Project report 2011

Introduction to the fauji fertilizer company:

FFC occupies a special niche in the industrial and agricultural development of the country with a
successful track record of excellence business performance. The company moved from one high level
of achievement to other establishing records year after year and is now ranked as a top tier player in the
fertilizer industry with highest production capacity and market participation.

During the year, FFC acquired 100% management control. Of PSFL, a wholly owned subsidiary of
NFC, through competitive bidding on payment of RS.8.15 billion to the Privatization commission.
With the integration of PSFL, which now stands dissolved and merged with FFC effective july1, 2002,
pursuant to a scheme of amalgamation approved by the Honorable High Court of Sindh, the production
capacity of our urea manufacturing facilities has more than tripled from 570 thousand tones p.a. in 1982
to almost 2 million tones p.a. in this short span of less than 25 years of existence. FFC now owns three
mega plants worth over 1 billion dollars in terms of replacement value, besides over 49% stake in
FJFC.
2002 was a difficult year and business conditions were challenging because of the economic fall out of
the recent regional crisis. Uncertain economic and weather conditions, high natural gas prices, global
product oversupply, falling international urea prices and weak domestic demand contributed to an
extremely difficult operation environment during the year which created a downward pressure on prices
and margins.
These adverse factors are continuing since past few years and have created intense competition for the
industry players; however, once again our diversification has paid dividends and strategies

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implemented over the years allowed the company to maintain solid financial foundation throughout this
prolonged downturn.

With a vision to acquire self - sufficiency in fertilizer production in the country, FFC was incorporated
in 1978 as a private limited company. This was a joint venture between Fauji Foundation (a leading
charitable trust in Pakistan) and Haldor Topsoe A/S of Denmark.

The initial authorized capital of the company was 813.9 Million Rupees. The present share capital of
the company stands at Rs. 3.0 Billion. Additionally, FFC has Rs. 1.0 Billion stakes in the subsidiary
Fauji Fertilizer Bin Qasim Limited (formerly FFC-Jordan Fertilizer Company Limited).
FFC commenced commercial production of urea in 1982 with annual capacity of 570,000 metric tons.
Through De-Bottle Necking (DBN) program, the production capacity of the existing plant increased to
695,000 metric tons per year. Production capacity was enhanced by establishing a second plant in 1993
with annual capacity of 635,000 metric tons of urea. FFC participated as major shareholders in a new
DAP/Urea manufacturing complex with participation of major international/national institutions. The
new company Fauji Fertilizer Bin Qasim Limited (formerly FFC-Jordan Fertilizer Company Limited)
commenced commercial production with effect from January 01, 2000. The facility is designed to
produce 551,000 metric tons of urea and 445,500 metric tons of DAP. This excellent performance was
due to hard work and dedication of all employees and the progressive approach and support from the
top management. In the year 2002, FFC acquired ex Pak Saudi Fertilizers Limited (PSFL) Urea Plant
situated at Mirpur Mathelo, District Ghotki from National Fertilizer Corporation (NFC) through
privatization process of the Government of Pakistan. This acquisition at Rs. 8,151 million represents
one of the largest industrial sector transactions in Pakistan

Recently Fauji Fertilizers Company offered the highest bid of Rs 8.151 billion for the Pak-Saudi
Fertilizers Limited here on Saturday. Second highest bidder was the Dawood Hercules that offered Rs
3.78 billion while the lowest bid of Rs 3.602 billion was received from Engro Chemicals. In simple
words Fauji Fertilizers Company offered Rs 4.50 billion rupees more than

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Engro and Rs 4.371 billion more than Dawood Hercules in bidding for Pak-Saudi Company. Sealed
bids for the privatization of Pak-Saudi Fertilizer Company were opened by journalists on the request of
Privatization Minister in the presence of bidders, senior government officials and private sector
representatives. Three companies, Fauji Fertilizers, Engro Chemical and Dawood Hercules filed bids
for the said company. Fauji Fertilizers offered Rs 135.85 for each share of the Pak-Saudi Company,
Dawood Hercules offered Rs 70 per share, while Engro Chemical offered Rs 66.70 for a share. Seeing a
far high difference in the price offered by Fauji Fertilizers, the other two bidders did not take interest in
contesting privatization of the said company and wished a good luck for FFC.

Nature of the Business:

The company is a public company incorporated in Pakistan under the Companies Act, 1913, (now the
Companies Ordinance, 1984 and its shares are quoted on the stock exchanges in Pakistan. The principal
activity of the company is manufacturing, purchasing and marketing of fertilizer, including investment
in other fertilizer manufacturing operations. Now FFC is proposed for steel sector also. FFC is in the
progress of setting up a Wind Power Project with an estimated investment of US $ 130 Million at
Jhimpir Distt. Thatta, Sindh with an installed capacity of 50 Mega Watts for onward supply to national
Transmission & Dispatch Company (NTDC).

