fauji fertilizer bin qasim limited

“Fauji Fertilizer Bin Qasim Limited”Financial Analysis Report

Supervised by:Miss Ayesha Riaz

Submitted by:Zakia AbidRoll# 06-54 BBA (Hons) 8th semester

Department of Management Sciences

University of Education Okara Campus

DEDICATION

I dedicate it to my respected and beloved parents. Without their

patience, understanding support, and most of love all, the completion of this

work is not possible. I dedicate it to my respected and honorable teacher

Miss Ayesha Riaz, who helps me very much in finding data.

ii

ACKNOWLEDGEMENT

I bow my head to Almighty Allah with gratitude. I would like to

express gratitude to all those who gave me the possibility to complete this

assignment. I am greatly thankful and show the sincere respect to our

respected teacher Miss Ayesha Riaz. Without their guidance, I was not able

to understand it and achieve its basic goal. Our teacher provides us the real

guideline to accomplish this task. Her spiritual personality and kindness

gave us courage to do this assignment. I am also greatly thankful to my

respected parents, who pray for me. Without the support of our parents, I

am nothing. With the guidance of my parents, I accomplish this task easily.

Zakia Abid

iii

FINAL APPROVAL

This is to certify that we have read project submitted by Zakia Abid

and it is our judgement that this report is of sufficient standard to warrant

its acceptance by University of Education Okara Campus for BBA (Hons)

degree.

Professor Dr. Shafiq Khan

Director

UE Okara Campus. Signature

Mr. Rai Imtiaz Hussain

Head of Department


Miss Ayesha Riaz

Supervisor


Table of Contents

iv

1. Introduction 2

1.1 Agriculture Sector 2

1.2 Economic Environment 4

1.3 Types of Fertilizer 6

1.4 Global Scenario 7

1.5 Pakistan Fertilizer Industry 10

1.5.1 Fertilizer Industry Brief 11

1.5.2 Market Situation 12

Future Outlook and Growth 14

2. Company Profile 16

2.1 Company Information 16

2.2 Fauji Fertilizer Bin Qasim Limited 17

2.2.1 Vision 19

2.2.2 Mission 19

2.2.3 Core Values 20

2.2.4 Products 20

2.2.5 ISO Certification 21

3. Industry Analysis 24

3.1 Porter’s Five Forces 24

3.1.1 Supplier Power 25

3.1.2 Buyer Power 25

3.1.3 Potential Entrants 26

3.1.4 Threat of Substitutes 26

3.1.5 Degree of Competitive Rivalry 27

4. External Environment 29

v

4.1 PEST Analysis 29

4.1.1 Political/Legal Factors 30

4.1.2 Economic Factor 30

4.1.3 Social Factor 31

4.1.4 Technological Factor 32

5. Internal Environment 34

5.1 SWOT Analysis 34

5.1.1 Strengths 35

5.1.2 Weaknesses 36

5.1.3 Opportunities 36

5.1.4 Threats 37

6. Boston Consulting Group Matrix 39

6.1 BCG Matrix 39

6.2 Strategies under BCG Matrix 40

7. Summarized Financial Statements 42

7.1 Income Statement 42

7.2 Balance Sheet 45

8. Common Size/Component Percentage Analysis 51

8.1 Introduction 51


8.2.1 CGS, GP and Net Profit 55


8.3.1 Total Assets 62

8.3.2 Total Equity and Liabilities 64

8.4 Conclusion 66

9. Trend Percentage Analysis 68

9.1 Introduction 68

vi


9.2.1 Net Sales 72

9.2.2 Cost of Sales 74

9.2.3 Gross Profit 76

9.2.4 Net Profit 78


9.3.1 Total Assets 85

9.3.2 Total Liabilities 87

9.4 Conclusion 89

10. Dollar and Percentage Changes 91

10.1 Introduction 91



10.4 Conclusion 100

11.Ratio Analysis 102

11.1 Analysis of Short Term Financial Position 102

11.1.1 Net Working Capital 103

11.1.2 Current Ratio 104

11.1.3 Acid Test Ratio 105

11.1.4 Absolute Liquid Ratio 107

11.1.5 Conclusion 108

11.2 Analysis of Efficiency 109

11.2.1 Inventory Efficiency 109

11.2.2 Debtor Efficiency 111

11.2.3 Creditor Efficiency 113

11.2.4 Cycle Efficiency 115

11.2.5 Assets Efficiency 117

vii

11.2.6 Working Capital Turnover Ratio 119


11.3 Analysis of Long Term Risk 121

11.3.1 Proprietory Ratio 121

11.3.2 Capital Gearing Ratio 122

11.3.3 Solvency Ratio 124


11.4Analysis of Profitability 126

11.4.1Percentage Change Ratio 126

11.4.2 Gross Profit Ratio 128

11.4.3 Net Profit Ratio 130

11.4.4 Operating Profit Ratio 131

11.4.5 Expense Ratio 133

11.4.6 Operating Ratio 135


11.5 Analysis of Return 137

11.5.1 Return on Assets 137

11.5.2 Return on Investment 138

11.5.3 Return on Equity 140


12. Cross Sectional Analysis 143

12.1 Introduction 143



12.4 Short Term Financial Position Analysis 148

12.5 Profitability Analysis 150

12.6 Return Analysis 152

viii

12.7 Efficiency Analysis 154

12.8 Long Term Financial Position Analysis 156

12.9 Conclusion 157

13. Conclusion 159

14.Future Projections 161

15. Recommendations 163

16. Annexure 165

ix

1. Introduction

Pakistan is agriculture country. Pakistan has moved from an economy

heavily dependent on the agriculture to a relatively balanced economy based on

services, industry and agriculture. Fertilizer usage in Pakistan is low. The greater

demand is expected to continue in the future as economic growth continues. Due

to excess demand, it is expected to keep reserves in the next years after which

manufactures will be forced to fight for market share.

Pakistan’s fertilizer manufactures have low resource costs due to feed stock

gas subsidy advanced by Government. Through this subsidy manufactures are able

to get feed stock gas at lower rates than the market which improves their

profitability. The current excess demand situation has promoted capacity

expansions which gave profits in 2014. The surplus amount is exported to

neighboring countries. Stock presents an attractive opportunity to take exposure in

high growth stocks at low costs.

1.1 Agriculture Sector

Pakistan is agriculture country and agriculture is the larger part of Pakistan

economy. The undeniable importance of the agriculture sector to the economy of

Pakistan is reflected in its contribution to national output, employment and export

earnings. This sector contributes 20.8% to the country's Gross Domestic Product

(GDP) and employs 43% of total labor force. As per experts estimation the share

of agriculture cannot go down further, as many industrial sector such textile, sugar

and fertilizer are also depend on agriculture. These industries provide input, as

well as derived input from agriculture. However, in the future, the share of

agriculture in overall GDP is estimated to start rising as the population demand for

food rises.

2

Growth in this area of Economy is vital for poverty alleviation, as about 66

percent of rural population is directly or indirectly dependent on the agriculture

sector for sustenance. Pakistan’s major source of foreign exchange earnings is the

textile sector which also relies on agricultural performance. The major crops of

Pakistan are wheat, cotton, rice and sugarcane, which make up 7% of the country’s

GDP.

AGRICULTURAL AS A % OF GDP

Source: Economic Survey of Pakistan

AGRICULTURAL GROWTH VERSUS GDP GROWTH

Source: Economic Survey of Pakistan 3

Fertilizer has a significant contribution in increasing crop yields and

productivity. Proper application of nutrients helps in efficient utilization of limited

natural resources such as land and water. Fertilizers improve crop yield by

removing the deficiency of chemical elements taken from the soil by harvesting,

grazing, leaching or erosion. Coupled with improved seeds, better insecticides and

more effective fungicides, chemical fertilizers play a vital role in boosting

agricultural output. With proper farmer education and increased awareness, the

fertilizer off-take can improve substantially. Nutrient application in suitable

quantities can further improve farm productivity, thereby helping in eradicating

poverty.

1.2 Economic Environment

Fertilizer consumption world wide is highly correlated with

macroeconomic growth of the country. Likewise, Pakistan has witnessed robust

economic growth in the last few years. The strong economic performance has been

accompanied by an increase in agriculture growth, per acre yield and resultant

demand. So, Pakistan’s economy is expected to grow.

Pakistan’s agriculture output has suffered in the recent past due to adverse

weather conditions and crop spoilage. The government is committed to improve

agriculture performance through the following measures:

i. Irrigation system improvement

ii. Subsidy to farmer

iii. Encouraging use of fertilizer

iv. Above average credit disbursement

As a result of these policies, yield per hectare of Pakistan is showing

gradual improvement although it is low as compared to the other countries. So,

Agriculture is expected to grow because of government policies and better

irrigation.

4

The low yield can be explained in a large part by the low fertilizer use in

Pakistan. Fertilizer consumption in Pakistan stands at 165.2kg/hectare.

The fertilizer policy aimed at providing low cost fertilizers to the farmer so

as to enable them to improve yields. It encourages manufacturers to invest in the

YIELD PER HECTARE (SELECTED COUNTRIES)

Source: IFA

CONSUMPTION KG/HECTARE

Source: IFA

5

country and subsidizes their most important feed stock gas rates. In the future

these measures are expected to results in great use of fertilizers and thereby create

demand for it.

Generally, fertilizer consumption closely follows production in a country

subject to the availability of raw materials and also because of the relation between

fertilizers consumption and economic growth.

1.3 Types of Fertilizer

Urea, which represents 65% of total fertilizer consumed and di-ammonium

phosphate (DAP), which accounts for 18%, are the main types of fertilizer used in

Pakistan, but there is a total of eight different fertilizer products which fall into

three categories. Urea, along with calcium ammonium nitrate (CAN) and

ammonium sulphate (AS) together make up almost three fourths of total fertilizer

consumption and come under the nitrogenous category.

Under the phosphatic category which makes up about 27%, is DAP, triple

super phosphate (TSP), single super phosphate (SSP) and nitro phosphate (NP).

And under the last category, potassic is sulphate of potash which makes up only

1%. Since the soil in Pakistan generally tends to be deficient in nitrogen, urea is

the most used fertilizer. DAP is used, as most phosphatic fertilizers are to counter

the effect of the acidic urea and maintain levels of fertility in the soil.

6

1.4 Global Scenario

The world grain consumption has outpaced production in six of the last

seven years, in which production superseded supply due to favorable weather in

almost all the major grain producing countries. With the growing demand of food

and rapid increase in demand for biofuels, the grain consumption growth has

witnessed an increase of 5% in 2009 from the historical average rate of 1.5% p.a.

This has led to a widening gap between consumption and production resulting in

sharp increase in food prices in the global market.

This growth was spurred by the rise in food demand by the burgeoning

world population. Attaining higher production given the same amount of land can

be done through three ways:

i. Turning more land into arable land through better irrigation

ii. Using High Yielding Seeds (HYS)

iii. Using fertilizers to improve soil content

Improvement in soil content is the most convenient and frequently followed

method. Moreover, it has gained widespread use as food demand rises.

CONSUMPTION OF EACH SECTOR

Source: State Bank of Pakistan

7

0

20

40

60

80

100

120

140

160

180

1950 1960 1970 1980 1990 2000 2010

Million T

ons

Demand of grains from this sector has grown rapidly over the past few

years on account of higher consumption of dairy products and meat by the

developing countries especially China, India and Brazil. The amount of grain

stored by governments, a good measure of the global cushion against poor

harvests and rising prices continues to decline.

WORLD FERTILIZER CONSUMPTION

Source: FAO, IFA

WORLD GRAIN PRODUCTION vs CONSUMPTION

Source: FAO, IFA

8

The international Fertilizer Association (IFA) produces forecast of world

fertilizer usage and production. Following estimates are taken from IFA. Till the

year 2030, the increasing world population and higher standards of living in

developing countries will demand a substantial increase in global cereal

production. Problem in supply-demand are likely to occur because agricultural

production in developing countries is not keeping pace with this increase in

demand.

The increase in demand can be met through increase in cultivated area;

however, this appears only as a possibility in Africa and Latin America. In most

other parts of the world the increase in demand must be met through greater yield,

which will most certainly require increased use of fertilizers.

Growth in production is expected to outpace fertilizer consumption.

According to IFA estimates world urea supply is expected to reach 180.8mntpa in

2011 from 148.2mntpa in 2010. Most of the forecasted increase in fertilizer

capacity is expected to arise from China and Saudi Arabia.

DEMAND FOR FOOD FOR HUMANS AND ANIMALS

Source: IFPRI

9

80%

20%

Local manufactures Import

1.4 Pakistan Fertilizer Industry

Pakistan’s economy is agriculture based country; however our cultivable

land is deficient in nutrient contents. This deficiency can only be overcome

through the balanced use of fertilizer. Presently, there are ten manufacturing units

in Pakistan. Out of these, four units are located in the public sector and six are

operating in the private sector. The province-wise distribution of units confirms

that 5 units are located in Punjab, 3 in Sindh and 2 in the NWFP.

Fertilizer production is concentrated in nitrogenous fertilizers, which

comprises 85% of all fertilizers produced in the country. Although other types of

fertilizers are also produced in Pakistan, the bulk of whose demand is imported.

The main reason for this concentration on nitrogenous fertilizers is that its main

raw material i.e. natural gas is cheaply available in the country. The raw material

for other fertilizers such as potassium and phosphate has to be imported. The local

fertilizer companies meet almost 80% of Pakistan’s Fertilizer requirement. The

total installed capacity is over 5,124 million tones per annum. It mainly comprises

of 4,180 million tones for urea and remaining for NP, DAP, CAN and SSP.

FERTILIZER COMPANIES

Source: Economic Survey of Pakistan

10

1.4.1 Fertilizer Industry Brief

PARTICULARS DESCRIPTIONS

Sector Fertilizer Industry

Sector Life Cycle Expansion stage

Type of Industry Growth Industry

GDP 20.8%

Historical Performance

Fertilizer industry is fast growing industry, being aided by

Government of Pakistan, as it is associated with agriculture.

Pakistan, being an agriculture country will have to support

all industries which are directly related to Agriculture to

ensure maximum benefits as well as maximum production.

Current the sector is growing with almost 35% rate.

Market Player

Dawood Hercules Company Ltd,

Fauji Fertilizers Company Ltd,

Fauji Fertilizers Bin Qasim Company Ltd,

Engro Chemicals Pakistan Ltd,

Threats Supplier (Raw material), Consumer (Less purchasing power)

Risks & mitigationInflation rate, Interest rate, Environmental problems,

Political instability

Financial Indicators

Overall profitability of fertilizer sector increased 45%

Increased in fertilizer demand by 20%

Fertilizer sector is the 2nd largest consumer of gas

1.4.2 Market Situation

11

The fertilizer industry in Pakistan has an oligopoly structure. The products

are differentiated and there are 9 firms in the industry. Four of them are listed and

other is unlisted. The entry or exit of a single player can affect pricing. There is no

single dominant industry leader.

Urea demand showed the growth approximately 5% in fiscal year 2009.

The characteristics of fertilizer are such that the farmers cannot do without it. It

dissipates quickly in the soil and is removed in large quantities by the crops that

they need it. So, demand of urea will increase in the following years, if we showed

the focus on agriculture to achieve the desired food.

DAP demand showed the growth approximately 35% in fiscal year 2009. In

fiscal year 2008, DAP growth is low due to soaring of international DAP prices

and after that in 2009 it stabilized the demand of DAP in local market. So, demand

of DAP will decrease in the following years according to NFDC and IGI research.

UREA GROWTH

Source: NFDC, IGI Research

DAP GROWTH (mn MT)


12

The four largest firms are deemed to be price setters. These are called

market players. These include:

i. Fauji Fertilizers Company Limited

ii. Engro Chemical Pakistan Limited

iii. Fauji Fertilizers Bin Qasim Limited

iv. Dawood Hercules Company Limited

PRODUCTION OF 4 COMPANIES

Source: Company Reports and NFDC

13

Market share are shown. Through this analysis, it is expected that the

manufactures will grow through expansion.

1.4.3 Future Outlook and Growth

The industry’s future outlook of the fertilizer sector is very strong because

of supportive government policies, favorable climatic conditions and gas pricing.

Short term outlook appears encouraging with significant projections for strong

demand for our fertilizers. In the long term, the Company is committed to achieve

sustained levels of operations at demonstrated operating efficiencies through focus

on their fundamental strengths.

Customs duty of 5% was withdrawn from imported urea. A similar

withdrawal was done on imported DAP fertilizer last year this will not affect local

manufacturers The medium to long term projected demand supply gap situation

together with commissioning of their BMR projects with enhanced urea

production capacities would further consolidate their market presence and allow

improved returns to the Company and its stakeholders.

