivative Financial instrument 1531 498 207.429719

Deffered Liabilities 4655 3381 37.6811594

Employee Housing Subsidy Retirment& Other Service benefit Obligation 104 99 5.05050505

62186 55460 12.12766

CURRENT LIABILITIES Trade & Other Payables 18012 7957 126.366721

Accrued Finance Cost 1480 1788 -17.225951

Borrowings 2924 14896 -80.370569

Retirement & Other Service Benefit Obligations 44 40 10

Short Term Borrowings

1000 -100

Derivative Financial instrument 213 566 -62.367491

22673 26247 -13.616794

TOTAL LIABILITIES 109928 97505 12.7408851

ASSETS NON-CURRENT ASSETS Property Plant & Equipment 79315 82878 -4.2990902

Intangible Assets 138 162 -14.814815

Long Term Loans & Advances 109 84 29.7619048

79562 83124 -4.2851643

CURRENT ASSETS Stores, Spares & loose Tools 4369 4107 6.3793523

Stock in Trade 1382 1687 -18.07943

Trade Debts 758 1046 -27.53346

Deffered Employee Compensation Expense Derivative Financial Instrument 130 1 12900

Loans & Advances, Deposits & Payments 626 395 58.481013

Other Recievables 28 61 -54.09836

taxes Recoverable 557 2000 -72.15

Short term Investments 18058 2635 585.31309

Cash & bank balance 4458 2449 82.033483

30366 14381 111.15361

Total Asset 109928 97505 12.740885

P a g e 32 | 38

Fatima Fertilizer Vertical Analysis

Column1 2013 2012 2013% 2012%

Sales 33496 25199 100 100

Cost of Sales 13713 12252 40.93922 41.50547

Gross Profit 19783 17267 59.0608 58.4945



17254 15294 51.5106 51.8107

Finance Cost 4169 5774 12.44626 19.56028

Other Expenses 1010 506 3.015285 1.71415

12075 9014 36.0491 30.5363

Other Income 246 67 0.734416 0.226972 Net profit Before Taxation 12321 9081 36.7835 30.7632

Provision for Taxation 4298 2969 12.83138 10.05793

Net profit After taxation 8023 6112 23.9521 20.7053

Interpretation During the year 2013, the company recorded sales of Rs 33496 million as

compared to Rs 25199 million in 2012, depicting an increase in sales over recent

year. This increase in sales is attributed to the fact that in order to meet the

growing demand of feed for the growing population, Fatima fertilizer was

operating its business at full capacity. The aggregate utilization of all three plants

of the Company during 2013 was 100%. The additional production compared to

recent year was mainly due to De-Bottle Necking (DBN) of Plant III commissioned

in early 2013. The rise in sales volume and turnover of the Company in 2013

more than offset the 40% increase in cost of sales, mainly due to increase in gas

prices. Consequently, the gross profit of Fatima fertilizer registered a decrease of

59.064% in the recent year 2013, and the gross profit margin and net profit

margin showed a Year-on-Year growth of 23% and 20%, respectively.

FATIMA FERTLIZER

Horizontal Analysis (Balance Sheet) LIABILITIES

Column1 Column2 Column3 Column4

2013 2012 %

EQUITY & LIABILITIES Equity

P a g e 33 | 38

Issued Subscribed & Paid up Capital 21000 21000 0

Prefference Share Share Premium 1790 1790 0

Accumulated Profit/Loss 9969 6158 61.8869763

32759 28948 13.1649855

Total Capital & Reserves 32759 28948 13.1649855

NON CURRENT LIABILITIES Long Term Borrowings 22647 27024 -16.196714

Dividend & markup Payble to related parties

2918 -100

Deffered liabilities 8609 4844 77.7250206

Advance Against Prefference Shares

31256 34786 -10.14776


Accrued Finance Cost 383 499 -23.246493

Short Term Finance-Secured 2303 2690 -14.386617

Current Portion of Long Term Borrowings 5938 4085 45.3610771

Provision for Taxation

15275 12271 24.480482



Intangible Assets 43 34 26.4705882

Capital Work in Progress 1893 1662 13.898917

Deffered Tax Asset Long Term Investments 85 85 0

long Term Deposits & Payments 10 11 -9.0909091

67726 67675 0.0753602


Stock in Trade 2702 2508 7.7352472

Trade Debts 99 138 -28.26087

Short Term Loans to Associated Company 3000 Loans & Advances Deposits & Payments 1674 1468 14.032698