Fauji fertilizer company history:

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During the mid 70's the Government of Pakistan expressed the desire that Fauji Foundation should look
into the possibility of establishing a urea manufacturing plant to fill the projected gap in demand and
indigenous production. The shortfall was being met through imports at a high cost in foreign exchange.
The project was sanctioned by the Government of Pakistan on 17th December, 1977.
FFC was incorporated on May 8, 1978.
Based Unit at Goth Machhi commenced commercial production in June 1982 with annual designed
capacity of 570 thousand tones urea.
Based Unit up-graded in April 1992 to produce 695 thousand tones annually.
Expansion Unit at Goth Machhi commenced commercial production in March 1993 with designed
capacity of 635 thousand Tonnes.
FJFC founded in November 1993 with initial contribution of Rs. 1 billion. The company’s
investment in FJFC now stands at over RS 4 billion.
PSFL acquired on May 31,202 and merged with FFC on July 1, 2002. Situated at Mirpur Mathelo
the plant has annual designed production capacity of 574 thousand tones.
The aggregate designed production capacity of FFC is three plants now stand at almost 2 million
tones annually.
Since inception to 2002, FFC has produced and marketed 21million tones of urea. In terms of import
substitution this has resulted in national savings of well over 3 billion dollars in foreign exchange.
Since inception the company has sold/marketed almost 28 million tones of fertilizers.
FFC is the only company providing Mobile Farm Extension Services at the farmers, door-step since
1986.
FFC was the first company in fertilizer Sector to achieve in 2002 the highest ever.
FFC was the first company in Fertilizer sector to achieve ISO 9002 certification in 1997.
FFC has been placed amongst the list of top 25 companies of PAKISAN BY KSE for eight years
consecutively, topping the list in 1997.
21.5 million Man-hours of operation without injury were achieved in 2003, the highest ever.
The company’s annual Reports have been adjudged as one of the best reports in the Chemical sector
twice by joint committee of ICAP/ICMAP.

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Brand name

The Company annually produces 2.05 million metric tons of

urea, marketed under the brand name of “Sona Urea”.

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\Products
Product Lines
FFC PRODUCTS
➢ SONA UREA (Prilled)
➢ IMPORTED UREA FFC
➢ UREA FINES
➢ DAP – FFC
➢ SOP
➢ TSP (Triple Super Phosphate)– FFC
➢ SONA BORON (BORAX)
FFBL PRODUCTS (Marketed By FFC)
➢ SONA UREA (Granular)
➢ IMPORTED UREA FFBL

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➢ SONA DAP

Objective of the company:

The broad objectives of the company are:
To play a vital role in agricultural development of the country.
To provide the quality products.
To be environment-friendly organization.
To sustain its role as market leader in urea production and marketing.
To deliver exclusive values and services to the shareholders and customers through its strategies.
To place great value on social responsibilities and welfare.
To develop a culture based on principles of honesty, integrity, fairness and respect.
To create the agricultural awareness in farmers through media and training.
To provide farmers technical services through technical services department free of cost.
To hire and retain satisfied workforce.
To set high standards for production and sale and achieve these objectives.
To promote education in the farmers community by awarding merit scholarships.
To help upgrade the capability of fertilizer research, extension and marketing personnel in the
transfer of fertilizer technology.
To provide a neutral common platform to resolve contentious issues in fertilizer sector.

ISO-9002 Certification:

Another major landmark for Fauji Fertilizer Company is ISO-9002 certification for its manufacturing
division 1st Goth Machhi. Quality in all areas has been a hallmark of the Company right from the
beginning and our product “SONA UREA” has already established its rightful place in the market.
Therefore to bring their system in line with internationally recognized quality standards, they decided
to go for ISO-9002 certification. To achieve a total quality management system, FFC surpassed the
requirement of ISO-9002 standards by including all support services like Admission, personnel,
Finance Hospital, Schools and Management Club etc. also in the certification scope. They selected
Bureau of VERITAS quality international (BVQI), England, a leading certification agency as our

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registrar. BVQI is honored by various accreditation authorities of the world. Quality management
system of FFC got ISO certified in its first attempt during November 1997 with the honor of being the
1st Fertilizer Plant in Pakistan. Since then they have not looked back. They have passed all surveillance
audits with commendable remarks from their registrar.
Since 21 February, 2001 Quality Management system of FFC now stands recertified (ISO 9002) by
BVQI after successful completion of initial certification period of 3 year

SAFTY AWARDS
The effectiveness of the safety program is reflected by the various awards won from National Safety
Council (USA) since 1982. The company has received 15 awards of honor.
Two special safety awards on outstanding performance were given to FFC in 1989 / 1993 by the
council for constantly achieving outstanding performance in the field of safety. FFC also has the honor
of achieving all time best 16.49 Million man-hours without lost time injury as of 31 December 2001,
which is the all time best.

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ISO Certifications

Sr. No Certification Name Brief Description of Certifications

1 ISO-9001:2008 Quality Management System

2 ISO 14001:2004 Environmental Management System

OHSAS 18001:2007
3 Occupational Health & Safety Assessment Series

QUALITY POLICY:
Fauji Fertilizer Company Limited is committed to attaining excellence in all areas of its operations.
They continue to strive for improvement through coordinated efforts, feedback, and training and
employee motivation. They are determined to ensure customer satisfaction, Company’s productivity &
profitability, occupational health, safety and care for their environment and continue playing their role
in the industrial and agricultural development of Pakistan

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SAFETY AND HEALTH POLICY:

At FFC, we are committed to maintain a safe and healthy environment having the same significance as
productivity. They inculcate safety culture by specific training, incentives, and effective control, to
ensure a safe and healthy working environment. They resolve to attain the highest standards of safety
and health through consistent improvements in on-the-job and off-the-job safety and in the working
conditions.

Environment policy

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Fauji Fertilizer Company Limited is committed to achieve environmental protection through

compliance with all the applicable laws and regulations. An active pollution prevention program is
followed with efforts for continual improvement in the environmental aspects related to plant
operations.