MARKET SHARE


14

2. Company Profile

2.1 Company Information

Company Name Fauji Fertilizer Bin Qasim limited

Nature of Business Manufacturing & Purchasing & Marketing

Share in Market Third highest share in market

Date of Formation 17th November, 1993

GDP 20.8%

Products Granular Urea (Sona Urea)

Di Ammonium Phosphate (Sona DAP)

Listed in

Lahore Stock Exchange

Karachi Stock Exchange

Islamabad Stock Exchange

Registered Office 73-Harley Street, Rawalpindi, Pakistan

Location of FactoryPlot # EZ/1/P-1, Eastern Zone,

Bin Qasim, Karachi, Pakistan

Chairman Lt Gen Hamid Rab Nawaz, HI(M), (Retired)

Chief Executive Lt Gen Anis Ahmed Abbasi, HI(M), (Retired)

Company Secretary Brig Javed Nasir Khan, SI(M), (Retired)

Board of Directors

Lt Gen Malik Arif Hayat, HI(M), (Retired)

Mr Qaiser Javed

Brig Arif Rasul Qureshi, SI(M), (Retired)

Brig Rahat Khan, SI(M), (Retired)

Dr Nadeem Inayat

Brig Liaqat Ali, TI(M), (Retired)

16

Brig Jawaid Rashid Dar, SI(M), (Retired)

Chief Financial Officer Syed Aamir Ahsan

Auditors

KPMG Taseer Hadi & Co Chartered

Accountants, 6th Floor, State Life Building,

Jinnah Avenue, Islamabad.

Legal Advisors

Orr Dignam & Co

Advocates,

3-A, Street 32, Sector F-8/1,

Islamabad, Pakistan

Shares Registrar

M/s Corplink (Pvt) Limited

Wings Arcade,1-K, Commercial, Model Town,

Lahore.

2.2 Fauji Fertilizer Bin Qasim Limited

Fauji Fertilizer Bin Qasim Limited Plantsite is a modern Granular Urea and

Di-Ammonium Phosphate (DAP) fertilizers manufacturing complex, built at a cost

of US$ 468 Million and located in Eastern Zone of Bin Qasim, Karachi, with Head

Office at Harley Street, Rawalpindi.

Initially named as FFC-Jordan Fertilizer Company (FJFC), wef 17th Nov

1993, with FFC (30%), FF (10%) and JPMC (10%) as main sponsors. The

company was formally listed with stock exchanges in May 1996 and commercial

production commenced wef Jan 2000. However, it continued to run in crises due

to technical, financial and managerial reasons till 2001. DAP Plant brought to

suspension in 2001 due to accumulated loss of Rs. 6.5 Billion. It resumed

production in Sep 2003, after a lapse of 2 years.

17

Renamed as Fauji Fertilizer Bin Qasim Ltd. (FFBL) in 2003, as such Jordan

Phosphate Mines Co. (JPMC) had sold its entire equity in the company.

Accordingly Phosphoric acid supply agreement with Jordan was terminated.

Performance & Production:

FFBL fertilizer complex is state of the art manufacturing facility with

advanced Distributed Control System for safe and efficient operation. The

phosphoric acid being raw material for DAP plant is imported from Morocco and

initially stored in tanks at Port Qasim. Design capacity viz-a-viz actual production

of Plants is as under:

Manufacturing Plants Production (Metric Ton / Day)

Original Actual (Approx)

Urea Granular 1670 1920

DAP 1350 2230 (After Revamp)

Ammonia 1270 1570 (After Revamp)

Our Distinction

FFBL is the only fertilizer complex in Pakistan producing DAP fertilizer

and Granular Urea thus making significant contribution towards agricultural

18

growth of the country by meeting 45% of the demand of DAP and 13% of Urea in

domestic market.

2.2.1 Vision

Be a leading fertilizer company with a diverse product base

Keep exploring other project investment opportunities to remain

progressive, flexible and viable

Continue to excel in operations

Commitment to business ethics, safety,

health, environment and involvement in

the community

Remain a good corporate citizen

Be one of the best corporate employers

2.2.2 Mission

Pursue as a team, the progressive strategy based on the principle of

maintaining the spirit of excellence to remain among the best companies for

delivering competitively priced quality products, achieving sustainable growth rate

in all activities and generating optimum profits to the satisfaction of all

stakeholders.

2.2.3 Core Values

19

Our business success is dependent on trusting relationships. Our reputation

is founded on the integrity of the Company’s personnel and our commitment to

our principles of:

Quality assurance

Integrity and honesty

Confidentiality

Respect for people and team work

Safety and health

Corporate image

2.2.4 Products

1. Granular Urea (Sona Urea)

With its state of the art Fertilizer Plant, Fauji Fertilizer Bin Qasim Limited

is the only Granular Urea manufacturer in Pakistan.

Urea is a synthetic organic compound containing 46 % nitrogen in amide

form

Available in the form of white solid prills. free flowing for easy application

Being hygroscopic, urea is packed in moisture proof high density Polythene

bags.

2. Di Ammonium Phosphate (Sona DAP)

20

Fauji Fertilizer Bin Qasim Limited is the pioneer of premium quality DAP

fertilizer manufacturing in Pakistan. Our DAP plant is the only facility of its kind

in the country. Our product meets international quality standards.

DAP contains the second most important nutrient element, phosphorous

besides nitrogen

Available in free flowing granular form

Granules are stronger, harder and of uniform size

2.2.5 ISO Certification

The company has developed and implemented following three international

standards to improve in quality, environment, health & safety.

Certification Description Audit Company

ISO 9001 - 2000 Quality Management System

Bureau of Veritas Quality International

(BVQI)

ISO 14001 - 2004 Environmental Management System

OHSAS 18001 - 1999Occupational Health & Safety Assessment

Series

Our work practices, emissions and safety procedures at the Head Office and

Plant Site were verified by the world renowned International Certification Agent,

21

Ms BVQI during Mar 2006. We achieved this honor for all three standards in the

first attempt.

22

3. Industry Analysis

3.1 Porter’s Five Forces

Fauji Foundation is taken from the company logo "Increasing our outreach

through sustainable growth". Fauji Fertilizer Bin Qasim Limited (FFBL) is a

Pakistani fertilizer manufacturing; purchasing and marketing company is a

23

http://en.wikipedia.org/wiki/Pakistan

primary target for an analysis using Michael Porter’s 5-Forces Model (“5-

Forces”).

We have applied the 5-Forces Analysis into the respective divisions:

1. Supplier Power

2. Barriers to Entry

3. Threat of Substitutes

4. Buyer Power

5. Competitive rivalry

Graphical Representation

3.1.1 Supplier Power

The term 'suppliers' comprises all sources for inputs that are needed in order

to provide goods or services. Supplier Power is analyzed though supplier

concentration, importance of volume to supplier, differentiation of inputs,

switching costs of firms in the industry.

24

In this industry supplier has a high bargaining power, as most of them are

Foreign Groups.

Concentration is low. They act as separate groups competing for the same

project.

High Switching cost because it is difficult to contract with other groups and

deal with them.

No threat of forward integration.

Suppliers are powerful if there are only a few suppliers, a large number of

purchasers, and significant costs of switching suppliers.

3.1.2 Buyer Power

Fauji Fertilizer Bin Qasim Limited (FFBL) ensures sellout production to

Pakistani and international customers, due to flexible demand delivery and low

down payments.

Buyers have power over when they are concentrated, purchase a significant

portion of new production, and pose a credible threat to purchases from

competitors.

Although Buyers are large in numbers and purchases a large quantity as

well, but buyers do not have a bargaining power.

Customers have low margins and are price sensitive.

3.1.3 Potential Entrants

Economies of scale, product differentiation, capital requirements, switching

costs and government policy all affect the industry. There are number of barriers

to entry such, as capital requirements, government policies, reputation of existing

firms and ecological surveys.

25

Huge capital requirement is one of the greatest barriers for entry.

Government Policies and regulation are also act as barriers; because

Natural Gas which is the main raw material of the industry, and the prices

and supply of it is completely depend upon the Government. Government

does not easily give permission for manufacturing plant due to shortage of

Natural gas and harmful environmental effects, this also act as a barrier.

Brand reputation of existing companies is also one of the barriers because

customers do not easily get ready to switch.

Brand loyalty of customers

3.1.4 Threat of Substitutes

The threat of substitutes entails a consideration of such things as switching

costs, buyer inclination to substitute and the price-performance trade-off of

substitutes. Many organizations do realize that substitutes are there but they must

develop such a product that satisfies their customer. Some threats are such that:

Brand loyalty of customers,

Close customer relationships,

Switching costs for customers,

The relative price for performance of substitutes,

Current trends

3.1.5 Degree of Competitive Rivalry

This force describes the intensity of competition between existing players

(companies) in an industry. High competitive pressure results in pressure on

prices, margins, and hence, on profitability for every single company in the

industry.

26

Fixed Costs are too high, which is not easily possible to tolerate. It reduces

the competition.

Fertilizer industry is at maturity stage so; competition on the basis of

growth is low.

Prices are fixed for every season so no competition on the basis of pricing

behavior.

Competition is only on the basis of Quality.

27

4. External Environment

4.1 PEST Analysis

Fauji Foundation is taken from the company logo "Increasing our outreach

through sustainable growth".

28

PEST analysis stands for" Political, Economic, Social, and Technological

analysis" and describes a framework of macro-environmental factors used in the

environmental scanning component of strategic management. So, we have applied

the PEST Analysis into the respective divisions:

1. Political / Legal Factor

2. Economic Factor

3. Social Factor

4. Technological Factor


4.1.1 Political/Legal Factor

Political factors include government regulations and legal issues and define

both formal and informal rules under which the firms operate.

Political trends are always in favor of this industry.

29

To fulfill local demand of fertilizers at affordable prices, the Government is

providing subsidy on production and import of fertilizers.

Investors will be allowed to relocate second hand plant, equipment and

machinery, with the same concession/exemption as applicable to new

plants.

The Government is providing concessionary feed stock gas to the fertilizer

plants for production of urea.

Tax relaxation has also been offered by the Government.

Export benefit to suppliers of capital goods for new/modernization projects

of fertilizer.

Gas price has been fixed for 8 years for new investments.

4.1.2 Economic Factor

Economic factors affect the purchasing power of potential customers and the

firm’s cost of capital. Economic factors can not be excluded for operating any

business including fertilizers.

One of the main sectors of economy is Agricultural as it contributes 22% to

the GDP and without Fertilizer industry this sector would not able to work.

Due to that Government always gives support to the fertilizer industry.

Tax relaxation has been offered in order to attract new entrants.

Export benefit to suppliers of capital goods for new/modernization projects

of fertilizer. To reduce the dependence on imported fertilizers by enhancing

the local production capacity.

The Government is providing subsidy on production and import of

fertilizers. A massive subsidy of Rs.27 billion in the supply of urea and

DAP in 2009.

Ban on export of fertilizer is also imposed so that economic stability would

be gain.

4.1.3 Social Factor

30

Health consciousness among the people of Pakistan has been increasing

day by day. The citizens of Pakistan are getting aware of their duties in order to

maintain the healthy environment. Government is taking several steps in order to

educate, how important it is for the people to live in the healthy environment.

Although the adverse effects of this industry is very high because of the

improper handling of the waste. Due to this, many diseases like asthma, kidney

diseases, hepatitis etc. are caused. Still, the usage of the fertilizers cannot be

stopped because it gives farmers so much ease in terms of saving time and

actually, using it.

The government discourages the operation of the industries with in the city

by charging these factories with environmental charges. In spite of this

discouragement, there are many factories that are running inside the city,

discharging poisonous gases and chemicals. By the passage of time, the people as

well along with the government are discouraging such activities and demand for

clean environment.

Urea manufacturing site has got ISO 9001:2000 & ISO 14001:2004,

OHSAS 18001:1999, ISO 14000 certifications.

4.1.4 Technological Factor

To meet the demand of fertilizers in the country through indigenous

production, self-reliance in design engineering and execution of fertilizer projects

is very crucial. This requires a strong indigenous technological base in planning,

development of process know-how, detailed engineering and expertise in project

management and execution of projects.

31

The fertilizer plant operators have now fully absorbed and assimilated the

latest technological developments, incorporating environmental friendly process

technologies, and are in a position to operate and maintain the plants at their

optimum levels and on international standards in terms of capacity utilization,

specific energy consumption & pollution standards. The average performance of

gas-based plants in the country today is amongst the best in the world.

The fertilizer industry is also carrying out de-bottlenecking and energy

saving scheme in their existing plants and to enhance the capacity and reduce the

specific energy consumption per ton of product. Companies are also planning to

convert to Liquefied Natural Gas (LNG).

32

5. Internal Environment

5.1 SWOT Analysis

SWOT analysis is a tool for auditing an organization and its environment.

It is the stage of planning and helps marketers to focus on key issues. SWOT

33

stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and

weaknesses are internal factors. Opportunities and Threats are external factors.

The SWOT analysis provides information that is helpful in matching the

firm's resources and capabilities to the competitive environment in which it

operates. As such, it is instrumental in strategy formulation and selection. It

involves specifying the objective of the business venture or project and identifying

the internal and external factors that are favorable and unfavorable to achieve that

objective.


5.1.1 Strengths

A firm's strengths are its resources and capabilities that can be used as a

basis for developing a competitive advantage. Some are:

34

The persons 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.

It provides the good quality products to its customers to get the better

advantages and maximizes their profits.

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.

High quality and skilled professionals are there helping the industry to

achieve their target.

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.

FFBL has new technological devices to seeking and using the natural

resources in the fertilizer industry.

5.1.2 Weaknesses

The absence of certain strengths may be viewed as a weakness. Some

weaknesses are:

35

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 don’t exactly know the balanced use of fertilizer.

There is wastage of raw material.

Delay in capacity expansion.

Large investment needed for business expansion.

Disputes between Middle level and Lower management.

Dependence on supply and price of international market raw material and

natural gas.

5.1.3 Opportunities

The external environmental analysis may reveal certain new opportunities

for profit and growth. Some of them are:

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. It means that Government

has decided to increase fertilizer industry funding.

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

to expand the capacity to fulfill the local demand.

36

As Pakistan is an agricultural country and farmers are getting awareness

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

Government programs and excess demand of fertilizers in Pakistan aware

the farmer in Pakistan. So it is a golden opportunity for firms to provide

better services to potential customers.

5.1.4 Threats

Changes in the external environmental also may present threats to the firm.

Potential unfavorable conditions for an FFBL face such 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.

Scarce water resources.

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.

Competition may pose a threat because the company will have to maintain

its leadership in an expanding market.

37

6. Boston Consulting Group Matrix

38

6.1 BCG Matrix

For more effective planning and operations, a multi-business or multi-

product organization should be divided according to its major markets o products.

Each such entity is called a strategic business unit (SBU).

Using this matrix, an organization classified each of such SBU according to

the factor like

i. Market Share

ii. Industry Growth Rate

Representation

The BCG matrix is shown below:

39

Under the light of BCG matrix, I can examine that Fauji Fertilizer Bin

Qasim Limited is existing in the category of Question Mark because of low market

share and medium business growth rate as compared to others. In order to be the

market leader, Fauji Fertilizer Bin Qasim Limited has to improve its market

position.

6.2 Strategies under BCG Matrix

This is the exact time for Fauji Fertilizer Bin Qasim Limited to grow more

rapidly with the showing of its internal strength to the market to make the market

favorable. Following are the main strategies that will be helpful for Fauji Fertilizer

Bin Qasim Limited to get a better market position.

6.2.1 Differentiation Strategy

Fauji Fertilizer Bin Qasim Limited has to provide good quality products

and more values to its consumers, so that it will be beneficial to become the

market leader.

6.2.2 Cost Leadership Strategy

Fauji Fertilizer Bin Qasim Limited has to consider its cost to improve its

profitability ratio.

6.2.3 Focused Strategy

Focus strategy refers to the focus on the customer, focus on the target

market, identify them and serve them better.

40

7. Summarized Financial Statements

7.1 Income Statement

FAUJI FERTILIZER BIN QASIM LIMITEDSummarized Profit & Loss Account

As At December 31, 2009.