Cash & Bank Balance 238 984 -75.81301

11563 8329 38.828191

Total Asset 79289 76004 4.3221409

P a g e 34 | 38

Fauji Fertilizer Vertical Analysis

Column1 2013 2012 2013% 2012%

Sales 74481 74323 100 100

Cost of Sales 39949 38300 53.6365 51.5318

Gross Profit 34532 36023 46.364 48.468


28365 30469 38.084 40.995

Finance Cost 756 999 1.01502 1.34413

Other Expenses 2558 2686 3.43443 3.61396

25051 26784 33.634 36.037

Other Income 4368 4268 5.86458 5.7425 Net profit Before Taxation 29419 31052 39.499 41.7798

Provision for Taxation 9284 10192 12.4649 13.7131

Net profit After taxation 20135 20860 27.034 28.067

Interpretation During the year 2012, the company recorded sales of Rs 74323 million as compared to

Rs 74481 million in 2013, depicting an increase in sales over recent year. This increase

in sales is attributed to the fact that in order to meet the growing demand of feed for the

growing population, FFC was operating its business at full capacity. The aggregate

utilization of all three plants of the Company during 2012 was 100%. The additional

production compared to recent year was mainly due to De-Bottle Necking (DBN) of

Plant III commissioned in early 2012. The rise in sales volume and turnover of the

Company in 2012 more than offset the 53% increase in cost of sales, mainly due to

increase in gas prices. Consequently, the gross profit of FFC registered an decrease of

46.364% in the recent year 2013, and the gross profit margin and net profit margin

showed a Year-on-Year growth of 27% and 28%, respectively.

P a g e 35 | 38

Fauji Fertilizers

Horizontal Analysis (Balance Sheet) Column1 Column2 Column3

2013 2012 %

EQUITY & LIABILITIES EQUITY Share Capital 12722 12722 0

Capital Reserve 160 160 0

Revenue Reserve 12269 12885 -

4.780752813

25151 25767 -2.3906547

NON CURRENT LIABILITIES Long Term Borrowings 4280 3870 10.59431525

Deffered Taxation 4078 3915 4.163473819

8358 7785 7.36030829


Interest &Mark up Accrued 22 25 -12

Short Term Borrowings 7000 4990 40.28056112

Current Portion of Long Term Borrowings 1460 1434 1.813110181

Taxation 3984 4543 -

12.30464451

34320 27118 26.5580058

67829 60670 11.7999011

ASSETS NON-CURRENT ASSETS Property Plant & Equipment 18444 17819 3.507492003

Intangible Assets 1652 1679 -1.60810006

Long Term Investments 20662 9512 117.2203532

long Term Loans & Advances 740 701 5.563480742

long Term Deposits & Payments 3 5 -40

41501 29716 39.6587697


Stock in Trade 302 442 -31.674208

Trade Debts 701 3611 -80.587095

Loans & Advances 921 678 35.840708

Deposits & Payments 47 36 30.5555556

Other Receiveables 790 589 34.1256367

Short Term Investments 18960 18750 1.12

Cash & Bank Balance 1362 3749 -63.670312

P a g e 36 | 38

26328 30954 -14.944757

67829 60670 11.7999011

4.Hercules Vertical Analysis

Column1 2013 2012 2013% 2012% Sales 4840 4602 100 100

Cost of Sales 4051 3816 83.69835 82.92047

Gross Profit 789 786 16.30165 17.07953

0 0

Distribution Expenses 96 76 1.983471 1.651456


Impairment Loss

0 0 0

Other Expense 39 9 0.805785 0.195567

Other Income 280 488 5.785124 10.60409

Result from Operating Activities 293 746 6.05372 16.2103

Finance Cost 850 915 17.56198 19.88266

Share of Profit from Associate, Net of Tax 4618 1275 95.41322 27.70535

Profit Before Tax 4061 1106 83.905 24.033

Income Tax Expense 459 123 9.483471 2.672751

Profit Afer Tax 3602 983 74.4215 21.3603

Interpretation During the year 2012, the company recorded sales of Rs 4602 million as