BOARF OF DIRECTORS NOMINATED BY

Dr. Haldor Topsoe
DIRECTORS
Mr. Qaiser Javed
Mr. Tariq Iqbal Khan
Dr. Nadeem Inayat
Mr. Istaqbal Mehdi
Brig. Arif Rasul Qureshi (Retired)
Maj. Gen Muhammad Tahir(Retired)
Brig. Rahat Khan (Retired)
Mr. Shahid Aziz Siddiqui
Mr. Shahid Anwar Khan
Mr. Khizar Hayat Khan
Fauji Foundation
Fauji Foundation
National Investment Trust
(NIT)
Fauji Foundation
Pak Kuwait Investment
Company
Fauji Foundation
Fauji Foundation
Fauji Foundation
State Life Insurance
National Bank of Pakistan
Government of Pakistan

CHAIRMAN
Lt. Gen. Hamid Rab Nawaz, HI (M) (Retired)
CHIEFEXECUTIVE AND MANAGING DIRECTOR
Lt. Gen. Malik Arif Hayat, HI(M) (Retired)

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CHIEF FINANCIAL OFFICER

Syed Shahid Husain

COMPANY’s SECRETARY
Brig. Khalid Kibriya (Retired)

FFC ORGANIZATIONAL CHART

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B u s in e s s M a rk e tin g
D e ve lo p m e n t

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Departments

HUMAN RESOURCE DEPARTMENT

The FFC Management, acknowledging the importance of human resources has always placed
personnel management at the top of its priority list. The Human Resources Department, therefore, right
from the inception of the Company has played a vital role in steering the Company through all its
phases, operations and progress.

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The functions of Human Resources Department vis-à-vis personnel management and human
resources development are going side by side and it is due to the progressive approach and dynamic
philosophy of the management that Personnel Management remains abreast with the latest style of
management ensuring high level of motivation and satisfaction of the work force under varied
situations. Personnel policies are kept updated and are periodically modified to respond to the latest
socio-economic changes and market trends of the country.

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. At Plant site, the Company has a Technical Training
Centre, which is unique, and the only centre in Asia having a true replica of the Plant for providing
realistic training as far as possible, to the employees.

Employees' welfare has all along received due consideration by the Management. A number of
agreements have been signed with CBA Workers Union, resulting in handsome remuneration packages
to employees. The company, since its inception, has undertaken five salary revisions for Management
employees, to remain amongst the top paying organizations of the country. It is due to the sheer
sincerity, welfare oriented policies and concern for every single employee that there has never been any
strike, lock out or go slow in FFC.

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FINANCE DEPARTMENT
Marketing division has its own Finance department which deals with the financial matters of all
concerned departments of the divisions as well as all the zonal, regional and area offices. All the 5 farm
advisory centers are also in contact with it. It approves all the budgets and expenses and is monitored
by the General Manager Marketing. It follows the financial strategies made by the Head office but the
price is set in the marketing division. All the data is compiled, analyzed and sent to the head office on
daily basis. This department is headed by the General Manager (Finance) of marketing division.
There are two segment of the finance department which is given as follows:

1. General Accounting
2. Sales Accounting

General Accounting
Headed by the Senior Executive (General Accounting), It handles all general record keeping
responsibilities of marketing division from distribution of salaries to disbursement of medical bills. It

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also handles responsibility of maintaining necessary funds and transferring excess funds to head office.
T he following activities are performed by the general accounting section:

1. Payroll of permanent and temporary staff employees

2. Deduction of income tax from payroll and deposition in govt. treasury.
3. Forwarding detailed of provident fund contribution of permanent employees to head office.
4. Reimbursement of regional imprested/distribution imprested.
5. Forwarding of L/C opening request to head office for import of fertilizer.
6. Processing of export related documents.
7. Deduction of income tax from various supplies and deposit into government treasury.
8. Maintenance of books of account including fixed assets ,supplies , employees etc
9. Payment of telephone , electricity and medical bill
10. Payment in respect of bags and line for imported fertilizers
11. Clearing and forwarding charges in respect of import of fertilizer
12. Payments
13. Documentation
14. Financial reporting
15. Travel expenses
16. Bank reconciliation
17. Different schedules
18. Preparation of Annual Business Plan (ABP)
19. Imports and exports
20. Coordination with internal and external audit.

Sales Accounting
It is the most important function of finance department. It maintains dealer’s accounts and record all
sales made. It tracks all activities right from customer order to making of an invoice and delivery to the
customer
The following activities are performed by the sales accounting section:

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21. Processing of bank Guarantees for secured credit sales

22. Monitoring of unsecured credit sales to fauji sugar mills/forms
23. Preparation of pricing and discount structure for various fertilizers
24. Receiving data from plants for warehouse shipment
25. Recording of stock movement reports
26. Overall reconciliation of stock movement with intimation of head office
27. Follow up receivables for sale through rail
28. Recording of stocks receives from FFBL for sale on their behalf
29. Sending the information regarding dealers balance to field force for recovery of receivables
on various accounts .

Manufacturing Department:
The largest urea manufacturing facility of Pakistan consisting of two ammonia/urea units owned by
FFC, is built at Goth Machhi in district Rahim Yar Khan.Goth Machhi is situated at a distance of 2 kms
from the main Lahore-Karachi highway and is adjacent to the main railway line.

The two plants are based on natural gas from Mari Gas Fields and have an annual designed production
capacity of 1.3 million tons of urea.

Over the years, the plants have demonstrated an operational excellence which has become a reference
for the engineering companies whose process technologies are used here. Delegations from China,
Middle East and Far East keep visiting the plant site for gaining first hand knowledge before deciding
to purchase a new plant.

Engineering:
After the successful start-up of the first plant in mid 1982, a group of selected engineers was assigned
to Technology Division-TD (then called CED) Head Office with the objective of providing engineering
and technical backup to the plant operations.

Additional responsibilities that are assigned to TD, include monitoring plant performance, development
of new projects, handling capital investment projects, advising management on technical matters and
development of a technological base along with consultancy functions.