(Rupees '000) 2005 2006 2007 2008 2009

SALES

Gross sales 15,277,232

15,777,640

13,167,135

27,410,75637,270,51

5Less:

ale tax 884,662 921,803 716,918 339,847 0

Trade discount 116,181 125,724 190,443 230,017 518,878

Commission to holding company 21,625 22,825 16,886 20,080 26,717

1,022,468 1,070,352 924,247 589,944 545,595

NET SALES 14,254,764

14,707,288

12,242,888

26,820,81236,724,92

0

LESS: COST OF SALES

Raw materials consumed 6,621,531 7,098,429 6,526,801 34,409,31815,518,40

9Packing materials consumed 270,870 304,025 256,652 492,509 470,472

Fuel and power 982,669 1,230,819 1,100,224 1,713,011 1,990,504

Chemicals and supplies consumed 63,836 72,643 83,729 135,274 158,370

Salaries, wages and benefits 332,650 332,360 434,734 616,825 1,074,527

Rent, rates and taxes 20,481 21,577 22,575 23,606 28,359

Insurance 44,338 47,909 45,252 46,710 69,671

Travel and conveyance 28,423 30,969 33,839 42,062 55,145

Repairs and maintenance 206,917 257,294 605,995 482,904 979,294

Communication and other expenses 37,570 46,895 30,323 57,061 35,483

Provision for doubtful advances 45 0 0 0 0

Depreciation 925,152 986,363 1,051,381 1,186,433 1,212,073

Provision for inventory obsolescence 4,297 0 29,686 113,545 56,263

Opening stock - work in process 4,482 1,504 4,801 13,472 3,602

Closing stock - work in process -1,504 -4,801 -13,472 -3,602 -5,140

Subsidy on DAP fertilizer from Pak Govt. 0 -1,322,110 -2,797,017 -15,522,573 0

Cost of goods manufactured 9,541,757 9,103,876 7,415,503 23,806,55521,647,03

2Opening stock - own manufactured fertilizers 39,403 398,724 99,322 252,267 5,583,460

Closing stock - own manufactured fertilizers -398,724 -99,322 -252,267 -5,583,460 -170,926

Cost of sale - own manufactured fertilizer 9,182,436 9,403,278 7,262,558 18,475,36227,059,56

6Opening stock - purchased fertilizers 4,751 3,215 139,885 1,246 0

Purchase of fertilizers 508,264 756,436 19,113 118,144 0

Closing stock - purchased fertilizers -3,215 -139,885 -1,246 0 0

Cost of sales - purchased fertilizers 509,800 619,766 157,752 119,390 0

TOTAL COST OF SALES 9,692,236 10,023,04 7,420,310 18,594,752 27,059,56

42

4 6

GROSS PROFIT 4,562,528 4,684,244 4,822,578 8,226,060 9,665,354

2005 2006 2007 2008 2009

LESS: OPERATING EXPENSES Selling and distribution expenses

Product transportation 1,044,439 1,169,597 829,047 1,440,265 1,680,782

Expenses charged by holding company

Salaries, wages and benefits 128,540 156,085 149,319 213,145 353,109

Rent, rates, and taxes 19,886 20,462 19,438 25,716 33,410

Technical services 1,243 1,733 1,515 2,280 3,616

Insurance expenses 0 0 0 0 14688


Sale promotion and advertising 11,482 8,916 8,581 9,715 17,260

Communication and other expenses 11,134 15,106 12,808 19,010 36,495

Warehousing expenses 12,275 14,033 15,022 23,019 38,070

Depreciation 4,189 5,293 4,948 7,223 9,096

Total expenses 213,259 250,804 239,582 336,599 555,341

Total selling and distribution expenses 1,257,698 1,420,401 1,068,629 1,776,864 2,236,123

Administrative expenses

Salaries, wages and benefits 51,952 70,195 88,232 137,482 262,580


Utilities 1,024 1,435 1,658 2,123 3,397

Printing and stationery 1,617 2,308 2,596 2,207 8,575

Repairs and maintenance 1,836 1,122 2,870 3,754 6,019

Communication, advertisement and other 9,232 8,941 8,652 11,435 16,928

Rent, rates and taxes 2,085 2,755 2,594 2,828 5,807

Listing fee 208 212 215 221 328

Donation to President relief fund 18,215 500 600 1,363 33,915

Legal and professional 3,612 2,432 2,483 2,622 8,582

Depreciation 14,286 3,775 4,607 3,639 4,686

Miscellaneous 3,378 3,871 4,719 6,218 20,090

Total administrative expenses 114,470 103,643 131,369 207,383 401,204

TOTAL OPERATING EXPENSES 1,372,168 1,524,044 1,199,998 1,984,247 2,637,327

OPERATING PROFIT 3,190,360 3,160,200 3,622,580 6,241,813 7,028,027

LESS: OTHER OPERATING COSTS

Finance cost

Mark-up on long term financing

Banking companies & financial institution 149,438 159,912 131,465 114,439 96,708

PKIC, an associated undertaking 18,402 19,692 16,189 14,092 0

167,840 179,604 147,654 128,531 96,708

Finance charge on leased plant, equipment 1,051 461 206 29 0

Mark-up on long term murabaha 15,570 16,661 13,697 11,921 8,971

Mark-up on short term borrowings 73,845 204,817 429,735 1,434,171 1,212,803

Interest on WPPF 100 180 246 283 454

Bank charges 1,103 1,391 2,554 3,204 4,669

Exchange loss 308 9,256 36,421 1,213,832 136,187

43

Total finance cost 259,817 412,370 630,513 2,791,971 1,459,792

2005 2006 2007 2008 2009

Other operating expensesWorkers' Profit Participation Fund 169,206 164,973 177,786 218,437 312,302

Worker's Welfare Fund 0 77,561 77,998 88,097 125,430

Property, plant and equipment written off 0 0 0 257,332 4,200

Loss on sale of property, plant & equipment 0 0 87,293 0 0

Auditor's remunerationFees - annual audit 400 400 440 440 550

Fees - half yearly review 100 100 100 100 100

Other certification & services 0 0 146 60 60

Out of pocket expenses 40 40 50 50 50

540 540 736 650 760

Total other operating expenses 169,746 243,074 343,813 564,516 442,692

TOTAL OTHER OPERATING COSTS 429,563 655,444 974,326 3,356,487 1,902,484

NET PROFIT AFTER INTEREST 2,760,797 2,504,756 2,648,254 2,885,326 5,125,543

PLUS: OTHER INCOMES

Share of profit of associate & joint venture 0 0 0 133,221 -314908

Compensation from GOP 700,000 700,000 600,000 600,000 0

OthersIncome from financial assets

Profit on bank balances and term deposits 425,333 518,198 519,152 591,844 583,976

Surplus of investment at fair value 0 2,387 88,907 0 0

Dividend received on investment in MMF 0 0 0 127,356 156,267

Gain on sale of investment 0 0 5,691 12,686 219,425

425,333 520,585 613,750 731,886 959,668

Income on payments made on behalf of FF 105 0 0 0 0

Income from asset other the financial assetScrap sales and miscellaneous receipts 25,834 28,533 37,925 50,710 36,636

Gain on sale of property & equipment 2,851 3,040 0 3,732 1,364

28,685 31,573 37,925 54,442 38,000

Total others 454,123 552,158 651,675 786,328 997,668

TOTAL OTHER INCOMES 1,154,123 1,252,158 1,251,675 1,519,549 682,760

PROFIT BEFORE TAXATION 3,914,920 3,756,914 3,899,929 4,404,875 5,808,303

Less: Taxation 1,465,811 1,312,056 1,359,896 1,505,254 2,023,938

PROFIT AFTER TAXATION 2,449,109 2,444,858 2,540,033 2,899,621 3,784,365

44

7.2 Balance Sheet

FAUJI FERTILIZER BIN QASIM LIMITEDSummarized Balance Sheet


(Rupees '000)2005 2006 2007 2008 2009

EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES Share capital 9,341,100 9,341,100 9,341,100 9,341,100 9,341,100

Capital reserves 228,350 228,350 228,350 228,350 228,350

Statutory reserves 0 0 0 0 6,380

Translation reserves 0 0 0 572,399 698,005

Accumulated profit / (loss) -1,841,919 -1,031,754 -1,060,523 344,522 386,066

TOTAL SHARE CAPITAL AND RESERVES 7,727,531 8,537,696 8,508,92710,486,37

110,659,90

1

NON-CURRENT LIABILITIES

Long-term financing

From banks and financial institutions

Habib Bank Limited 713,875 584,080 454,284 324,488 194,694

Standard Chartered Bank 408,210 333,990 259,770 185,550 111,329

Muslim Commercial Bank Limited 703,727 575,777 447,827 319,876 191,926

Askari Commercial Bank Limited 157,143 128,571 100,000 71,429 42,857

Saudi Pak Agricultural & Investment Company 58,808 48,116 37,423 26,731 16,039

2,041,763 1,670,534 1,299,304 928,074 556,845

From associated undertaking

Pak Kuwait Investment Company Limited 251,429 205,714 160,000 114,286 68,571

2,293,192 1,876,248 1,459,304 1,042,360 625,416

Less: Current portion under current liabilities 416,944 416,944 416,944 416,944 416,944

Total long-term financing 1,876,248 1,459,304 1,042,360 625,416 208,472

Liabilities against asset subject to lease

Gross lease payments payable in future 6,553 3,338 0 0 0

Less: Finance charge 259 28 0 0 0

Total liabilities against asset subject to lease 6,294 3,310 0 0 0

Long term murabaha

Faysal Bank Limited (FBL) 212,730 174,052 135,373 96,696 58,017


Total long term murabaha 174,051 135,373 96,694 58,017 19,338

Deferred tax liability

Compensated leave absences 0 0 0 116,510 143,808

Deferred tax 1,322,283 2634339 3994235 4,080,283 3,909,006

Total deferred tax liability 1,322,283 2,634,339 3,994,235 4,196,793 4,052,814

45

2005 2006 2007 2008 2009

Long term loan

Government of Pakistan (GOP) loan 5,148,455 4,860,646 4,552,690 4,223,180 3,870,599

Deferred Government Assistance 2,629,954 2,269,562 1,929,317 1,610,626 1,315,006

7,778,409 7,130,208 6,482,007 5,833,806 5,185,605


Total long term loan 7,130,208 6,482,007 5,833,806 5,185,605 4,537,404

TOTAL NON-CURRENT LIABILITIES 10,509,084

10,714,333

10,967,095

10,065,831

8,818,028

CURRENT LIABILITIES AND PROVISIONS

Trade and other payable

Creditors 1,615,935 1,497,540 1,048,909 4,748,957 2,949,346

Accrued liabilities 330,542 397,603 495,602 707,751 1,381,721

Advances from customers 605,000 472,353 351,393 364,990 837,375

Workers' Profit Participation Fund 9,206 14,973 17,786 18,437 52,302

Payable to gratuity fund 0 0 0 8,417 14,473

Worker's welfare fund 0 77,561 155,560 243,657 280,989

Unclaimed dividend 321,950 183,327 295,461 39,466 386,635

Tax deducted at source 2,667 2,002 1,958 5,713 3,275

Other payables 20,695 29,544 97,577 127,281 809,723

Total trade and other payable 2,905,995 2,674,903 2,464,246 6,264,669 6,715,839

Mark-up accrued

On long term financing

From banks and financial institutions 45,240 38,036 30,781 27,695 19,765

From PKIC, an associated undertaking 5,571 4,669 3,791 3,410 0

50,811 42,705 34,572 31,105 19,765

On long term murabaha 4,714 3,830 3,207 2,886 1,834

On short term borrowings 38,823 58,417 86,108 559,595 88,725

Total mark-up accrued 94,348 104,952 123,887 593,586 110,324

Short term running finance 2,236,649 4,531,836 5,875,34118,257,08

27,730,450

Current portion of:

Long term financing 416,944 416,944 416,944 416,944 416,944

Liabilities against assets subject to lease 4,015 2,586 2,651 0 0

Long term murabaha 38,679 38,679 38,679 38,679 38,679

Long term loan 648,201 648,201 648,201 648,201 648,201

Sales tax payable 0 11,226 0 0 0

Provision for income tax - net 0 0 0 308 1,086,816

Total of current portion 1,107,839 1,117,636 1,106,475 1,104,132 2,190,640

TOTAL CURRENT LIABILITIES 6,344,831 8,429,327 9,569,94926,219,46

916,747,25

3

TOTAL EQUITY AND LIABILITIES 24,581,446

27,681,356

29,045,971

46,771,671

36,225,182

46

2005 2006 2007 2008 2009

ASSETS

NON-CURRENT ASSETS

Property, plant and equipment

Owned assets

Leasehold land 158,733 154,205 149,566 144,927 144,155

Free hold land 120,000 120,000 120,000 120,000 120,000

Buildings on leasehold land 1,202,185 1,160,692 1,120,936 1,080,963 1,112,498

Plant and machinery 12,120,835

12,036,551

13,470,385

14,182,532

13,236,931

Catalyst 39,288 38,990 59,118 40,741 113,858

Furniture and fittings 1,952 1,660 3,869 4,192 3,826

Vehicles 17,844 33,294 40,786 47,027 97,517

Office and other equipment 5,981 6,598 1,164 9,351 24,299

Computer and ancillary equipment 4,180 3,816 6,477 9,387 17,284

Library books 369 241 270 176 1029

Capital work in progress 884,602 1,371,566 1,485,694 207,808 705,502

14,555,969

14,927,613

16,458,265

15,847,104

15,576,899

Assets subject to finance lease

Vehicles 7,134 2,726 0 0 0

Total property, plant and equipment 14,563,103

14,930,339

16,458,265

15,847,104

15,576,899

Long term investments

Pakistan Maroc Phosphore S.A, Morocco

Cost of investment 734,275 1,411,150 1,411,150 1,411,150 2,105,894

Share of profit / loss 0 0 0 122,345 -336,015

Dividend 0 0 0 0 -99,496

Gain on translation of net assets 0 0 0 572,399 125,606

Balance 734,275 1,411,150 1,411,150 2,105,894 1,795,989

Investment in associate

Fauji Cement Company Limited

Cost of investment 0 0 0 300,000 310,876

Share of post acquisition profits 0 0 0 10,876 21,107

Balance 0 0 0 310,876 331,983

Investment – available for sale

Arabian Sea Country Club Limited

300,000 ordinary shares of Rs. 10 each 3,000 3,000 3,000 3,000 3,000

Less: Impairment in value of investment 3,000 3,000 3,000 3,000 3,000

0 0 0 0 0

Total long term investments 734,275 1,411,150 1,411,150 2,416,770 2,127,972

Long term deposits

Security deposit 15,208 15,228 15,228 15,228 76,546

Lease key money 2,966 2,045 1,623 0 0

18,174 17,273 16,851 15,228 76,546

Less: Current portion of long term deposits 779 0 1623 0 0

Total long term deposits 17,395 17,273 15,228 15,228 76,546

47

TOTAL NON-CURRENT ASSETS 15,314,773

16,358,762

17,884,643

18,279,102

17,781,417

2005 2006 2007 2008 2009

CURRENT ASSETS Short term investments

Loans and receivables

Term deposits with bank & financial institution 0 0 2,150,000 0 4,400,000

Investments at fair value through profit or loss

Fixed income / Money market funds 0 500,000 1,655,755 0 251,376

Surplus on re measurement 0 2,387 88,907 0 7,560

0 502,387 1,744,662 0 258,936

Total short term investments 0 502,387 3,894,662 0 4,658,936

Bank balances

Deposit accounts 6,608,287 7,047,562 3,499,683 6,755,864 7,977,897

Current accounts 323,328 188,187 300,777 1,185,477 1,669,919

Cash in hand 0 0 109 183 215

Total bank balances 6,931,615 7,235,749 3,800,569 7,941,524 9,648,031

Trade debts

Considered good 115,059 230,874 243,269 283,612 476,728

Due from FF, unsecured, considered good 22 398 482 1,842 0

Total trade debts 115,081 231,272 243,751 285,454 476,728

Other receivables

Due from holding company - considered good 267,744 375,022 67,540 413,529 161,203

Other receivables

Considered good (net) 67,244 969,891 750,752 57,984 69,594

Considered doubtful 53,482 53,482 53,482 53,482 53,482

120,726 1,023,373 804,234 111,466 123,076

Less: Provision for doubtful receivables 53,482 53,482 53,482 53,482 53,482

67,244 969,891 750,752 57,984 69,594

Insurance claims 1,278 1,954 0 0 0

Total other receivables 336,266 1,346,867 818,292 471,513 230,797

Stores and spares

Stores 34,514 31,258 22,943 47,342 70,769

Spares 496,027 656,379 1,149,427 1,276,757 1,848,846

Items in transit 50,838 113,974 128,183 241,700 129,674

581,379 801,611 1,300,553 1,565,799 2,049,289

Less: Provision for obsolescence 4,297 4,297 33,983 143,232 199,495

Total stores and spares 577,082 797,314 1,266,570 1,422,567 1,849,794

Stock in trade

Packing materials 9,632 13,936 31,152 62,848 17,072

Raw materials 341,653 206,424 289,809 26,829 1,033,875

Raw material in transit 268,229 336,167 0 0 0

Work in process 1,504 4,801 13,472 3,602 5,140

Finished goods 401,939 239,207 253,513 5,583,460 170,926

Total stock in trade 1,022,957 800,535 587,946 5,676,739 1,227,013

Income and sales tax refundable 157,005 251,034 365,026 119,530 119,487

Interest accrued 85,545 91,218 96,526 65,669 116,819

48

Due from GOP on account of DAP subsidy 0 0 012,440,06

00

2005 2006 2007 2008 2009

Advances Advances to:

Executives, unsecured considered good 378 795 2,982 1,479 3,546

Other employees, considered good 3,318 4,935 3,747 8,104 13,813

Advances to suppliers and contractors

Considered good 34,120 55,430 72,790 55,054 93,994

Considered doubtful 45 45 45 45 45

34,165 55,475 72,835 55,099 94,039

Less:Provision for doubtful advances 45 45 45 45 45

34,120 55,430 72,790 55,054 93,994

Total advances 37,816 61,160 79,519 64,637 111,353

Trade deposits & short term prepayments

Current portion of long term deposits 779 0 1,623 0 0

Security deposits 622 1,387 4,582 1,969 1,047

Prepayments 1,905 3,671 2,262 2,907 3,760

Total trade deposits and prepayments 3,306 5,058 8,467 4,876 4,807

TOTAL CURRENT ASSETS 9,266,67311,322,59

411,161,32

828,492,56

918,443,76

5

TOTAL ASSETS 24,581,446

27,681,356

29,045,971

46,771,671

36,225,182

49

8. Common Size/Component Percentage Analysis

8.1 Introduction

Component percentage indicates the relative size of each item included in

the total known as component percentage analysis. It is also known as vertical or

static analysis, which refers to the review of financial information for only one

accounting period.