compared to Rs 4840 million in 2013, depicting an increase in sales over recent

year. This increase in sales is attributed to the fact that in order to meet the

growing demand of feed for the growing population, Dawood hurcules was

operating its business at full capacity. The aggregate utilization of all three plants

of the Company during 2012 was 100%. The additional production compared to

recent year was mainly due to De-Bottle Necking (DBN) of Plant III commissioned

in early 2012. The rise in sales volume and turnover of the Company in 2012

more than offset the 82% increase in cost of sales, mainly due to increase in gas

prices. Consequently, the gross profit of Dawood hurcules registered a decrease

of 16% in the recent year 2013, and the gross profit margin and net profit margin

showed a Year-on-Year growth of 21% and 74%, respectively.

P a g e 37 | 38

DAWOOD HURCLES

Horizontal Analysis (Balance Sheet)

LIABILITIES Column1 Column2 Column3 Column4

2013 2012 %

EQUITY & LIABILITIES Equity Issued Subscribed & Paid up Capital 4813 4813 0

Revenue Reserve 24111 20890 15.4188607

Fair value Reserve 0 1 -100

Share Holders Equity with FVR 28924 25704 12.5272331

Non Current Liabilities 6296 7822 -19.509077

35220 33526 5.0527948

CURRENT LIABILITIES Current Portion-Long Term Loan 1996 216 824.074074

Short Term Financing Secured 905 32 2728.125

Trade & Other Payables 892 302 195.364238

Mark up Payable on Secured Loans 54 32 68.75

Provision for taxation

3847 582 560.996564



Long Term Investments 34393 30814 11.6148504

Long Term Loans & Advances 0 1 -100

36402 33044 10.162208


Stock in Trade 72 52 38.461538

Trade Debts 40 0 Loans & Advances 308 298 3.3557047

Short Term Investments 1335 3 44400

Cash & bank balance 143 36 297.22222

2666 1065 150.32864

Total Asset 39068 34109 14.538685

P a g e 38 | 38

Fertilizer industry:

Conclusion: The fertilizer industry in Pakistan is of an oligopolistic nature, with the four major

players namely Engro, FFC, FFBL and Dawood Hercules, who form 90% of the total urea

production in Pakistan. FFC has the highest share of urea production (45%), Engro

(20%), FFBL (13%) and Dawood Hercules (11%).

Fauji Fertilizer Company remains the market leader in Fertilizer Industry and still

remains strong in domestic market. About 44% shares in FFC are owned by Fauji

Foundation group. Fauji Fertilizer Company has its monopoly in the province of Punjab,

the hub of agricultural activities. FFC also holds 51% stake in Fauji Fertilizer Bin Qasim

and 12.5% in Pak Maroc Phosphore. FFC has also filed a pre-merger application for 75-

79 per cent shares of Agritech Limited. FFC has also diversified its operation by taking

up wind projects in Thatta/Sindh. FFC is one of the most stable companies with strong

cash flows, stable earnings, consistent dividend payouts and low leverage. FFC is likely

to remain stable benefitting from government subsidies, strong urea growth, domestic

market advantage and high prices gap between domestic and international markets.

The recent gas curtailment will also benefit FFC since it gets gas from Mari Gas network

while other major fertilizer companies are based on the SNGPL network which is

increased span of gas curtailment.

FFC is likely to continue its steady growth along the lines of agriculture growth trends.

Its likely acquisition of Agritech and expansion in wind energy might create synergy

benefits as well. The acquisition of Agritech will require debt raising along with cuts in

dividend payouts, however strong domestic demand for urea along with current low

capex business can reap higher dividends in subsequent years.

THE END

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