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Since 1982, TD has made tremendous progress in the field of Plant Engineering, Project Management,
Project Feasibilities and Project Development.

The development of TD was equally supported by the FFC management which has recognized the need
to promote research and technological development activities.

TD is manned by a team of highly trained project engineers, process engineers and IT specialists.
Nearly half of the strength is located at the plant to provide on-the-spot assistance to the manufacturing
units besides feeding vital plant data to the Head Office for immediate processing.

TD is equipped with latest computing facilities along with engineering software from world famous
engineering designer M/s Haldor Topsoe of Denmark and other technical software purchased from the
engineering companies as well as in-house developed software related to engineering and other general
purpose need of the company. This technology enables TD to undertake detailed process/engineering
design related assignments and to provide most valuable assistance to other departments within the
company.

TD most significant contributions to date have been successful project management of FFC Project 1
debottlenecking, FFC Plant Expansion Project 2 and the Fauji Fertilizer Bin Qasim (formerly FJFC)
Project. TD's role in all projects starts from the conceptual stage and concludes at the successful
commissioning and handing over of the project to the Operation Group. The success achieved so far by
TD proves that FFC now possesses requisite in-house capabilities to ensure successful completion of
large scale projects within allocated budgets and assigned project schedules.

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Fauji Fertilizer Company Limited

BALANCE SHEET
AS ON DECEMBER 31

LIABILITIES &
EQUITY 2,006 2,007 2,008 2,009 2,010

Share Capital 4,934,742 4,934,742 4,934,742 6,785,271 6,785,271

Capital Reserve 160,000 160,000 160,000 160,000 160,000

Revenue Reserve 7,346,166 7,861,801 7,190,471 6,137,171 8,502,276

SHARE CAPITAL AND
RESERVES 12,440,908 12,956,543 12,285,213 13,082,442 15,447,547

Non Current Liabilities 981,078 1,193,750 5,378,214 4,578,809 3,819,405

Deferred Taxation 2,401,000 2,396,000 2,431,895 3,035,757 3,215,821
TOTAL LONG TERM
LIABILITIES 3,382,078 3,589,750 7,810,109 7,614,566 7,035,226

CURRENT
LIABILITIES
Trade and other payables 6,737,803 4,025,926 5,993,674 8,002,897 96,914,026
Interest and mark – up
accrued 81,644 134,039 194,570 147,329 137,968
Short term borrowings 2,504,963 4,531,090 3,114,000 6,088,348 5,640,240
Current portion of Long
term: 743,036 1,799,405 1,759,405
Taxation 1,414,418 1,305,606 1,778,361 1,816,595 3,426,264
TOTAL CURRENT
LIABILITIES 12,626,153 10,883,988 11,823,641 17,854,574 20,578,083

Total Liabilities & Equity 28,449,139 27,430,281 31,918,963 38,551,582 43,060,856

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FINANCIAL
ANANLYIS
FROM 2006-2010

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Fauji Fertilizer Company Limited

BALANCE SHEET
AS ON DECEMBER 31

LIABILITIES &
EQUITY 2,006 2,007 2,008 2,009 2,010

Share Capital 4,934,742 4,934,742 4,934,742 6,785,271 6,785,271

Capital Reserve 160,000 160,000 160,000 160,000 160,000

Revenue Reserve 7,346,166 7,861,801 7,190,471 6,137,171 8,502,276

SHARE CAPITAL AND
RESERVES 12,440,908 12,956,543 12,285,213 13,082,442 15,447,547

Non Current Liabilities 981,078 1,193,750 5,378,214 4,578,809 3,819,405

Deferred Taxation 2,401,000 2,396,000 2,431,895 3,035,757 3,215,821
TOTAL LONG TERM
LIABILITIES 3,382,078 3,589,750 7,810,109 7,614,566 7,035,226

CURRENT
LIABILITIES
Trade and other payables 6,737,803 4,025,926 5,993,674 8,002,897 96,914,026
Interest and mark – up
accrued 81,644 134,039 194,570 147,329 137,968
Short term borrowings 2,504,963 4,531,090 3,114,000 6,088,348 5,640,240
Current portion of Long
term: 743,036 1,799,405 1,759,405
Taxation 1,414,418 1,305,606 1,778,361 1,816,595 3,426,264
TOTAL CURRENT
LIABILITIES 12,626,153 10,883,988 11,823,641 17,854,574 20,578,083

Total Liabilities &

Equity 28,449,139 27,430,281 31,918,963 38,551,582 43,060,856

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2006 2007 2008 2009 2010

ASSETS

Property, Plant And Equipment 9,184,727 9,607,957 12,730,813 13,993,518 1,593,588

Goodwill 1,673,849 1,569,234 1,569,234 1,569,234 1,569,234
Long Term Investments 6,058,006 6,409,382 7,744,779 7,727,528 7,870,027
Long Term Loans And Advances 64,545 76,647 163,102 337,541 455,328
Long Term Deposits, Prepayments 3,435 2,474 1,524 6,305 9,037

TOTAL FIXED ASSETS 16,984,562 17,665,694 22,209,452 23,634,126 25,837,214

CURRENT ASSETS

Stores, spares and loose tools 2,154,318 2,202,053 3,034,268 2,996,633 2,440,201
Stock in trade 560,472 952,905 258,094 144,087 2,117,720
Trade debts 659,713 961,427 495,929 256,886 357,956
Loans, advances, prepayments and other
receivables
722,709 1,572,123 1,477,792 901,934 1,004,121
Short term investments 6,195,252 2,452,850 3,511,563 6,768,568 12,020,581
Cash and bank balances 1,172,113 1,623,229 931,865 3,849,348 1,189,063
TOTAL CURRENT ASSETS 11,464,577 9,764,587 9,709,511 14,917,456 17,223,642