Financial statement item that is used as a base value. Vertical analysis

discloses the internal structure of the firm. It compared with the prior years to

determine whether the company's financial condition is improving or deteriorating

over time. All other accounts on the financial statement are compared to it.

In the balance sheet, for example, total assets equal 100%. Each asset is

stated as a percentage of total assets.

Similarly, total liabilities and stockholders' equity are assigned 100%

with a given liability or equity account stated as a percentage of the total

liabilities and stockholders' equity.

For the income statement, 100% is assigned to net sales with all revenue

and expense accounts related to it.

Component percentage analyses of FAUJI FERTILIZER BIN

QASIM LIMITED are given on next pages.

51


FAUJI FERTILIZER BIN QASIM LIMITEDVertical Analysis of Summarized Profit & Loss Account


2005 2006 2007 2008 2009SALES

Gross sales - - - - -

Less:Sale tax - - - - -

Trade discount - - - - -

Commission to holding company - - - - -

- - - - -

NET SALES 100.00% 100.00% 100.00% 100.00% 100.00%

LESS: COST OF SALES

Raw materials consumed 46.45% 48.26% 53.31% 128.29% 42.26%

Packing materials consumed 1.90% 2.07% 2.10% 1.84% 1.28%

Fuel and power 6.89% 8.37% 8.99% 6.39% 5.42%

Chemicals and supplies consumed 0.45% 0.49% 0.68% 0.50% 0.43%

Salaries, wages and benefits 2.33% 2.26% 3.55% 2.30% 2.93%

Rent, rates and taxes 0.14% 0.15% 0.18% 0.09% 0.08%

Insurance 0.31% 0.33% 0.37% 0.17% 0.19%

Travel and conveyance 0.20% 0.21% 0.28% 0.16% 0.15%

Repairs and maintenance 1.45% 1.75% 4.95% 1.80% 2.67%

Communication and other expenses 0.26% 0.32% 0.25% 0.21% 0.10%

Provision for doubtful advances 0.00% 0.00% 0.00% 0.00% 0.00%

Depreciation 6.49% 6.71% 8.59% 4.42% 3.30%

Provision for inventory obsolescence 0.03% 0.00% 0.24% 0.42% 0.15%

Opening stock - work in process 0.03% 0.01% 0.04% 0.05% 0.01%

Closing stock - work in process -0.01% -0.03% -0.11% -0.01% -0.01%

Subsidy on DAP fertilizer from Pak Govt. 0.00% -8.99% -22.85% -57.88% 0.00%

Cost of goods manufactured 66.94% 61.90% 60.57% 88.76% 58.94%

Opening stock - own manufactured fertilizers 0.28% 2.71% 0.81% 0.94% 15.20%

Closing stock - own manufactured fertilizers -2.80% -0.68% -2.06% -20.82% -0.47%

Cost of sale - own manufactured fertilizer 64.42% 63.94% 59.32% 68.88% 73.68%

Opening stock - purchased fertilizers 0.03% 0.02% 1.14% 0.00% 0.00%

Purchase of fertilizers 3.57% 5.14% 0.16% 0.44% 0.00%

Closing stock - purchased fertilizers -0.02% -0.95% -0.01% 0.00% 0.00%

Cost of sales - purchased fertilizers 3.58% 4.21% 1.29% 0.45% 0.00%

TOTAL COST OF SALES 67.99% 68.15% 60.61% 69.33% 73.68%

52

GROSS PROFIT 32.01% 31.85% 39.39% 30.67% 26.32%

2005 2006 2007 2008 2009

LESS: OPERATING EXPENSES

Selling and distribution expenses

Product transportation 7.33% 7.95% 6.77% 5.37% 4.58%



Rent, rates, and taxes 0.14% 0.14% 0.16% 0.10% 0.09%

Technical services 0.01% 0.01% 0.01% 0.01% 0.01%

Insurance expenses 0.00% 0.00% 0.00% 0.00% 0.04%


Sale promotion and advertising 0.08% 0.06% 0.07% 0.04% 0.05%


Warehousing expenses 0.09% 0.10% 0.12% 0.09% 0.10%

Depreciation 0.03% 0.04% 0.04% 0.03% 0.02%

Total expenses 1.50% 1.71% 1.96% 1.25% 1.51%

Total selling and distribution expenses 8.82% 9.66% 8.73% 6.62% 6.09%




Utilities 0.01% 0.01% 0.01% 0.01% 0.01%

Printing and stationery 0.01% 0.02% 0.02% 0.01% 0.02%


Communication, advertisement and other 0.06% 0.06% 0.07% 0.04% 0.05%


Listing fee 0.00% 0.00% 0.00% 0.00% 0.00%

Donation to President relief fund 0.13% 0.00% 0.00% 0.01% 0.09%

Legal and professional 0.03% 0.02% 0.02% 0.01% 0.02%

Depreciation 0.10% 0.03% 0.04% 0.01% 0.01%

Miscellaneous 0.02% 0.03% 0.04% 0.02% 0.05%

Total administrative expenses 0.80% 0.70% 1.07% 0.77% 1.09%

TOTAL OPERATING EXPENSES 9.63% 10.36% 9.80% 7.40% 7.18%

OPERATING PROFIT 22.38% 21.49% 29.59% 23.27% 19.14%


Finance cost


Banking companies & financial institution 1.05% 1.09% 1.07% 0.43% 0.26%

PKIC, an associated undertaking 0.13% 0.13% 0.13% 0.05% 0.00%

1.18% 1.22% 1.21% 0.48% 0.26%

Finance charge on leased plant, equipment 0.01% 0.00% 0.00% 0.00% 0.00%

Mark-up on long term murabaha 0.11% 0.11% 0.11% 0.04% 0.02%

Mark-up on short term borrowings 0.52% 1.39% 3.51% 5.35% 3.30%

Interest on WPPF 0.00% 0.00% 0.00% 0.00% 0.00%

Bank charges 0.01% 0.01% 0.02% 0.01% 0.01%

53

Exchange loss 0.00% 0.06% 0.30% 4.53% 0.37%

Total finance cost 1.82% 2.80% 5.15% 10.41% 3.97% 2005 2006 2007 2008 2009

Other operating expenses

Workers' Profit Participation Fund 1.19% 1.12% 1.45% 0.81% 0.85%

Worker's Welfare Fund 0.00% 0.53% 0.64% 0.33% 0.34%

Property, plant and equipment written off 0.00% 0.00% 0.00% 0.96% 0.01%

Loss on sale of property, plant & equipment 0.00% 0.00% 0.71% 0.00% 0.00%

Auditor's remuneration

Fees - annual audit 0.00% 0.00% 0.00% 0.00% 0.00%

Fees - half yearly review 0.00% 0.00% 0.00% 0.00% 0.00%

Other certification & services 0.00% 0.00% 0.00% 0.00% 0.00%

Out of pocket expenses 0.00% 0.00% 0.00% 0.00% 0.00%

0.00% 0.00% 0.01% 0.00% 0.00%

Total other operating expenses 1.19% 1.65% 2.81% 2.10% 1.21%

TOTAL OTHER OPERATING COSTS 3.01% 4.46% 7.96% 12.51% 5.18%

NET PROFIT AFTER INTEREST 19.37% 17.03% 21.63% 10.76% 13.96%

PLUS: OTHER INCOMES

Share of profit of associate & joint venture 0.00% 0.00% 0.00% 0.50% -0.86%

Compensation from GOP 4.91% 4.76% 4.90% 2.24% 0.00%

Others

Income from financial assets

Profit on bank balances and term deposits 2.98% 3.52% 4.24% 2.21% 1.59%

Surplus of investment at fair value 0.00% 0.02% 0.73% 0.00% 0.00%

Dividend received on investment in MMF 0.00% 0.00% 0.00% 0.47% 0.43%

Gain on sale of investment 0.00% 0.00% 0.05% 0.05% 0.60%

2.98% 3.54% 5.01% 2.73% 2.61%

Income on payments made on behalf of FF 0.00% 0.00% 0.00% 0.00% 0.00%

Income from asset other the financial asset

Scrap sales and miscellaneous receipts 0.18% 0.19% 0.31% 0.19% 0.10%

Gain on sale of property, plant & equipment 0.02% 0.02% 0.00% 0.01% 0.00%

0.20% 0.21% 0.31% 0.20% 0.10%

Total others 3.19% 3.75% 5.32% 2.93% 2.72%

TOTAL OTHER INCOMES 8.10% 8.51% 10.22% 5.67% 1.86%

PROFIT BEFORE TAXATION 27.46% 25.54% 31.85% 16.42% 15.82%

Less: Taxation 10.28% 8.92% 11.11% 5.61% 5.51%

PROFIT AFTER TAXATION 17.18% 16.62% 20.75% 10.81% 10.30%

54

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

2005 2006 2007 2008 2009

COST OF SALES GROSS PROFIT NET PROFIT

8.2.1 CGS, GP and Net Profit

The Cost of Sales involves the identification of the expenses that are

related to the manufacturing process. It is determined by adding beginning

inventory of material and net purchases with the deduction of ending inventory

from both. Gross Profit is determined by deduction of Cost of good sold from net

sales. Net Profit is amount of money earned after all expenses, including

overhead, employee salaries, manufacturing costs, and advertising costs, have

been deducted from the total revenue. Amounts are given below:

Amounts:

2005 2006 2007 2008 2009

Cost of Sales 67.99% 68.15% 60.61% 69.33% 73.68%

Gross Profit 32.01% 31.85% 39.39% 30.67% 26.32%

Net Profit 17.18% 16.62% 20.75% 10.81% 10.30%


CGS, GP, NET PROFIT

Source: FFBL Annual Report

55

Interpretation:

Cost of goods sold contribution has been decreasing over the year which is

a good sign for the company as it is able to control its cost and it is good for the

future sales growth the profits. But in 2007-2009 cost of goods sold contribution

has been increasing over the year which is not a good sign for the company.

The company also improved year after year in the gross profit section as

well which better tells the company how much they improved over the past few

years and the big reason for that in not only better sales but also a decline in cost

of sales percentage.

The company maintained its distribution cost over all the past years which

were around 8 to 9 percent. As the company improved in increasing sales and

decreasing their cost of sales and maintain their distribution cost they also made a

healthier operating profit over the last few years.

So because all these reason the company improved in maintain their before

tax and after tax profit to a much better position.

56

8.3 Balance Sheet

FAUJI FERTILIZER BIN QASIM LIMITEDVertical Analysis of Summarized Balance Sheet


2005 2006 2007 2008 2009EQUITY AND LIABILITIES

SHARE CAPITAL AND RESERVES

Share capital 38.00% 33.75% 32.16% 19.97% 25.79%

Capital reserves 0.93% 0.82% 0.79% 0.49% 0.63%

Statutory reserves 0.00% 0.00% 0.00% 0.00% 0.02%

Translation reserves 0.00% 0.00% 0.00% 1.22% 1.93%

Accumulated profit / (loss) -7.49% -3.73% -3.65% 0.74% 1.07%

TOTAL SHARE CAPITAL AND RESERVES 31.44% 30.84% 29.29% 22.42% 29.43%


Long-term financing


Habib Bank Limited 2.90% 2.11% 1.56% 0.69% 0.54%

Standard Chartered Bank 1.66% 1.21% 0.89% 0.40% 0.31%

Muslim Commercial Bank Limited 2.86% 2.08% 1.54% 0.68% 0.53%

Askari Commercial Bank Limited 0.64% 0.46% 0.34% 0.15% 0.12%

Saudi Pak Agricultural Investment Company 0.24% 0.17% 0.13% 0.06% 0.04%

8.31% 6.03% 4.47% 1.98% 1.54%


Pak Kuwait Investment Company Limited 1.02% 0.74% 0.55% 0.24% 0.19%

9.33% 6.78% 5.02% 2.23% 1.73%

Less: Current portion under current liabilities 1.70% 1.51% 1.44% 0.89% 1.15%

Total long-term financing 7.63% 5.27% 3.59% 1.34% 0.58%


Gross lease payments payable in future 0.03% 0.01% 0.00% 0.00% 0.00%

Less: Finance charge 0.00% 0.00% 0.00% 0.00% 0.00%

Total liabilities against asset subject to lease 0.03% 0.01% 0.00% 0.00% 0.00%

Long term murabaha

Faysal Bank Limited (FBL) 0.87% 0.63% 0.47% 0.21% 0.16%


Total long term murabaha 0.71% 0.49% 0.33% 0.12% 0.05%


Compensated leave absences 0.00% 0.00% 0.00% 0.25% 0.40%

Deferred tax 5.38% 9.52% 13.75% 8.72% 10.79%

57

Total deferred tax liability 5.38% 9.52% 13.75% 8.97% 11.19%

2005 2006 2007 2008 2009

Long term loan

Government of Pakistan (GOP) loan 20.94% 17.56% 15.67% 9.03% 10.68%

Deferred Government Assistance 10.70% 8.20% 6.64% 3.44% 3.63%

31.64% 25.76% 22.32% 12.47% 14.31%


Total long term loan 29.01% 23.42% 20.08% 11.09% 12.53%

TOTAL NON-CURRENT LIABILITIES 42.75% 38.71% 37.76% 21.52% 24.34%



Creditors 6.57% 5.41% 3.61% 10.15% 8.14%

Accrued liabilities 1.34% 1.44% 1.71% 1.51% 3.81%

Advances from customers 2.46% 1.71% 1.21% 0.78% 2.31%


Payable to gratuity fund 0.00% 0.00% 0.00% 0.02% 0.04%

Worker's welfare fund 0.00% 0.28% 0.54% 0.52% 0.78%

Unclaimed dividend 1.31% 0.66% 1.02% 0.08% 1.07%

Tax deducted at source 0.01% 0.01% 0.01% 0.01% 0.01%

Other payables 0.08% 0.11% 0.34% 0.27% 2.24%

Total trade and other payable 11.82% 9.66% 8.48% 13.39% 18.54%

Mark-up accrued


From banks and financial institutions 0.18% 0.14% 0.11% 0.06% 0.05%

From PKIC, an associated undertaking 0.02% 0.02% 0.01% 0.01% 0.00%

0.21% 0.15% 0.12% 0.07% 0.05%

On long term murabaha 0.02% 0.01% 0.01% 0.01% 0.01%

On short term borrowings 0.16% 0.21% 0.30% 1.20% 0.24%

Total mark-up accrued 0.38% 0.38% 0.43% 1.27% 0.30%

Short term running finance 9.10% 16.37% 20.23% 39.03% 21.34%

Current portion of:

Long term financing 1.70% 1.51% 1.44% 0.89% 1.15%

Liabilities against assets subject to lease 0.02% 0.01% 0.01% 0.00% 0.00%

Long term murabaha 0.16% 0.14% 0.13% 0.08% 0.11%

Long term loan 2.64% 2.34% 2.23% 1.39% 1.79%

Sales tax payable 0.00% 0.04% 0.00% 0.00% 0.00%

Provision for income tax – net 0.00% 0.00% 0.00% 0.00% 3.00%

Total of current portion 4.51% 4.04% 3.81% 2.36% 6.05%

TOTAL CURRENT LIABILITIES 25.81% 30.45% 32.95% 56.06% 46.23%

TOTAL EQUITY AND LIABILITIES 100.00% 100.00% 100.00% 100.00% 100.00%

58

2005 2006 2007 2008 2009

ASSETS

NON-CURRENT ASSETS


Owned assets

Leasehold land 0.65% 0.56% 0.51% 0.31% 0.40%

Free hold land 0.49% 0.43% 0.41% 0.26% 0.33%

Buildings on leasehold land 4.89% 4.19% 3.86% 2.31% 3.07%

Plant and machinery 49.31% 43.48% 46.38% 30.32% 36.54%

Catalyst 0.16% 0.14% 0.20% 0.09% 0.31%

Furniture and fittings 0.01% 0.01% 0.01% 0.01% 0.01%

Vehicles 0.07% 0.12% 0.14% 0.10% 0.27%

Office and other equipment 0.02% 0.02% 0.00% 0.02% 0.07%

Computer and ancillary equipment 0.02% 0.01% 0.02% 0.02% 0.05%

Library books 0.00% 0.00% 0.00% 0.00% 0.00%

Capital work in progress 3.60% 4.95% 5.11% 0.44% 1.95%

59.22% 53.93% 56.66% 33.88% 43.00%


Vehicles 0.03% 0.01% 0.00% 0.00% 0.00%

Total property, plant and equipment 59.24% 53.94% 56.66% 33.88% 43.00%



Cost of investment 2.99% 5.10% 4.86% 3.02% 5.81%

Share of profit / loss 0.00% 0.00% 0.00% 0.26% -0.93%

Dividend 0.00% 0.00% 0.00% 0.00% -0.27%

Gain on translation of net assets 0.00% 0.00% 0.00% 1.22% 0.35%

Balance 2.99% 5.10% 4.86% 4.50% 4.96%




Share of post acquisition profits 0.00% 0.00% 0.00% 0.02% 0.06%

Balance 0.00% 0.00% 0.00% 0.66% 0.92%

Investment - available for sale


300,000 ordinary shares of Rs. 10 each 0.01% 0.01% 0.01% 0.01% 0.01%

Less: Impairment in value of investment 0.01% 0.01% 0.01% 0.01% 0.01%

0.00% 0.00% 0.00% 0.00% 0.00%

Total long term investments 2.99% 5.10% 4.86% 5.17% 5.87%

Long term deposits

Security deposit 0.06% 0.06% 0.05% 0.03% 0.21%

Lease key money 0.01% 0.01% 0.01% 0.00% 0.00%

0.07% 0.06% 0.06% 0.03% 0.21%

Less: Current portion of long term deposits 0.00% 0.00% 0.01% 0.00% 0.00%

Total long term deposits 0.07% 0.06% 0.05% 0.03% 0.21%

59

TOTAL NON-CURRENT ASSETS 62.30% 59.10% 61.57% 39.08% 49.09%

2005 2006 2007 2008 2009

CURRENT ASSETS

Short term investments


Term deposits with bank & financial institution 0.00% 0.00% 7.40% 0.00% 12.15%


Fixed income / Money market funds 0.00% 1.81% 5.70% 0.00% 0.69%

Surplus on re measurement 0.00% 0.01% 0.31% 0.00% 0.02%

0.00% 1.81% 6.01% 0.00% 0.71%

Total short term investments 0.00% 1.81% 13.41% 0.00% 12.86%

Bank balances

Deposit accounts 26.88% 25.46% 12.05% 14.44% 22.02%

Current accounts 1.32% 0.68% 1.04% 2.53% 4.61%

Cash in hand 0.00% 0.00% 0.00% 0.00% 0.00%

Total bank balances 28.20% 26.14% 13.08% 16.98% 26.63%

Trade debts

Considered good 0.47% 0.83% 0.84% 0.61% 1.32%

Due from FF, unsecured, considered good 0.00% 0.00% 0.00% 0.00% 0.00%

Total trade debts 0.47% 0.84% 0.84% 0.61% 1.32%

Other receivables

Due from holding company - considered good 1.09% 1.35% 0.23% 0.88% 0.45%

Other receivables

Considered good (net) 0.27% 3.50% 2.58% 0.12% 0.19%

Considered doubtful 0.22% 0.19% 0.18% 0.11% 0.15%

0.49% 3.70% 2.77% 0.24% 0.34%

Less: Provision for doubtful receivables 0.22% 0.19% 0.18% 0.11% 0.15%

0.27% 3.50% 2.58% 0.12% 0.19%

Insurance claims 0.01% 0.01% 0.00% 0.00% 0.00%

Total other receivables 1.37% 4.87% 2.82% 1.01% 0.64%

Stores and spares

Stores 0.14% 0.11% 0.08% 0.10% 0.20%

Spares 2.02% 2.37% 3.96% 2.73% 5.10%

Items in transit 0.21% 0.41% 0.44% 0.52% 0.36%

2.37% 2.90% 4.48% 3.35% 5.66%

Less: Provision for obsolescence 0.02% 0.02% 0.12% 0.31% 0.55%

Total stores and spares 2.35% 2.88% 4.36% 3.04% 5.11%

Stock in trade

Packing materials 0.04% 0.05% 0.11% 0.13% 0.05%

Raw materials 1.39% 0.75% 1.00% 0.06% 2.85%

Raw material in transit 1.09% 1.21% 0.00% 0.00% 0.00%

Work in process 0.01% 0.02% 0.05% 0.01% 0.01%

Finished goods 1.64% 0.86% 0.87% 11.94% 0.47%

Total stock in trade 4.16% 2.89% 2.02% 12.14% 3.39%

Income and sales tax refundable 0.64% 0.91% 1.26% 0.26% 0.33%

Interest accrued 0.35% 0.33% 0.33% 0.14% 0.32%

60

Due from GOP on account of DAP subsidy 0.00% 0.00% 0.00% 26.60% 0.00%

2005 2006 2007 2008 2009

Advances

Advances to:

Executives, unsecured considered good 0.00% 0.00% 0.01% 0.00% 0.01%

Other employees, considered good 0.01% 0.02% 0.01% 0.02% 0.04%


Considered good 0.14% 0.20% 0.25% 0.12% 0.26%


0.14% 0.20% 0.25% 0.12% 0.26%

Less: Provision for doubtful advances 0.00% 0.00% 0.00% 0.00% 0.00%

0.14% 0.20% 0.25% 0.12% 0.26%

Total advances 0.15% 0.22% 0.27% 0.14% 0.31%


Current portion of long term deposits 0.00% 0.00% 0.01% 0.00% 0.00%

Security deposits 0.00% 0.01% 0.02% 0.00% 0.00%

Prepayments 0.01% 0.01% 0.01% 0.01% 0.01%

Total trade deposits and prepayments 0.01% 0.02% 0.03% 0.01% 0.01%

TOTAL CURRENT ASSETS 37.70% 40.90% 38.43% 60.92% 50.91%

TOTAL ASSETS 100.00% 100.00% 100.00% 100.00% 100.00%

61

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

2005 2006 2007 2008 2009

NON-CURRENT ASSETS CURRENT ASSETS

8.3.1 Total Assets

All the valuables possessed by the Fauji Fertilizer Bin Qasim Limited are

called its assets. It includes all Current Assets, Non-Current Assets, and Fixed

Assets. Amounts are given below:

Amounts:

2005 2006 2007 2008 2009

Total Non-Current Assets 62.30% 59.10% 61.57% 39.08% 49.09%

Total Current Assets 37.70% 40.90% 38.43% 60.92% 50.91%


TOTAL ASSETS


62

Interpretation:

Non-Current Assets has decreased year by year and dropped to 25% in

2008 as compared to 2007 which tells that the company was not in good position.

So, these are increased in fiscal year 2009 which shows the relative good position

of the company.

Fixed assets of the company has deteriorated year by year and dropped to

34% in 2008 as compared to other years which tells that the company was not

interested in buying plants and equipment. The Fixed assets section increased in

huge amount in 2009 which tells us that the company really invested in the buying

of the fixed assets for much better capacity and storage so they can improve and

increase their production.

The current assets section as it is clear that the stores, spares and loose tools

and stock in trade were almost just enough as much they needed. It seems that the

company is utilizing their inventory as much they needed. The current assets

section was in the greater proportion as compared to rest of assets that how well

the company not in the long term but also in short term is keeping it better in the

market and improved their position over the last few years.

63

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

2005 2006 2007 2008 2009

TOTAL EQUITY TOTAL NON-CURRENT LIABILITIESTOTAL CURRENT LIABILITIES

8.3.2 Total Equity and Liabilities

The claim of outsiders against the assets of the firm is called liability. It

includes current and non current liabilities for the particular year, and the claim of

the owner against the assets of the firm are called shareholder equity. Amounts are

given below:

Amounts:

2005 2006 2007 2008 2009

Total Equity 31.44% 30.84% 29.29% 22.42% 29.43%Total Non-Current Liabilities 42.75% 38.71% 37.76% 21.52% 24.34%Total Current Liabilities 25.81% 30.45% 32.95% 56.06% 46.23%


TOTAL EQUITY AND LIABILITIES


64

Interpretation:

As the number of shares issued in 2001 was 3,341,100 shares and they have

increased it to 9,341,100 shares in 2008. The reason for increasing shares is to

raise funds for the company. The number of shares issued till 2005-2009 are same.

The company after 2008 raised some share capital to raise fund as their value was

Going Up, while 2005-2008 it shows the declining. As the share holder equity

section is increasing year by year but in terms of percentage it is going down and it

are about 30% of the assets.

There is no redeemable capital which tells us that the company position is

getting good and strong that they were not in the need of urgent funds by issuing

some temporary shares.

Non-Current Liabilities shows the negative trend. The reason is that Long

term financing is also falling down which means that the company has increased

its capital to overcome its business. In the year 2009, it becomes 0.58% which is

the best in comparison of the previous years.

The Current Liabilities shows the positive trend. The Current Liabilities are

around 25 to 30% which means that the company is paying off its liabilities within

one year.

65

8.4 Conclusion

The company mainly manufactures and market fertilizers. The analysis of

Fauji Fertilizer Bin Qasim Limited has shown a modest growth over the past few

years showing healthy increases in the profit of the company.

According to the Component Percentage Analysis,

The company’s numbers of share are going to increase from 2004 to 2009.

The reason for increasing shares is to raise funds for the company. The Current

Liabilities shows the positive trend and Non-Current Liabilities shows the negative

trend, which shows that the company’s financial position is healthy. Company has

the good quantity of assets, which leads the company upward. But there is

problem in Fixed Assets, which shows the negative trend. This is due to that

company is not interested in buying the new assets.

Cost of goods sold contribution has been decreasing over the year which is

a good sign for the company as it is able to control its cost. Selling and

administrative expenses contribution has remained which is a positive sign as the

firm is able to control its expenses. An important development in 2008 is the

amount spent on interest charges which has increased by around 5% due to high

debt. The company’s profit is good and in the remaining years it show the good

result if the company control their cost of sales.

66

9. Trend Percentage Analysis

9.1 Introduction

The process of dividing each expense item of a given year by the same

expense item in the base year is known as Trend Percentage Analysis. This allows

for the exploration of changes in the relative importance of expense items over

time and the behavior of expense items as sales change.

Comparing analytical data for a current period with similar computation for

prior years afford some basis for judging whether the condition of the business is

improving or worsening. This comparison of data over time is sometimes called

horizontal or trend analysis. The changes in financial statement items from a base

year to following years are expressed as trend percentages to show the extent and

direction of change.

First, a base year is selected and each item in financial statement for the

base year is given a weight of 100%.

Second step is the express each item in the financial statement for

following years as a percentage of its base year amount.

Trend percentage analyses of FAUJI FERTILIZER BIN QASIM

LIMITED are given on next pages.

68


FAUJI FERTILIZER BIN QASIM LIMITEDHorizontal Analysis of Summarized Profit & Loss Account


2005 2006 2007 2008 2009SALES

Gross sales 100.00% 103.28% 86.19% 179.42% 243.96%

Less:

Sale tax 100.00% 104.20% 81.04% 38.42% 0.00%

Trade discount 100.00% 108.21% 163.92% 197.98% 446.61%

Commission to holding company 100.00% 105.55% 78.09% 92.86% 123.55%

100.00% 104.68% 90.39% 57.70% 53.36%

NET SALES 100.00% 103.17% 85.89% 188.15% 257.63%

LESS: COST OF SALES

Raw materials consumed 100.00% 107.20% 98.57% 519.66% 234.36%

Packing materials consumed 100.00% 112.24% 94.75% 181.82% 173.69%

Fuel and power 100.00% 125.25% 111.96% 174.32% 202.56%




Insurance 100.00% 108.05% 102.06% 105.35% 157.14%




Provision for doubtful advances 100.00% 0.00% 0.00% 0.00% 0.00%

Depreciation 100.00% 106.62% 113.64% 128.24% 131.01%

Provision for inventory obsolescence 100.00% 0.00% 690.85% 2642.42% 1309.36%

Opening stock - work in process 100.00% 33.56% 107.12% 300.58% 80.37%

Closing stock - work in process 100.00% 319.22% 895.74% 239.49% 341.76%

Subsidy on DAP fertilizer from Pak Govt. 0.00% 100.00% 211.56% 1174.08% 0.00%

Cost of goods manufactured 100.00% 95.41% 77.72% 249.50% 226.87%

Opening stock - own manufactured fertilizers 100.00% 1011.91% 252.07% 640.22%14170.14

%Closing stock - own manufactured fertilizers 100.00% 24.91% 63.27% 1400.33% 42.87%

Cost of sale - own manufactured fertilizer 100.00% 102.41% 79.09% 201.20% 294.69%

Opening stock - purchased fertilizers 100.00% 67.67% 2944.33% 26.23% 0.00%

Purchase of fertilizers 100.00% 148.83% 3.76% 23.24% 0.00%

Closing stock - purchased fertilizers 100.00% 4351.01% 38.76% 0.00% 0.00%

Cost of sales - purchased fertilizers 100.00% 121.57% 30.94% 23.42% 0.00%

TOTAL COST OF SALES 100.00% 103.41% 76.56% 191.85% 279.19%

GROSS PROFIT 100.00% 102.67% 105.70% 180.30% 211.84%

69

2005 2006 2007 2008 2009

LESS: OPERATING EXPENSES

Selling and distribution expenses

Product transportation 100.00% 111.98% 79.38% 137.90% 160.93%



Rent, rates, and taxes 100.00% 102.90% 97.75% 129.32% 168.01%

Technical services 100.00% 139.42% 121.88% 183.43% 290.91%

Insurance expenses 0.00% 0.00% 0.00% 0.00% 100.00%


Sale promotion and advertising 100.00% 77.65% 74.73% 84.61% 150.32%



Depreciation 100.00% 126.35% 118.12% 172.43% 217.14%

Total expenses 100.00% 117.61% 112.34% 157.84% 260.41%

Total selling and distribution expenses 100.00% 112.94% 84.97% 141.28% 177.79%




Utilities 100.00% 140.14% 161.91% 207.32% 331.74%

Printing and stationery 100.00% 142.73% 160.54% 136.49% 530.30%


Communication, advertisement and other 100.00% 96.85% 93.72% 123.86% 183.36%


Listing fee 100.00% 101.92% 103.37% 106.25% 157.69%

Donation to President relief fund 100.00% 2.74% 3.29% 7.48% 186.19%

Legal and professional 100.00% 67.33% 68.74% 72.59% 237.60%

Depreciation 100.00% 26.42% 32.25% 25.47% 32.80%

Miscellaneous 100.00% 114.59% 139.70% 184.07% 594.73%

Total administrative expenses 100.00% 90.54% 114.76% 181.17% 350.49%

TOTAL OPERATING EXPENSES 100.00% 111.07% 87.45% 144.61% 192.20%

OPERATING PROFIT 100.00% 99.05% 113.55% 195.65% 220.29%


Finance cost


Banking companies & financial institution 100.00% 107.01% 87.97% 76.58% 64.71%

PKIC, an associated undertaking 100.00% 107.01% 87.97% 76.58% 0.00%

100.00% 107.01% 87.97% 76.58% 57.62%

Finance charge on leased plant, equipment 100.00% 43.86% 19.60% 2.76% 0.00%

Mark-up on long term murabaha 100.00% 107.01% 87.97% 76.56% 57.62%

Mark-up on short term borrowings 100.00% 277.36% 581.94% 1942.14% 1642.36%

Interest on WPPF 100.00% 180.00% 246.00% 283.00% 454.00%

Bank charges 100.00% 126.11% 231.55% 290.48% 423.30%

Exchange loss 100.00% 3005.19%11825.00

%394101.30

%44216.56

%Total finance cost 100.00% 158.72% 242.68% 1074.59% 561.85%

70

2005 2006 2007 2008 2009



Worker's Welfare Fund 0.00% 100.00% 100.56% 113.58% 161.72%

Property, plant and equipment written off 0.00% 0.00% 0.00% 100.00% 1.63%

Loss on sale of property, plant & equipment 0.00% 0.00% 100.00% 0.00% 0.00%




Other certification & services 0.00% 0.00% 100.00% 41.10% 41.10%


100.00% 100.00% 136.30% 120.37% 140.74%

Total other operating expenses 100.00% 143.20% 202.55% 332.57% 260.80%

TOTAL OTHER OPERATING COSTS 100.00% 152.58% 226.82% 781.37% 442.89%

NET PROFIT AFTER INTEREST 100.00% 90.73% 95.92% 104.51% 185.65%

PLUS: OTHER INCOMES

Share of profit of associate & joint venture 0.00% 0.00% 0.00% 100.00% -236.38%

Compensation from GOP 100.00% 100.00% 85.71% 85.71% 0.00%

Others


Profit on bank balances and term deposits 100.00% 121.83% 122.06% 139.15% 137.30%

Surplus of investment at fair value 0.00% 100.00% 3724.63% 0.00% 0.00%

Dividend received on investment in MMF 0.00% 0.00% 0.00% 100.00% 122.70%

Gain on sale of investment 0.00% 0.00% 100.00% 222.91% 3855.65%

100.00% 122.39% 144.30% 172.07% 225.63%

Income on payments made on behalf of FF 100.00% 0.00% 0.00% 0.00% 0.00%


Scrap sales and miscellaneous receipts 100.00% 110.45% 146.80% 196.29% 141.81%

Gain on sale of property & equipment 100.00% 106.63% 0.00% 130.90% 47.84%

100.00% 110.07% 132.21% 189.79% 132.47%

Total others 100.00% 121.59% 143.50% 173.15% 219.69%

TOTAL OTHER INCOMES 100.00% 108.49% 108.45% 131.66% 59.16%

PROFIT BEFORE TAXATION 100.00% 95.96% 99.62% 112.52% 148.36%

Less: Taxation 100.00% 89.51% 92.77% 102.69% 138.08%

PROFIT AFTER TAXATION 100.00% 99.83% 103.71% 118.39% 154.52%

71

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

2005 2006 2007 2008 2009

NET SALES

9.2.1 Net Sales

This is the amount of net revenues earned from sales of goods during the

particular period. It is determined by deducting sales tax from own manufactured

and purchased products or services rendered of that period. Amounts are given

below:

Amounts:

2005 2006 2007 2008 2009

Net Sales 100.00% 103.17% 85.89% 188.15% 257.63%


NET SALES


72

Interpretation:

Net Sales are showing positive optimistic trend. It’s increasing year by year

but shows the decline in fiscal year 2007 and then reaches to the 257.63% in fiscal

year 2009 as compared to the fiscal year 2005. Further explanations are given as

under:

FY2005: Company's sales in 2005 are 24% higher than the year 2004. This is

mainly due to increase in volumes and higher prices of both Granular Urea and

DAP, coupled with un-interrupted availability of Phos acid from Morocco

throughout the year. The Company achieved the highest Ammonia, Urea and DAP

production during the year with a significant increase over 2004.