Total Assets 28,449,139 27,430,281 31,918,963 38,551,582 43,060,856

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Fauji fertilizer company

Frofit and loss account
For the period ended 31st December

2006 2007 2008 2009 2010

PROFIT AND LOSS ACCOUNT

For The Year Ended December 31

Sales 25,481,121 29,950,873 30,592,806 36,163,174 44,874,359
Less: Cost of goods sold 16,293,642 20,242,194 18,234,692 20,515,044 25,310,406
GROSS PROFIT 9,187,479 9,708,679 12,358,114 15,648,130 19,563,953

Less: Selling and Distribution Expense 2,371,208 2,746,782 2,668,571 3,174,505 3,944,473
6,816,271 6,961,897 9,689,543 12,473,625 15,619,480
Financial Charges 325,999 517,362 695,371 944,947 1,086,741

Other Charges 715,891 735,331 895,647 1,272,448 1,376,000

5,774,381 5,709,204 8,098,525 10,256,230 13,156,739

Other income 1,439,955 1,275,940 1,942,558 2,800,987 3,153,110
NET PROFIT BEFORE TAXATION 7,214,336 6,985,144 10,041,083 13,057,217 16,309,849
Provision for taxation 2,317,000 2,349,000 3,516,000 4,234,111 5,281,000
NET PROFIT AFTER TAXATION 4,897,336 4,636,144 6,525,083 8,823,106 11,028,849

Cash flow statement

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2006 2007 2008 2009 2010

Cash flow from operating activies
cash generating from operation 2,953,298 9,200,680 13,067,512 14,487,016 20,241,360
Finance cost paid (422,831) (605,275) (685,231) (992,188) (1,096,102)
Income tax paid (2,462,813) (2,497,500) (2,952,745) (3,603,877) (3,488,331)
Payment to grtuity fund (40,779) (44,592) (50,327) (74,715) (63,710)
Paymnts to penssion funds/ (36,438) (35,472) (44,530) (78,963) (77,446)
Payments to worker frofit participatin fund (386,728) (374,992) (151,813) (200,821) (625,969)

Net cash generated from oprating activities (396,291) 5,942,849 8,165,914 8,919,075 14,628,659

Cash flow from investing activies

Fixed capital expenditure 1,225,148 (1,611,784) (3,234,087) (2,344,076) (3,313,841)
proceeds from sale of property,plant 17,273 8,983 11,173 15,869 260,433
intrest received 388,092 273,572 314,586 491,326 501,482
investment in Pak in MAROC (338,438) - (1,500,000) - (650,000)
increase/ decrease in other investment (27,335) (457,901) 367,825 (1,538,085) 1,727,800
divident ffbl 531,658 1,306,891 797,516 2,002,160 2,575,478
net cash generated from investindg activities (353,892) (480,239) (3,242,987) (1,372,806) 1,101,352

Cash flow from investing activities

long term financing -disborsement 1,100,000 2,600,000 4,550,000 1,000,000 1,500,000
- repayments (1,845,658) (987,327) (1,022,500) (743,036) (2,299,405)
long term loan -repayments - - - - -
long term mudaraba -repayments (41,667) (1,436,473) - - -
increase in short term borrowing 1,996,667 - (2,931,081) - -
Divident paid (3,764,184) (5,976,382) (7,025,915) (6,447,973) (10,622,306)
net cash use in financing activities (2,554,842) (5,800,182) (7,529,496) (6,191,009) (11,421,711)
net (decrease)/increase in cash and cash
equivalent (3,305,025) (337,572) (2,606,569) 1,355,260 4,308,300
cash and cash equavalent in begning of the year 7,176,453 3,884,668 3,344,262 739,929 2,096,060
Effects of exchange rate changes 13,420 7,166 2,236 871 18,904
cash and cash equavalent at the end of the year 3,884,668 3,554,262 739,929 2,096,060 642,362

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RATIO ANANLYSIS
FAUJI FERTILIZER
COMPANY

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Liquidity Ratios
Current Ratio
Quick Ratio

Profitability Ratios'
Profit Margin
Return on Equity
Return on Assets
Gross Profit Margin
Market Value Ratios
○ Earning per Share

○ Dividend Per Shares

○ Price Earning Ratio

Long Term Solvency Ratio

Total Debt to Asset
Debt to Equity

Turn Over Ratio

Inventory TurnOver
Total Asset Turnover
Fixed Asset Turnover
Average age of inventory

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CURRENT RATIO:

2010 2009 2008 2007 2006

Current Ratio 0.83699 0.83559 1.3 1.02 1.13

Current ratio = Current asset

Current liabilities

INTERPRETATION
The company has the less current ratio in 2010 as compare to the 2008, 2007 which means the
company has less ability to pay its liabilities. Because its liabilities are more than the asset

QUICK RATIO:

Quick ratio = Current assets – inventory

Current liabilities

2010
Quick Ratio 0.82671 0.82749 0.52 0.6 0.58
2009 2008
2007 2006

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Interpretation:
The company’s quick ratio is 0.84 in 2010 as compare to 2008, in which the quick ratios
was 0.47 which means the ratio was increase during the year.

PROFIT MARGIN RATIO:

Net profit margin = Earning available for common stock holders

Sales

2010 2009 2008 2007 2006

Profit Margin 24.5777 24.3984 3.26 0.6 2.7

Interpretation:
The profit margin ratio shows the profitability of the company that generated from the revenue.the
profit margin of the company in 2010 is greater as compare to the 2007.
In 2010 the margin was24.57 that is greater than 0.6 in 2007.its means that the company profit increase
during three year.

RETURN ON EQUITY:

Return on equity = Earning available for common stockholders

Common stock equity
2010 2009 2008 2007 2006
Rerurn on Equity 71.3957 67.4425 44.63 7.2 34.1

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Interpretation:
Return on equit measure the return earned on the common stockholder, investment. higher the return
the higher the firm earns.. ROE in 2010 is 71.39 as compare to the 2007 which was 7.20.. its mean that
the company earn more in 2010.

GROSS PROFIT MARGIN:

Gross profit = net profit

Net sale

2010 2009 2008 2007 2006

Gross Profit Margin 43.5978 43.270 40.3959 32.415 36.0560239

Interpretation:
There was the low gross profit margin in 2007 but in 2010 the company has the highest gross profit
margin at 43.59%. Its means that company have the high profit in 2010.

Return on assets:

Return on total assets = Earning available for common stock holders

Total assets

2010 2009 2008 2007 2006

Return on Assets 25.6124 22.8865 12.95 2.42 11.03

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Interpretation:
ROA is also called the return on investment which measure the overall effectiveness of management in
generating profit. higher the return on total assets the better the firm.ROA in 201 was 25.61 as
compare to 2007 in whicg ROA was 2.42 only.

EARNING PER SHARE:

Earning per share = Earning available for common stock holders

No. of shares of common stock outstanding

2010 2009 2008 2007 2006

Earning per Share 10.52 37.42 93.76 12.9 57.4

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Interpretation:
EPS represent the no. of dollar earn during the ear on behalf of each out standing share in the
market.EPS in 2008 was very favorable as compare to the 2010 which was 10.52 only it represent the
company’s low position in market.

DIVIDEND PER SHARE:

2010 2009 2008 2007 2006

Dividend Per Shares 28 33 50 16 30

Interpretation:
DPS describes the ratio of divivent which is paid to the shareholder for every share held. In 2010 the
DPS was 28 as compare to the 2008 in which the DPS was at highest point 50

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PRICE EARNING RATIO:

Earning per share = Earning available for common stock holders

No. of shares of common stock outstanding

2010 2009 2008 2007 2006

Price Earning Ratio 7.3 6.7 8.5 31.8 8.4

Interpretation:
PER measure the amount that the investor willing to pay for each dollar of the firm’s earnings the
highest the PER the more investor is confidence.
The PER in 2010 was very low at 7.3 as compare to the 2007 at 31.8

TOTAL DEBT TO ASSETS:

Debt ratio = total debt

Total assets

2010 2009 2008 2007 2006

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Total Debt to Asset 0.00833 0.00663 0.01558 0.03505 0.02318

Interpretation:
Debts in 2007 were very much at 0.035 but there was a great improvement in 2010 at 0.008 which was
a great victory.

DEBT TO EQUITY:

Debt / Equity ratio = Total Liabilities

Stock holders equity

2010 2009 2008 2007 2006

Debt to Equity 00.02312 0.01936 0.04038 0.07424 0.05302771

Interpretation:
In 2007 there was the great debts over the company but in 2010 only 0.023 debts over the company.
Which shows the easy way to meet the solvency?

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INVENTORY TURNOVER:

Inventory turnover = cost of good sold

Inventory

2010 2009 2008 2007 2006

Inventory Turnover 211.954 250.985 118.536 31.4312 45.4636824

Interpretation:
How much inventory the co. have to satisfy the customer. In 2009 their was the highest inventory
turnover at 250.98 as compare to 2007 and 2010 there were low inventory.

TOTAL ASSETS TURNOVER:

Total asset turnover = sale

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Total asset

2010 2009 2008 2007 2006

Total Asset Turnover= 1.04215 0.93806 0.95852 1.09181 0.8956726

Interpretation:
Total assts tusnover shows the company’s ability to use assets effeciantly for generating profit.in 2010
(1.042) the total assets turnover was low as compare o the 2007 (1.091)

FIXED ASSETS TURNOVER:

2010 2009 2008 2007 2006

Fixed Asset Turnover 1.73681 1.53015 1.37748 1.69546 1.5002516

Fixed assets turnover = fixed assets

Total assets

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Interpretation:
FAT in 2010 was 1.73 as compare to the 2008 in which there was only 1.37 FAT only and lowest in the
2008
.

AVERAGE AGE OF INVENTORY:

Average age of inventory = 365
Inventory turnover

2010 2009 2008 2007 2006

Averge age of inventory 1.722093 1.45429 3.079296 11.61269 8.02883

Interpretation:
Average age of inventory in 2007 was very favorable at 11.67 but in 2010 rate was very low at the rate
1.722.

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HORIZONTAL &
VERTICAL
ANANLYSIS
FROM 2006-2010

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HORIZONTAL & VERTICAL ANALYSES

HORIZONTAL ANALYSIS
An analysis of percentage financial statements where all balance sheet or income statement figures for a
base year equal 100.0(percent) and subsequent financial statement items are expressed as percentage of
their values in the base year.