FY2006: During the year, sales net of DAP subsidy increased by 3% that is given

to farmers by the GOP through fertilizer company that is deducted from the cost of

production. It decrease the net sales price, thereby the sale of the company were

reduced by the amount of subsidy. But the Company achieved the highest

Ammonia and Urea production during the year.

FY2007: DAP sales has been decreased by 16%. During the year the Company

achieved ever-highest daily Ammonia production in September 2007. But the

required level is not achieved till the end of year. So, Ammonium, Sona DAP and

Granular Urea production was lower than last year 2006.

FY2008: The Company achieved the ever-highest Ammonia, Urea and DAP

production during the year with a significant increase over 2004. Ammonia, Urea

and DAP production during the year was better than the last year 2007 by 35%,

37% and 32%, respectively. For the better production, FFBL imported the Urea.

FY2009: With the DAP achieving the record yearly production, the overall

performance of all the plants remained satisfactory. Ammonium and Urea

production were lower as compared to the year 2008. No sale tax has been paid

during this year.

73

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

2005 2006 2007 2008 2009

COST OF SALES

9.2.2 Cost of Sales

The Cost of Sales involves the identification of the expenses that are

related to the manufacturing process. It is determined by adding beginning

inventory of material and net purchases with the deduction of ending inventory

from both. Amounts are given below:

Amounts:

2005 2006 2007 2008 2009

Cost of Sales 100.00% 103.41% 76.56% 191.85% 279.19%

Graphical Representation:

COST OF SALES


74

Interpretation:

Cost of sales are showing positive optimistic trend. It’s increasing year by

year but shows the decline in 2007 and then reaches to the 279.19% in fiscal year

2009 as compared to the fiscal year 2005. Further explanations are given as under:

FY2005: Cost of sales, net of DAP subsidy has been increased over the last year.

Cost of sales has been increased due to increase in purchase prices of raw material

consumed in process, and increase in fuel gases prices.

FY2006: Cost of sales, net of DAP subsidy has been increased by 3% over the

last year. However, the cost of sales has been increased 16% due to mainly on

account of increase in phosphoric acid and fuel gases also increased by 25%.

FY2007: Cost of sales has been decreased by 26% as the company is able to

control its cost. It is attributable to the continuity of DAP subsidy. Lesser

production during the year has resulted in lower raw material consumption.


last year. Cost of good sold grow much because of increase in raw material

consumed in business process and in manufacturing cost -through offset by prices

driven by change in demand and demand of food grains.


last year. Cost of sales has been increased because company did not purchase any

fertilizer. It consumed all the fertilizer and shows the good production. No subsidy

on DAP fertilizer from the compensation of GOP is paid out. So cost of sales has

been increased during this year.

9.2.3 Gross Profit

75

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

2005 2006 2007 2008 2009

GROSS PROFIT

Gross Profit is determined by deduction of Cost of good sold from net

sales. It helps to determine the net profit by deducting the operating expenses and

adding the operative income. Amounts are given below:

Amounts:

2005 2006 2007 2008 2009

Gross Profit 100.00% 102.67% 105.70% 180.30% 211.84%


Interpretation:

GROSS PROFIT


76

Gross Profits are showing positive trend. It’s increasing year by year and

reaches to the 211.84% in 2009 as compared to the 2005. Gross Profits are higher

due to higher unit selling price of Urea, Ammonium and DAP. This was mainly

attributed to shifting of plant turnaround to the year 2006 and overall increased

plant load. Further explanations are given as under:

FY2005: Gross profit for the year is 32% of the sales, higher by 40% compared to

2004. This is mainly due to higher production, better plant efficiency and

improved selling price of Urea and DAP.

FY2006: Gross Profit (32% of sales) remained the same as that of last year.

Consistent gross profit margin as of the last year are mainly due to better plant

efficiency, 5% increase in sale volume and improved selling price of Urea.

FY2007: Company’s cost of sales has been decreased 26%. By decreasing the

cost of sale, gross profit has been increased by 3% showing the better plant

efficiency.

FY2008: Company’s gross profit has been increased by 74% during this year.

Because of increase in raw material consumed in business process and in

manufacturing cost -through offset by prices driven by change in demand and

demand of food grains.

FY2009: Company’s gross profit has been increased by 32% during this year. But

the gross profit margin is decreased by 5% due to mainly completion of gas feed

subsidy during the year 2008.

9.2.4 Net Profit

77

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

160.00%

2005 2006 2007 2008 2009

NET PROFIT

Net Profit is amount of money earned after all expenses, including

overhead, employee salaries, manufacturing costs, and advertising costs, have

been deducted from the total revenue. Amounts are given below:

Amounts:

2005 2006 2007 2008 2009

Net Profit 100.00% 99.83% 103.71% 118.39% 154.52%


Interpretation:

NET PROFIT


78

Cost of sales are showing positive optimistic trend. It’s increasing year by

year but shows the decline in 2007 and then reaches to the 279.19% in fiscal year

2009 as compared to the fiscal year 2005. Further explanations are given as under:

FY2005: The net profit for the year shows an improvement of 34% over 2004.

Other incomes like as compensation of GOP and that of bank deposits improved

the profit rates and better liquidity position of the business as compared to the last

year.

FY2006: Net profit for the year is marginally the same as compared to the last

year. Other incomes like as compensation of GOP and that of bank deposits

improved the profit rates and better liquidity position of the business as compared

to the last year.

FY2007: Net profit shows the improvement means it is higher as compared to the

last year. Other incomes like as compensation of GOP has been decreased, but the

other income resources of FFBL has been increased that results the improved

profits and better liquidity position of the company.

FY2008: Net profit has been increased by 14% during this year. Company’s

finance cost is higher that shows the greater utilization of borrowed funds. But the

company’s other income resources are higher as it gets the share of profit on joint

venture has gained. That shows the improvement in net profit.

FY2009: Net profit has been increased by 37% during this year. Total finance

cost has been decreased that shows the reduced utilization of borrowed funds.

Other income resources are high made on the account of bank deposits and mutual

funds with the loss on share of joint venture. But the net profit after interest has

been increased during this year as compared to last year. Overall in 2009, it shows

the improved profits and better liquidity position of company.

9.3 Balance Sheet

79

FAUJI FERTILIZER BIN QASIM LIMITEDHorizontal Analysis of Summarized Balance Sheet


2005 2006 2007 2008 2009

EQUITY AND LIABILITIES


Share capital 100.00% 100.00% 100.00% 100.00% 100.00%


Statutory reserves 0.00% 0.00% 0.00% 0.00% 100.00%

Translation reserves 0.00% 0.00% 0.00% 100.00% 121.94%

Accumulated profit / (loss) 100.00% 56.02% 57.58% -18.70% -20.96%

TOTAL SHARE CAPITAL AND RESERVES 100.00% 110.48% 110.11% 135.70% 137.95%


Long-term financing


Habib Bank Limited 100.00% 81.82% 63.64% 45.45% 27.27%

Standard Chartered Bank 100.00% 81.82% 63.64% 45.45% 27.27%

Muslim Commercial Bank Limited 100.00% 81.82% 63.64% 45.45% 27.27%

Askari Commercial Bank Limited 100.00% 81.82% 63.64% 45.45% 27.27%

Saudi Pak Agricultural Investment Company 100.00% 81.82% 63.64% 45.45% 27.27%

100.00% 81.82% 63.64% 45.45% 27.27%


Pak Kuwait Investment Company Limited 100.00% 81.82% 63.64% 45.45% 27.27%

100.00% 81.82% 63.64% 45.45% 27.27%


Total long-term financing 100.00% 77.78% 55.56% 33.33% 11.11%


Gross lease payments payable in future 100.00% 50.94% 0.00% 0.00% 0.00%

Less: Finance charge 100.00% 10.81% 0.00% 0.00% 0.00%

Total liabilities against asset subject to lease 100.00% 52.59% 0.00% 0.00% 0.00%

Long term murabaha

Faysal Bank Limited (FBL) 100.00% 81.82% 63.64% 45.45% 27.27%


Total long term murabaha 100.00% 77.78% 55.55% 33.33% 11.11%


Compensated leave absences 0.00% 0.00% 0.00% 100.00% 123.43%

Deferred tax 100.00% 199.23% 302.07% 308.58% 295.63%

Total deferred tax liability 100.00% 199.23% 302.07% 317.39% 306.50%

2005 2006 2007 2008 2009

Long term loan

80

Government of Pakistan (GOP) loan 100.00% 94.41% 88.43% 82.03% 75.18%

Deferred Government Assistance 100.00% 86.30% 73.36% 61.24% 50.00%

100.00% 91.67% 83.33% 75.00% 66.67%


Total long term loan 100.00% 90.91% 81.82% 72.73% 63.64%

TOTAL NON-CURRENT LIABILITIES 100.00% 101.95% 104.36% 95.78% 83.91%



Creditors 100.00% 92.67% 64.91% 293.88% 182.52%


Advances from customers 100.00% 78.07% 58.08% 60.33% 138.41%


Payable to gratuity fund 0.00% 0.00% 0.00% 100.00% 171.95%

Worker's welfare fund 0.00% 100.00% 200.56% 314.15% 362.28%

Unclaimed dividend 100.00% 56.94% 91.77% 12.26% 120.09%

Tax deducted at source 100.00% 75.07% 73.42% 214.21% 122.80%

Other payables 100.00% 142.76% 471.50% 615.03% 3912.65%

Total trade and other payable 100.00% 92.05% 84.80% 215.58% 231.10%

Mark-up accrued


From banks and financial institutions 100.00% 84.08% 68.04% 61.22% 43.69%

From PKIC, an associated undertaking 100.00% 83.81% 68.05% 61.21% 0.00%

100.00% 84.05% 68.04% 61.22% 38.90%

On long term murabaha 100.00% 81.25% 68.03% 61.22% 38.91%

On short term borrowings 100.00% 150.47% 221.80% 1441.40% 228.54%

Total mark-up accrued 100.00% 111.24% 131.31% 629.15% 116.93%

Short term running finance 100.00% 202.62% 262.68% 816.27% 345.63%

Current portion of:


Liabilities against assets subject to lease 100.00% 64.41% 66.03% 0.00% 0.00%


Long term loan 100.00% 100.00% 100.00% 100.00% 100.00%

Sales tax payable 0.00% 100.00% 0.00% 0.00% 0.00%

Provision for income tax - net 0.00% 0.00% 0.00% 100.00%352862.34

%Total of current portion 100.00% 100.88% 99.88% 99.67% 197.74%

TOTAL CURRENT LIABILITIES 100.00% 132.85% 150.83% 413.24% 263.95%

TOTAL EQUITY AND LIABILITIES 100.00% 112.61% 118.16% 190.27% 147.37%

2005 2006 2007 2008 2009

81

ASSETS

NON-CURRENT ASSETS


Owned assets

Leasehold land 100.00% 97.15% 94.22% 91.30% 90.82%

Free hold land 100.00% 100.00% 100.00% 100.00% 100.00%

Buildings on leasehold land 100.00% 96.55% 93.24% 89.92% 92.54%

Plant and machinery 100.00% 99.30% 111.13% 117.01% 109.21%

Catalyst 100.00% 99.24% 150.47% 103.70% 289.80%

Furniture and fittings 100.00% 85.04% 198.21% 214.75% 196.00%

Vehicles 100.00% 186.58% 228.57% 263.55% 546.50%

Office and other equipment 100.00% 110.32% 19.46% 156.35% 406.27%

Computer and ancillary equipment 100.00% 91.29% 154.95% 224.57% 413.49%

Library books 100.00% 65.31% 73.17% 47.70% 278.86%

Capital work in progress 100.00% 155.05% 167.95% 23.49% 79.75%

100.00% 102.55% 113.07% 108.87% 107.01%


Vehicles 100.00% 38.21% 0.00% 0.00% 0.00%

Total property, plant and equipment 100.00% 102.52% 113.01% 108.82% 106.96%




Share of profit / loss 0.00% 0.00% 0.00% 100.00% -274.65%

Dividend 0.00% 0.00% 0.00% 0.00% 100.00%

Gain on translation of net assets 0.00% 0.00% 0.00% 100.00% 21.94%

Balance 100.00% 192.18% 192.18% 286.80% 244.59%




Share of post acquisition profits 0.00% 0.00% 0.00% 100.00% 194.07%

Balance 0.00% 0.00% 0.00% 100.00% 106.79%

Investment - available for sale


300,000 ordinary shares of Rs 10 each 100.00% 100.00% 100.00% 100.00% 100.00%


0.00% 0.00% 0.00% 0.00% 0.00%

Total long term investments 100.00% 192.18% 192.18% 329.14% 289.81%

Long term deposits

Security deposit 100.00% 100.13% 100.13% 100.13% 503.33%

Lease key money 100.00% 68.95% 54.72% 0.00% 0.00%

100.00% 95.04% 92.72% 83.79% 421.18%

Less: Current portion of long term deposits 100.00% 0.00% 208.34% 0.00% 0.00%

Total long term deposits 100.00% 99.30% 87.54% 87.54% 440.05%

TOTAL NON-CURRENT ASSETS 100.00% 106.82% 116.78% 119.36% 116.11%

2005 2006 2007 2008 2009

82

CURRENT ASSETS



Term deposits with bank & financial institution 0.00% 0.00% 100.00% 0.00% 204.65%


Fixed income / Money market funds 0.00% 100.00% 331.15% 0.00% 50.28%

Surplus on re measurement 0.00% 100.00% 3724.63% 0.00% 316.72%

0.00% 100.00% 347.27% 0.00% 51.54%

Total short term investments 0.00% 100.00% 775.23% 0.00% 927.36%

Bank balances

Deposit accounts 100.00% 106.65% 52.96% 102.23% 120.73%

Current accounts 100.00% 58.20% 93.03% 366.65% 516.48%

Cash in hand 0.00% 0.00% 100.00% 167.89% 197.25%

Total bank balances 100.00% 104.39% 54.83% 114.57% 139.19%

Trade debts

Considered good 100.00% 200.66% 211.43% 246.49% 414.33%

Due from FF, unsecured, considered good 100.00% 1809.09% 2190.91% 8372.73% 0.00%


Other receivables

Due from holding company - considered good 100.00% 140.07% 25.23% 154.45% 60.21%

Other receivables

Considered good (net) 100.00% 1442.35% 1116.46% 86.23% 103.49%


100.00% 847.68% 666.16% 92.33% 101.95%


100.00% 1442.35% 1116.46% 86.23% 103.49%

Insurance claims 100.00% 152.90% 0.00% 0.00% 0.00%

Total other receivables 100.00% 400.54% 243.35% 140.22% 68.64%

Stores and spares

Stores 100.00% 90.57% 66.47% 137.17% 205.04%

Spares 100.00% 132.33% 231.73% 257.40% 372.73%

Items in transit 100.00% 224.19% 252.14% 475.43% 255.07%

100.00% 137.88% 223.70% 269.33% 352.49%



Stock in trade

Packing materials 100.00% 144.68% 323.42% 652.49% 177.24%

Raw materials 100.00% 60.42% 84.83% 7.85% 302.61%

Raw material in transit 100.00% 125.33% 0.00% 0.00% 0.00%

Work in process 100.00% 319.22% 895.74% 239.49% 341.76%

Finished goods 100.00% 59.51% 63.07% 1389.13% 42.53%

Total stock in trade 100.00% 78.26% 57.48% 554.93% 119.95%

Income and sales tax refundable 100.00% 159.89% 232.49% 76.13% 76.10%

Interest accrued 100.00% 106.63% 112.84% 76.77% 136.56%

Due from GOP on account of DAP subsidy 0.00% 0.00% 0.00% 100.00% 0.00%

2005 2006 2007 2008 2009

Advances

83

Advances to:

Executives, unsecured considered good 100.00% 210.32% 788.89% 391.27% 938.10%

Other employees, considered good 100.00% 148.73% 112.93% 244.24% 416.31%


Considered good 100.00% 162.46% 213.34% 161.35% 275.48%


100.00% 162.37% 213.19% 161.27% 275.25%


100.00% 162.46% 213.34% 161.35% 275.48%

Total advances 100.00% 161.73% 210.28% 170.93% 294.46%


Current portion of long term deposits 100.00% 0.00% 208.34% 0.00% 0.00%

Security deposits 100.00% 222.99% 736.66% 316.56% 168.33%

Prepayments 100.00% 192.70% 118.74% 152.60% 197.38%

Total trade deposits and prepayments 100.00% 152.99% 256.11% 147.49% 145.40%

TOTAL CURRENT ASSETS 100.00% 122.19% 120.45% 307.47% 199.03%

TOTAL ASSETS 100.00% 112.61% 118.16% 190.27% 147.37%

9.3.1 Total Assets

84

0.00%

50.00%

100.00%

150.00%

200.00%

250.00%

300.00%

350.00%

400.00%

450.00%

2005 2006 2007 2008 2009

NON-CURRENT ASSETS CURRENT ASSETS

All the valuables possessed by the Fauji Fertilizer Bin Qasim Limited are

called its assets. It includes all Current Assets, Non-Current Assets, and Fixed

Assets. Amounts are given below:

Amounts:

2005 2006 2007 2008 2009

Total Non Current Assets 100.00% 106.82% 116.78% 119.36% 116.11%

Total Current Assets 100.00% 122.19% 120.45% 307.47% 199.03%

Total Assets 100.00% 112.61% 118.16% 190.27% 147.37%


Interpretation:

TOTAL ASSETS


85

From 2005 to 2008, it shows the positive trend. But in 2009, it is going to

decrease. From 2005 to 2009, the percentage increase in the fixed assets was high

which tells how much the company has invested to buy more fixed assets to

increase their production and sales. But in 2009, company did not purchase the

new machines. That’s why in 2009, company’s total assets has been decreased as

compared to the last 4 years.