This technique is also known as comparative analysis. It is conducted by setting consecutive balance
sheet, income statement or statement of cash flow side-by-side and reviewing changes in individual
categories on a year-to-year or multiyear basis. The most important item revealed by Comparative
financial statement analysis is trend. A comparison of statements over several years reveals direction,
speed and extent of trends

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2006 2007 2008 2009 2010

Share Capital 100 100.0 100.0 100.0 137.5
Capital Reserve 100 100.0 100.0 100.0 100.0
Revenue Reserve 100 107.0 97.9 83.5 115.7
SHARE CAPITAL AND
RESERVES 100 104.1 98.7 105.2 124.2
Non Current Liabilities 100 121.7 548.2 466.7 389.3
Deferred Taxation 100 99.8 101.3 126.4 133.9
TOTAL LONG TERM
LIABILITIES 100 106.1 230.9 225.1 208.0

CURRENT LIABILITIES
Trade and other payables 100 59.8 89.0 118.8 1,438.4
Interest and mark – up accrued 100 164.2 238.3 180.5 169.0
Short term borrowings 100 180.9 124.3 243.1 225.2

Taxation 100 92.3 125.7 128.4 242.2

TOTAL CURRENT LIABILITIES 100 86.2 93.6 141.4 163.0

Total Liabilities & Equity 100 96.4 112.2 135.5 151.4

HORIZONTAL ANANLYSIS
BALANCE SHEET

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2006 2007 2008 2009 2010

ASSETS

Property, Plant And Equipment 100 104.61 138.61 152.36 17.35

Goodwill 100 93.75 93.75 93.75 93.75
Long Term Investments 100 105.80 127.84 127.56 129.91

Long Term Loans And Advances 100 118.75 252.70 522.95 705.44

Long Term Deposits, Prepayments 100 72.02 44.37 183.55 263.09

TOTAL FIXED ASSETS 100 104.01 130.76 139.15 152.12

CURRENT ASSETS
Stores, spares and loose tools 100 102.22 140.85 139.10 113.27
Stock in trade 100 170.02 46.05 25.71 377.85
Trade debts 100 145.73 75.17 38.94 54.26
Loans, advances, prepayments and other
receivables 100 217.53 204.48 124.80 138.94
Short term investments 100 39.59 56.68 109.25 194.03
Cash and bank balances 100 138.49 79.50 328.41 101.45
TOTAL CURRENT ASSETS 100 85.17 84.69 130.12 150.23

Total Assets 100 96.42 112.20 135.51 151.36

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PROFIT AND LOSS ACCOUNT

2006 2007 2008 2009 2010

PROFIT AND LOSS ACCOUNT

For The Year Ended December 31

Sales 100 117.54 120.06 141.92 176.11
Less: Cost of goods sold 100 124.23 111.91 125.91 155.34
GROSS PROFIT 100 105.67 134.51 170.32 212.94
Less: Selling and Distribution Expense 100 115.84 112.54 133.88 166.35

100 102.14 142.15 183.00 229.15

Financial Charges 100 158.70 213.30 289.86 333.36
Other Charges 100 102.72 125.11 177.74 192.21
100 98.87 140.25 177.62 227.85
Other income 100 88.61 134.90 194.52 218.97
NET PROFIT BEFORE TAXATION 100 96.82 139.18 180.99 226.08
Provision for taxation 100 101.38 151.75 182.74 227.92
NET PROFIT AFTER TAXATION 100 94.67 133.24 180.16 225.20

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VERTICAL
ANANLYSIS
FROM 2006-2010

BALANCE SHEET

2006 2007 2008 2009 2010

LIABILITIES & EQUITY

Share Capital 17.35 17.99 15.46 17.60 15.76

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Capital Reserve 0.56 0.58 0.50 0.42 0.37

Revenue Reserve 25.82 28.66 22.53 15.92 19.74

SHARE CAPITAL AND RESERVES 43.73 47.23 38.49 33.93 35.87

Non Current Liabilities 3.45 4.35 16.85 11.88 8.87
Deferred Taxation 8.44 8.73 7.62 7.87 7.47

TOTAL LONG TERM LIABILITIES 11.89 13.09 24.47 19.75 16.34

CURRENT LIABILITIES
Trade and other payables 23.68 14.68 18.78 20.76 225.06
Interest and mark – up accrued 0.29 0.49 0.61 0.38 0.32
Short term borrowings 8.81 16.52 9.76 15.79 13.10
Current portion of Long term: 0.00 0.00 2.33 4.67 4.09
Taxation 4.97 4.76 5.57 4.71 7.96

TOTAL CURRENT LIABILITIES 44.38 39.68 37.04 46.31 47.79

Total Liabilities & Equity 100 100 100 100 100

2006 2007 2008 2009 2010

ASSETS
Property, Plant And Equipment 32.28 35.03 39.88 36.30 3.70
Goodwill 5.88 5.72 4.92 4.07 3.64
Long Term Investments 21.29 23.37 24.26 20.04 18.28
Long Term Loans And Advances 0.23 0.28 0.51 0.88 1.06
Long Term Deposits, Prepayments 0.01 0.01 0.00 0.02 0.02
TOTAL FIXED ASSETS 59.70 64.40 69.58 61.31 60.00

CURRENT ASSETS
Stores, spares and loose tools 7.57 8.03 9.51 7.77 5.67

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Stock in trade 1.97 3.47 0.81 0.37 4.92

Trade debts 2.32 3.50 1.55 0.67 0.83
Loans, advances, prepayments and other
receivables 2.54 5.73 4.63 2.34 2.33
Short term investments 21.78 8.94 11.00 17.56 27.92
Cash and bank balances 4.12 5.92 2.92 9.98 2.76
TOTAL CURRENT ASSETS 40.30 35.60 30.42 38.69 40.00

Total Assets 100 100 100 100 100

2006 2007 2008 2009 210

PROFIT AND LOSS ACCOUNT

For The Year Ended December 31

Sales 100 100 100 100 100
Less: Cost of goods sold 63.94 67.58 59.60 56.73 56.40
GROSS PROFIT 36.06 32.42 40.40 43.27 43.60

Less: Selling and Distribution Expense 9.31 9.17 8.72 8.78 8.79
26.75 23.24 31.67 34.49 34.81
Financial Charges 1.28 1.73 2.27 2.61 2.42
Other Charges 2.81 2.46 2.93 3.52 3.07

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22.66 19.06 26.47 28.36 29.32

Other income 5.65 4.26 6.35 7.75 7.03
NET PROFIT BEFORE TAXATION 28.31 23.32 32.82 36.11 36.35
Provision for taxation 9.09 7.84 11.49 11.71 11.77
NET PROFIT AFTER TAXATION 19.22 15.48 21.33 24.40 24.58

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SWOT
ANANLYSIS OF
COMPANY

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Strength:

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Strengths refer to those activities that a company performs better than it has competitors.
Strength basically means “the core competency of the company.”

The following points are our company’s strength:

FFC has a very stable urea market.
FFC is market leader; its share is 68%.
FFC has a strong dealer ship network and a large sales force to cater to its needs.
FFC produce best quality urea.
Its brand is preferred on others.
FFC owns three mega plants with Central location.
Broad production range.
No deceptive & unethical practices.
Experience in production and marketing of product.
Top player of fertilizer business with maximum production capacity.
Significant contribution towards the economic and agricultural development of the state.
Core competence in distribution with the largest distribution network.
Excellent environmental & working conditions.
Safety measures of international standards are exercised.
Strong Distribution Network
Low Fixed Costs (Depreciated Plants)
Management Quality

Weaknesses:
Weaknesses are the activities that the firm does not do well or the resources it needs but
does not possess. It also includes the factors that cause losses, hardships, disputes and
complaints for a business.

The following are our company’s weaknesses:

Because of high share in total production, it is allotted more of imported urea which sells
slowly.
Its price is higher than of competitors.
Dependence on imported feed stock, suppliers and special repair/maintenance facilities.
Too much centralization bureaucratic control effects timely decision making.

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Decline in sales in economic zones of competitors.

Lack of long term planning, decisions are made keeping in view the short term benefits.
Sales force is over staffed.
Distress in sales force due to extra burden of sales of acquired plan product
Limited Diversification
Dependence on Govt. Gas

Opportunity:
These are the directions that the business could profitably take in future because
of its strengths or because of the elimination of its weaknesses.

The following are opportunities for our company.

Demand of Urea is growing very rapidly.
Good chances of expansions.
Expansion of plants to meet the demand more efficiently.
Efficient as well as appropriate sales promotion and dynamic advertisement.
Proper placement of warehouses.
Delegation of authority so that decisions can be made at the spot without any delay.
Great opportunities for joint ventures.
Quality should be improved gradually with the results and trends in market, may utilize
the word of mouth influence by giving more benefits to dealers.
May diversify the business in allied services .may be cost leaders by cutting down the
unnecessary expenditures.
Diversification Opportunities
Favorable Industry Indicators
Favorable New Policy- Expansions

Threats:
A threat to a business arises from the activities of competitors and from failing to avail
opportunities because of so many reasons like political instability and economic and
financial crises etc.

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The following are the threats that our company is facing.

Any sharp decline will heart it the most.
A free trade policy of WTO is a major threat to the company.
Threat of water and gas crisis.
Rising Internal Oil Prices
Expansion in Global DAP Capacity
New Entrants (Fatima in 2008)
Gas Supply Constraints
Unfavorable Fertilizer Policy: increase in feedstock or new entrant incentives.

Suggestion and recommendation

Over staffing and unbalanced distribution of employees in departments. Like all the government
and semi government institutions FFC has also excessive staff than required. Moreover, there is
uneven distribution, a place where one man can do the job three people are working there. And
some place a job of three persons is taken from a man. This uneven distribution results in de-
motivation of the employee and gradually his interest in his work decreases that effects the
efficiency. In order to increase the efficiency of worker job is assigned to its caliper to develop his
interest in work that increase the output and decrease the overall cost of organization
.
In the company there is an unnecessary emphasis on documentation. In transactions a lengthy
procedure of paper work is involved that decrease the efficiency and results in wastage of time. It
is also observed that in some cases the same record is maintained by more than one department.

There are very few programs for career development of the employees. People working in one
section or department from years are still with the same knowledge and style of doing job. There
should be proper career planning of employee that not only sharpens the skills of the employee &
improve its efficiency but also results in better and improved output for the organization.

Some employees are working in the same department or section since they are appointed.

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Too much centralization in the organization. Managers at low level are not authorized to make
decisions even about minor things. They have to consult top management and give justification on
small matters. Involvement of top management and reaching at the final decisions is time
consuming and some times result in heavy losses. Also man at low level with responsibility and no
decision making power gradually lose interest in his job and de-motivated that effects his
performance. So there should be delegation of authority up to certain extent that enables manager
to take timely decisions at the spot with confidence. When they take decisions they feel themselves
more involved and responsible for the job and in turn their efficiency increases.

Due to high rate of unemployment in the country person join those jobs which are against their
interest and not according to their calipers. So proper analysis should be done, and explore those
employee which can do better what they are currently doing in the organization.

There in no strict means to force employees to take safety measures and follow safety rules.
Management should take necessary action in implementing the safety rules in the organization.

After viewing the marketing analysis we see that product quality is not up to standard because
management is more quantity conscious than the quality. While, FFC with almost the same plant and
machinery giving the standard product.

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Reference:
➢ WWW. FFC.pk.com
➢ WWW.Google.com
➢ WWW.Scbribd.com
➢ WWW.Googleimage .com

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