The company also invested a lot in the long term investments from year

2005 which was also by a greater proportion which tells how much the company is

trying to make money from greater long term projects. But in 2009, company’s

long term investments has been decreased that shows that the company is not

interested to make money from greater long term projects. Company’s long term

deposits have been also decreased in 2009.

The company’s stock-in trade and trade debts has been increased smoothly

but it arises in 2008 at a huge percentage and then in 2009 it declined by a huge

percentage. This tells how better the company is managing their inventory and

their decline in the account receivables section.

So, overall total assets rose over the last 4 years but it rose much more in

2008 by around 74% which tells that from year 2005 the company’s position was

getting very strong in Pakistan.

9.3.2 Total Liabilities

86

0.00%

100.00%

200.00%

300.00%

400.00%

500.00%

600.00%

2005 2006 2007 2008 2009

NON-CURRENT LIABILITIES CURRENT LIABILITIES

The claim of outsiders against the assets of the firm is called liability. It

includes current and non current liabilities for the particular year. Amounts are

given below:

Amounts:

2005 2006 2007 2008 2009

Total Non-Current Liabilities 100.00% 101.95% 104.36% 95.78% 83.91%

Total Current Liabilities 100.00% 132.85% 150.83% 413.24% 263.95%

Total Liabilities 100.00% 112.61% 118.16% 190.27% 147.37%


Interpretation:

TOTAL LIABILITIES


87

From 2005 to 2008, it shows the positive trend. But in 2009, it is going to

decrease. The company’s non-current liabilities increased in year 2005 to 2007 but

in 2008 and 2009 it has deteriorated. Deferred taxation also increased by a huge

amount in percentage over the last two to three years.

The trade and other payable section have fallen down in 2006 and 2007 but

it has increased almost doubled in 2008 and from here, it shows the little increase

in year 2009. The company also increased the short term borrowing amount by a

much greater percentage from year 2005 to 2008 which tells the company really

increased most of their liabilities in this particular section. But in 2009, it shows

the dramatically change in short term borrowings, it declined double in 2009. So

the current liabilities have been increased smoothly from 2005 to 2006 and it

doubled in 2007 and then it declined double in 2009.

So, overall total liabilities rose over the last 4 years but it rose much more

in 2008 by around 94% which tells that from year 2004 the company’s position

was getting very strong in Pakistan.

9.4 Conclusion

88




According to the Trend Percentage Analysis,

FFBL’s financial positions started getting stronger and stronger from year

2005 as they improved in almost all kinds of sections in which they can earn profit

by increasing their sales and make more money by buying assets, short term

investments and long term investment and huge amount of loans. The FFBL’s net

profit after taxation also rose too much in greater proportion over all the last five

years but raised much in year 2009 as compare to the last few years due to the

increased in demand and supply.

Since the company bought fixed assets that definitely have improved their

production capacity and this was definitely due to much bigger demand and

supply. So the company really improved in much greater proportion in increasing

their sales from year 2005 and continued their progress until now. The company

also invested a lot in the long term investments from year 2005 which was also by

a greater proportion which tells how much the company is trying to make money

from greater long term projects. The company’s non-current liabilities increased in

year 2006 and 2007 but in 2008 it has deteriorated. Deferred taxation also

increased by a huge amount in percentage over the last two to three years.

So over the three years we see how much the FFBL has improved in

perspective of all kinds of non-current and especially current assets and how better

they are managing it.

89

10. Dollar and Percentage Changes

10.1 Introduction

90

The dollar amount of any change is the difference between the amounts for

a comparison year and for a base year. The percentage change is computed by

dividing the amount of the change between years by the amount for the base year.

Percentage Changes

To calculate the percentage change between two periods:

1. Select the base year.

2. For each line item, divide the amount in each non base year by the

amount in the base year and multiply by 100.

The base year trend percentage is always 100.0%. A trend percentage of

less than 100.0% means the balance has decreased below the base year level in

that particular year. A trend percentage greater than 100.0% means the balance in

that year has increased over the base year. A negative trend percentage represents

a negative number. If the base year is zero or negative, the trend percentage

calculated will not be meaningful.

Percentage change analyses of FAUJI FERTILIZER BIN QASIM

LIMITED are given on next pages.


FAUJI FERTILIZER BIN QASIM LIMITED

91

Percentage Change of Summarized Income StatementAs At December 31, 2009.

2005 2006 2007 2008 2009

SALES

Gross sales 100.00% 3.28% -16.55% 108.18% 35.97%

Less:

Sale tax 100.00% 4.20% -22.23% -52.60% -

Trade discount 100.00% 8.21% 51.48% 20.78% 125.58%

Commission to holding company 100.00% 5.55% -26.02% 18.92% 33.05%

100.00% 4.68% -13.65% -36.17% -7.52%

NET SALES 100.00% 3.17% -16.76% 119.07% 36.93%

LESS: COST OF SALES

Raw materials consumed 100.00% 7.20% -8.05% 427.20% -54.90%

Packing materials consumed 100.00% 12.24% -15.58% 91.90% -4.47%

Fuel and power 100.00% 25.25% -10.61% 55.70% 16.20%


Salaries, wages and benefits 100.00% -0.09% 30.80% 41.89% 74.20%


Insurance 100.00% 8.05% -5.55% 3.22% 49.16%


Repairs and maintenance 100.00% 24.35% 135.53% -20.31% 102.79%

Communication and other expenses 100.00% 24.82% -35.34% 88.18% -37.82%

Provision for doubtful advances 100.00% - - - -

Depreciation 100.00% 6.62% 6.59% 12.85% 2.16%

Provision for inventory obsolescence 100.00% - 100.00% 282.49% -50.45%

Opening stock - work in process 100.00% -66.44% 219.22% 180.61% -73.26%

Closing stock - work in process 100.00% 219.22% 180.61% -73.26% 42.70%

Subsidy on DAP fertilizer from Pak Govt. - 100.00% 111.56% 454.97% -

Cost of goods manufactured 100.00% -4.59% -18.55% 221.04% -9.07%

Opening stock - own manufactured fertilizers 100.00% 911.91% -75.09% 153.99% 2113.31%

Closing stock - own manufactured fertilizers 100.00% -75.09% 153.99% 2113.31% -96.94%

Cost of sale - own manufactured fertilizer 100.00% 2.41% -22.77% 154.39% 46.46%

Opening stock - purchased fertilizers 100.00% -32.33% 4251.01% -99.11% -

Purchase of fertilizers 100.00% 48.83% -97.47% 518.13% -

Closing stock - purchased fertilizers 100.00% 4251.01% -99.11% - -

Cost of sales - purchased fertilizers 100.00% 21.57% -74.55% -24.32% -

TOTAL COST OF SALES 100.00% 3.41% -25.97% 150.59% 45.52%

GROSS PROFIT 100.00% 2.67% 2.95% 70.57% 17.50%

2005 2006 2007 2008 2009

LESS: OPERATING EXPENSES Selling and distribution expenses

92

Product transportation 100.00% 11.98% -29.12% 73.73% 16.70%


Salaries, wages and benefits 100.00% 21.43% -4.33% 42.74% 65.67%

Rent, rates, and taxes 100.00% 2.90% -5.00% 32.30% 29.92%

Technical services 100.00% 39.42% -12.58% 50.50% 58.60%

Insurance expenses - - - - 100.00%

Travel and conveyance 100.00% 19.04% -4.20% 30.55% 35.92%

Sale promotion and advertising 100.00% -22.35% -3.76% 13.22% 77.66%

Communication and other expenses 100.00% 35.67% -15.21% 48.42% 91.98%


Depreciation 100.00% 26.35% -6.52% 45.98% 25.93%

Total expenses 100.00% 17.61% -4.47% 40.49% 64.99%

Total selling and distribution expenses 100.00% 12.94% -24.77% 66.28% 25.85%



Travel and conveyance 100.00% -13.21% 99.16% 175.80% -9.54%

Utilities 100.00% 40.14% 15.54% 28.05% 60.01%

Printing and stationery 100.00% 42.73% 12.48% -14.98% 288.54%

Repairs and maintenance 100.00% -38.89% 155.79% 30.80% 60.34%

Communication, advertisement and other 100.00% -3.15% -3.23% 32.17% 48.04%

Rent, rates and taxes 100.00% 32.13% -5.84% 9.02% 105.34%

Listing fee 100.00% 1.92% 1.42% 2.79% 48.42%

Donation to President relief fund 100.00% -97.26% 20.00% 127.17% 2388.26%

Legal and professional 100.00% -32.67% 2.10% 5.60% 227.31%

Depreciation 100.00% -73.58% 22.04% -21.01% 28.77%

Miscellaneous 100.00% 14.59% 21.91% 31.77% 223.09%

Total administrative expenses 100.00% -9.46% 26.75% 57.86% 93.46%

TOTAL OPERATING EXPENSES 100.00% 11.07% -21.26% 65.35% 32.91%

OPERATING PROFIT 100.00% -0.95% 14.63% 72.30% 12.60%


Finance cost


Banking companies & financial institution 100.00% 7.01% -17.79% -12.95% -15.49%

PKIC, an associated undertaking 100.00% 7.01% -17.79% -12.95% -

100.00% 7.01% -17.79% -12.95% -24.76%

Finance charge on leased plant, equipment 100.00% -56.14% -55.31% -85.92% -

Mark-up on long term murabaha 100.00% 7.01% -17.79% -12.97% -24.75%

Mark-up on short term borrowings 100.00% 177.36% 109.81% 233.73% -15.44%

Interest on WPPF 100.00% 80.00% 36.67% 15.04% 60.42%

Bank charges 100.00% 26.11% 83.61% 25.45% 45.72%

Exchange loss 100.00% 2905.19% 293.49% 3232.78% -88.78%

Total finance cost 100.00% 58.72% 52.90% 342.81% -47.71% 2005 2006 2007 2008 2009


Workers' Profit Participation Fund 100.00% -2.50% 7.77% 22.87% 42.97%

93

Worker's Welfare Fund - 100.00% 0.56% 12.95% 42.38%

Property, plant and equipment written off - - - 100.00% -98.37%

Loss on sale of property, plant & equipment - - 100.00% - -




Other certification & services - - 100.00% -58.90% 0.00%


100.00% 0.00% 36.30% -11.68% 16.92%

Total other operating expenses 100.00% 43.20% 41.44% 64.19% -21.58%

TOTAL OTHER OPERATING COSTS 100.00% 52.58% 48.65% 244.49% -43.32%

NET PROFIT AFTER INTEREST 100.00% -9.27% 5.73% 8.95% 77.64%

PLUS: OTHER INCOMES

Share of profit of associate & joint venture - - - 100.00% -336.38%

Compensation from GOP 100.00% 0.00% -14.29% 0.00% -

Others


Profit on bank balances and term deposits 100.00% 21.83% 0.18% 14.00% -1.33%

Surplus of investment at fair value - 100.00% 3624.63% - -

Dividend received on investment in MMF - - - 100.00% 22.70%

Gain on sale of investment - - 100.00% 122.91% 1629.66%

100.00% 22.39% 17.90% 19.25% 31.12%

Income on payments made on behalf of FF 100.00% - - - -


Scrap sales and miscellaneous receipts 100.00% 10.45% 32.92% 33.71% -27.75%

Gain on sale of property & equipment 100.00% 6.63% - 100.00% -63.45%

100.00% 10.07% 20.12% 43.55% -30.20%

Total others 100.00% 21.59% 18.02% 20.66% 26.88%

TOTAL OTHER INCOMES 100.00% 8.49% -0.04% 21.40% -55.07%

PROFIT BEFORE TAXATION 100.00% -4.04% 3.81% 12.95% 31.86%

Less: Taxation 100.00% -10.49% 3.65% 10.69% 34.46%

PROFIT AFTER TAXATION 100.00% -0.17% 3.89% 14.16% 30.51%

10.3 Balance Sheet

FAUJI FERTILIZER BIN QASIM LIMITEDPercentage Change of Summarized Balance Sheet

94


2005 2006 2007 2008 2009EQUITY AND LIABILITIES


Share capital 100.00% 0.00% 0.00% 0.00% 0.00%


Statutory reserves - - - - 100.00%

Translation reserves - - - 100.00% 21.94%

Accumulated profit / (loss) 100.00% -43.98% 2.79% -132.49% 12.06%

TOTAL SHARE CAPITAL AND RESERVES 100.00% 10.48% -0.34% 23.24% 1.65%


Long-term financing


Habib Bank Limited 100.00% -18.18% -22.22% -28.57% -40.00%

Standard Chartered Bank 100.00% -18.18% -22.22% -28.57% -40.00%

Muslim Commercial Bank Limited 100.00% -18.18% -22.22% -28.57% -40.00%

Askari Commercial Bank Limited 100.00% -18.18% -22.22% -28.57% -40.00%

Saudi Pak Agricultural Investment Company 100.00% -18.18% -22.22% -28.57% -40.00%

100.00% -18.18% -22.22% -28.57% -40.00%


Pak Kuwait Investment Company Limited 100.00% -18.18% -22.22% -28.57% -40.00%

100.00% -18.18% -22.22% -28.57% -40.00%


Total long-term financing 100.00% -22.22% -28.57% -40.00% -66.67%


Gross lease payments payable in future 100.00% -49.06% - - -

Less: Finance charge 100.00% -89.19% - - -

Total liabilities against asset subject to lease 100.00% -47.41% - - -

Long term murabaha

Faysal Bank Limited (FBL) 100.00% -18.18% -22.22% -28.57% -40.00%


Total long term murabaha 100.00% -22.22% -28.57% -40.00% -66.67%


Compensated leave absences - - - 100.00% 23.43%

Deferred tax 100.00% 99.23% 51.62% 2.15% -4.20%

Total deferred tax liability 100.00% 99.23% 51.62% 5.07% -3.43%

2005 2006 2007 2008 2009

Long term loan

Government of Pakistan (GOP) loan 100.00% -5.59% -6.34% -7.24% -8.35%

Deferred Government Assistance 100.00% -13.70% -14.99% -16.52% -18.35%

100.00% -8.33% -9.09% -10.00% -11.11%

Less:Current portion under current liabilities 100.00% 0.00% 0.00% 0.00% 0.00%

95

Total long term loan 100.00% -9.09% -10.00% -11.11% -12.50%

TOTAL NON-CURRENT LIABILITIES 100.00% 1.95% 2.36% -8.22% -12.40%



Creditors 100.00% -7.33% -29.96% 352.75% -37.89%


Advances from customers 100.00% -21.93% -25.61% 3.87% 129.42%


Payable to gratuity fund - - - 100.00% 71.95%

Worker's welfare fund - 100.00% 100.56% 56.63% 15.32%

Unclaimed dividend 100.00% -43.06% 61.17% -86.64% 879.67%

Tax deducted at source 100.00% -24.93% -2.20% 191.78% -42.67%

Other payables 100.00% 42.76% 230.28% 30.44% 536.17%

Total trade and other payable 100.00% -7.95% -7.88% 154.22% 7.20%

Mark-up accrued


From banks and financial institutions 100.00% -15.92% -19.07% -10.03% -28.63%

From PKIC, an associated undertaking 100.00% -16.19% -18.80% -10.05% -100.00%

100.00% -15.95% -19.04% -10.03% -36.46%

On long term murabaha 100.00% -18.75% -16.27% -10.01% -36.45%

On short term borrowings 100.00% 50.47% 47.40% 549.88% -84.14%

Total mark-up accrued 100.00% 11.24% 18.04% 379.14% -81.41%

Short term running finance 100.00% 102.62% 29.65% 210.74% -57.66%

Current portion of:


Liabilities against assets subject to lease 100.00% -35.59% 2.51% - -


Long term loan 100.00% 0.00% 0.00% 0.00% 0.00%

Sales tax payable - 100.00% - - -

Provision for income tax - net - - - 100.00%352762.34

%Total of current portion 100.00% 0.88% -1.00% -0.21% 98.40%

TOTAL CURRENT LIABILITIES 100.00% 32.85% 13.53% 173.98% -36.13%

TOTAL EQUITY AND LIABILITIES 100.00% 12.61% 4.93% 61.03% -22.55%

2005 2006 2007 2008 2009

ASSETS

NON-CURRENT ASSETSProperty, plant and equipment

Owned assets

96

Leasehold land 100.00% -2.85% -3.01% -3.10% -0.53%

Free hold land 100.00% 0.00% 0.00% 0.00% 0.00%

Buildings on leasehold land 100.00% -3.45% -3.43% -3.57% 2.92%

Plant and machinery 100.00% -0.70% 11.91% 5.29% -6.67%

Catalyst 100.00% -0.76% 51.62% -31.09% 179.47%

Furniture and fittings 100.00% -14.96% 133.07% 8.35% -8.73%

Vehicles 100.00% 86.58% 22.50% 15.30% 107.36%

Office and other equipment 100.00% 10.32% -82.36% 703.35% 159.85%

Computer and ancillary equipment 100.00% -8.71% 69.73% 44.93% 84.13%

Library books 100.00% -34.69% 12.03% -34.81% 484.66%

Capital work in progress 100.00% 55.05% 8.32% -86.01% 239.50%

100.00% 2.55% 10.25% -3.71% -1.71%

Assets subject to finance leaseVehicles 100.00% -61.79% - - -

Total property, plant and equipment 100.00% 2.52% 10.23% -3.71% -1.71%

Long term investmentsPakistan Maroc Phosphore S.A, Morocco


Share of profit / loss - - - 100.00% -374.65%

Dividend - - - - 100.00%

Gain on translation of net assets - - - 100.00% -78.06%

Balance 100.00% 92.18% 0.00% 49.23% -14.72%

Investment in associateFauji Cement Company Limited

Cost of investment - - - 100.00% 3.63%

Share of post acquisition profits - - - 100.00% 94.07%

Balance - - - 100.00% 6.79%

Investment - available for saleArabian Sea Country Club Limited

300,000 ordinary shares of Rs 10 each 100.00% 0.00% 0.00% 0.00% 0.00%


0.00% 0.00% 0.00% 0.00% 0.00%

Total long term investments 100.00% 92.18% 0.00% 71.26% -11.95%

Long term depositsSecurity deposit 100.00% 0.13% 0.00% 0.00% 402.67%

Lease key money 100.00% -31.05% -20.64% - -

100.00% -4.96% -2.44% -9.63% 402.67%

Less: Current portion of long term deposits 100.00% - 100.00% - -

Total long term deposits 100.00% -0.70% -11.84% 0.00% 402.67%

TOTAL NON-CURRENT ASSETS 100.00% 6.82% 9.33% 2.21% -2.72%

2005 2006 2007 2008 2009

CURRENT ASSETS



Term deposits with bank & financial institution - - 100.00% - 100.00%


97

Fixed income / Money market funds - 100.00% 231.15% - 100.00%

Surplus on re measurement - 100.00% 3624.63% - 100.00%

- 100.00% 247.27% - 100.00%

Total short term investments - 100.00% 675.23% - 100.00%

Bank balances

Deposit accounts 100.00% 6.65% -50.34% 93.04% 18.09%

Current accounts 100.00% -41.80% 59.83% 294.14% 40.86%

Cash in hand - - 100.00% 67.89% 17.49%

Total bank balances 100.00% 4.39% -47.48% 108.96% 21.49%

Trade debts

Considered good 100.00% 100.66% 5.37% 16.58% 68.09%

Due from FF, unsecured, considered good 100.00% 1709.09% 21.11% 282.16% -


Other receivables

Due from holding company - considered good 100.00% 40.07% -81.99% 512.27% -61.02%

Other receivables

Considered good (net) 100.00% 1342.35% -22.59% -92.28% 20.02%


100.00% 747.68% -21.41% -86.14% 10.42%


100.00% 1342.35% -22.59% -92.28% 20.02%

Insurance claims 100.00% 52.90% - - -

Total other receivables 100.00% 300.54% -39.24% -42.38% -51.05%

Stores and spares

Stores 100.00% -9.43% -26.60% 106.35% 49.48%

Spares 100.00% 32.33% 75.12% 11.08% 44.81%

Items in transit 100.00% 124.19% 12.47% 88.56% -46.35%

100.00% 37.88% 62.24% 20.39% 30.88%



Stock in trade

Packing materials 100.00% 44.68% 123.54% 101.75% -72.84%

Raw materials 100.00% -39.58% 40.40% -90.74% 3753.57%

Raw material in transit 100.00% 25.33% - - -

Work in process 100.00% 219.22% 180.61% -73.26% 42.70%

Finished goods 100.00% -40.49% 5.98% 2102.44% -96.94%

Total stock in trade 100.00% -21.74% -26.56% 865.52% -78.39%

Income and sales tax refundable 100.00% 59.89% 45.41% -67.25% -0.04%

Interest accrued 100.00% 6.63% 5.82% -31.97% 77.89%

Due from GOP on account of DAP subsidy - - - 100.00% -

2005 2006 2007 2008 2009

Advances

Advances to:

Executives, unsecured considered good 100.00% 110.32% 275.09% -50.40% 139.76%

Other employees, considered good 100.00% 48.73% -24.07% 116.28% 70.45%


Considered good 100.00% 62.46% 31.32% -24.37% 70.73%

98


100.00% 62.37% 31.29% -24.35% 70.67%


100.00% 62.46% 31.32% -24.37% 70.73%

Total advances 100.00% 61.73% 30.02% -18.72% 72.27%


Current portion of long term deposits 100.00% - 100.00% - -

Security deposits 100.00% 122.99% 230.35% -57.03% -46.83%

Prepayments 100.00% 92.70% -38.38% 28.51% 29.34%

Total trade deposits and prepayments 100.00% 52.99% 67.40% -42.41% -1.42%

TOTAL CURRENT ASSETS 100.00% 22.19% -1.42% 155.28% -35.27%

TOTAL ASSETS 100.00% 12.61% 4.93% 61.03% -22.55%

10.4 Conclusion




99

According to the Dollar Percentage Analysis,

The firm’s position is quiet visible which we can measure from its sales

which is rising year after year especially from year 2005. The increase in sales the

cost of sales also rise but the company did really well in reducing their cost of

sales in the year 2007 which tells that the company is really making efforts in

order to increase the gross profit for the longer term. The company’s did well in

reducing most of their expense and increased sales to get the improved profits and

better liquidity position of the company. The company improved the profits in

year 2009.

The company’s position was getting better and better year after year

because shareholder’s equity section did rise all the years. Overall total liabilities

rose over the last 4 years but it rose much more in 2008 by around 94% which tells

that from year 2004 the company’s position was getting very strong in Pakistan.

The fixed asset portion of the company also rose from year to year and later on it

increased at a slow proportion in percentage. So overall the company’s total assets

rose over the last four years but they raised much in the year 2008 which tells that

in year 2008 the firm’s position was getting very strong in Pakistan. But in 2009

there comes a dramatically change that declines the total assets as compared to

2008.

100

11. Ratio Analysis

Ratio analysis involves the method of calculating and interpreting financial

ratios to analyze and monitor the firm’s performance. The basic inputs to ratio

analysis are the firm’s income statement and balance sheet.

Ratio Analysis enables the business owner/manager to spot trends in a

business and to compare its performance and condition with the average

101

performance of similar businesses in the same industry. The analysis is used to

provide indicators of past performance in terms of critical success factors of a

business. This assistance in decision-making reduces reliance on guesswork and

intuition and establishes a basis for sound judgment.

Financial ratio analysis groups the ratios into categories which tell us about

different facets of a company's finances and operations.

11.1 Analysis of Short Term Financial Position

A firm’s ability to satisfy its short term obligations as they become due is

known as liquidity of the firm. Liquidity refers to the solvency of the firm’s

overall financial position------ the ease with which it can pay its bills.

Trade creditors; creditor for expenses; commercial banks; short term

lenders are concerned with the short term financial position or liquidity of the unit.

Management is also interested in knowing how efficiently working capital is being

utilized by the business. Shareholders and long term creditors are also interested in

studying the prospectus of dividend and interest payment.

Liquidity ratios usually consist of:

1. Net Working Capital

2. Current Ratio or Working Capital Ratio

3. Acid test Ratio or Quick Ratio or Liquid Ratio

4. Absolute Liquid Ratio or Cash Position Ratio

11.1.1 Net Working Capital

The difference between the current assets and current liabilities of is known

as net working capital. It may be positive or negative. Greater the net working

capital lowers the risk of technically insolvency.

Formula:

Net Working Capital

102

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

2005 2006 2007 2008 2009

NET WORKING CAPITAL

Calculation:

2005 2006 2007 2008 2009

Current Assets 9,266,673 11,322,594 11,161,328 28,492,569 18,443,765Current Liabilities 6,344,831 8,429,327 9,569,949 26,219,469 16,747,253Net Working Capital 2,921,842 2,893,267 1,591,379 2,273,100 1,696,512


Interpretation:

Net working capital showed the negative trend from 2005 to 2007 and then

afterwards increases the net working capital in 2008 and in 2009 it again

decreased. The current assets of the company registered a nominal decrease during

2008 as compared to 2007. The major portion of the current assets is attributed to

subsidy due from GOP on account of DAP 44% of total current assets. Moreover,

NET WORKING CAPITAL


103

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

2005 2006 2007 2008 2009

CURRENT RATIO

the stock in trade has been slowly increased as the finished goods in the 2008 have

been increased.

Current liabilities showed a high increase during 2008 as compared to

2007. The major portion of the current liabilities is attributed to the short term

financing depicting an increase in 2008, by availing running finance facilities from

different banks and financial institutions to meet the working capital requirements

of company. The company has made a huge investment for expansion of fertilizer

producing plants. Moreover, the company availed short-term loans from various

banks to fulfill the requirements concerning purchase of raw material.

11.1.2 Current Ratio

Current ratio indicates the liquidity of current assets or the ability of the

business to meet its maturing current liabilities. Current ratio is also known as

Working capital ratio.

Formula

Current Ratio

Calculation:

2005 2006 2007 2008 2009

Current Assets 9,266,673 11,322,594 11,161,328 28,492,569 18,443,765Current Liabilities 6,344,831 8,429,327 9,569,949 26,219,469 16,747,253Current Ratio 1.46 1.34 1.17 1.09 1.10


CURRENT RATIO


104

Interpretation:

The business concern maintains current ratio of 1.10 times, which is equal

to 1:1 indicating the concerns capability to meet its short-term obligations. The

current ratio of FFBL has shown a decrease year by year as it was 1.46 times in

2005 and in 2009, it has become 1.10. This is due to increase in assets as it

liabilities has also increased but there is a high change in assets as compare to

liabilities. It also means that the FFBL will be able to pay off its current liabilities

in full even if current assets realizable value is 1 of its book value.

11.1.3 Acid Test Ratio

It establishes a relationship between liquid assets and current liabilities.

Liquid assets include all the assets minus inventory and prepaid expenses. Liquid

ratio is also known as quick ratio or acid test ratio.

Formula

Liquid Ratio

Calculation:

2005 2006 2007 2008 2009

105

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2005 2006 2007 2008 2009

ACID TEST RATIO

Quick Assets 7,663,328 9,719,687 9,298,345 21,388,387 15,362,151Current Liabilities 6,344,831 8,429,327 9,569,949 26,219,469 16,747,253Quick Ratio 1.21 1.15 0.97 0.82 0.92


Interpretation:

The quick ratio has shown an effective decrease in 2005 as it was 1.21

times. From 2005 to 2008 it decreased due to the high stock in trade, this may be

because of inflation. Then afterwards in 2009, there is an increase in quick ratio

that shows the favorable position of FFBL.

11.1.4 Absolute Liquid Ratio

Absolute Liquid Ratio relates cash, bank and marketable securities to the

current liabilities. It means absolute liquid assets worth one half of the value of

current liabilities are sufficient for satisfactory liquid position of a business.

Formula

ACID TEST RATIO


106

0.00

0.20

0.40

0.60

0.80

1.00

1.20

2005 2006 2007 2008 2009

ABSOLUTE LIQUID RATIO

Absolute Liquid Ratio

Calculation:

2005 2006 2007 2008 2009

Absolute Liquid Assets 7,211,981 8,141,548 8,236,302 20,631,420 14,654,626Current Liabilities 6,344,831 8,429,327 9,569,949 26,219,469 16,747,253Absolute Liquid Ratio 1.14 0.97 0.86 0.79 0.88


Interpretation:

The absolute liquid ratio has shown an effective decrease in 2005 as it was

1.14 times. From 2005 to 2008 it decreased due to increase in trade debts. Then

afterwards in 2009, there is an increase in quick ratio. But in spite of these this



107

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

2005 2006 2007 2008 2009

0.00

500000.00

1000000.00

1500000.00

2000000.00

2500000.00

3000000.00

3500000.00

CURRENT RATIO LIQUID RATIO ABSOLUTE LIQUID RATIO NWC

ratio shows the favorable position of FFBL, when compared to the rule of thumb

standard which is 0.50 times.

11.1.5 Conclusion

Liquidity of company has declined, illustrating that the firm may

experience problems in financing its short term obligations. However overall

liquidity position of the Fauji Fertilizer Bin Qasim Limited is “GOOD” because its

Current growth is greater than the growth of Current Liability, which shows that

company is not risky and may not be insolvent in short term.

11.2 Analysis of Efficiency

Activity or efficiency or turnover ratios are concerned with measuring the

efficiency in assets management. Efficiency implies effective utilization of

available resources. The term turnover refers to the rotation or utilization of a

LIQUIDITY RATIOS


108

resource or an asset in the process of business activity. Therefore the activity ratios

are used to find out the effective utilization of assets by relating the same to sales

or cost of goods sold. Activity ratios are therefore used to assess how active

various assets are in the business. Efficiency ratios usually consist of:

1. Inventory Efficiency

2. Debtor Efficiency

3. Creditor Efficiency

4. Assets Efficiency

5. Cycle Efficiency

11.2.1 Inventory Efficiency

It consists of inventory turnover ratio and average age of inventory.

1. Inventory Turnover Ratio

Measure the activity, 0r liquidity of the firm’s inventory is called Stock

Turnover Ratio.

Formula

Stock Turnover Ratio

Calculation:

2005 2006 2007 2008 2009

Cost of Goods Sold 9,692,236 10,023,044 7,420,310 18,594,752 27,059,566Average Inventory 1186345 1598944 1726182.5 4476911 5088056.5Stock Turnover Ratio 8.2 6.3 4.3 4.2 5.3

2. Average Age of Inventory

It shows how many days were taken to disposal off average inventory. It is

known as Average Age of Inventory (AAI).

Formula

109

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2005 2006 2007 2008 2009

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

STOCK TURNOVER AAI

Average Age of Inventory

Calculation:

2005 2006 2007 2008 2009

Stock Turnover Ratio 8.2 6.3 4.3 4.2 5.3

AAI 44.7 58.2 84.9 87.9 68.6


Interpretation:

The level of inventory turnover was decreasing from the year 2005 till 2008

and afterwards it increased in 2009. The higher the inventory level, the more time

it takes to come to an end. Inventory turnover days were increasing from the year

INVENTORY EFFICIENCY


110

2005 till 2008. But it created the problems because they have increased their

inventory level so it took more time to wipe out. And in 2009 it was decreased 20

days that there inventory finishes in 20 days.

11.2.2 Debtor Efficiency

It consists of debtor turnover ratio and average collection period.

1. Debtor Turnover Ratio

Measure the activity, or liquidity of the firm’s credit sales is called Debtor

Turnover Ratio.

Formula

Debtor Turnover Ratio

Calculation:

2005 2006 2007 2008 2009

Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920Average Trade Debtor 602424.5 1014743 1320091 909505 732246Debtor Turnover Ratio 23.7 14.5 9.3 29.5 50.2

2. Average Collection Period

It shows how many days were taken to collect trade debt by the company. It

is known as Average Collection Period (ACP).

Formula

Average Collection Period

Calculation:

2005 2006 2007 2008 2009

Debtor Turnover Ratio 23.7 14.5 9.3 29.5 50.2ACP 15.4 25.2 39.4 12.4 7.3

111

0.0

10.0

20.0

30.0

40.0

50.0

60.0

2005 2006 2007 2008 2009

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

DEBTOR TURNOVER ACP


Interpretation:

Receivable turnover has improved year by year as it was 24 times in 2005

and in 2008 it became 30 times, this is due to higher sales revenue. FFBL do

speedy and effective collection of trade debts. In 2009 turnover is increased that

indicates the sufficient collection of debts. Average collection period of trade

debts also improved year by year as it was 15 days in 2005 and in 2009 it became

7 days. This shows that FFBL collects its bills in 7 days. FFBL also improved its

position to collect its bills as soon.

11.2.3 Creditor Efficiency

It consists of creditor turnover ratio and average payment period.

1. Creditor Turnover Ratio

DEBTOR EFFICIENCY


112

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

2005 2006 2007 2008 2009

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

CREDITOR TURNOVER APP

Measure the activity, or liquidity of the firm’s credit purchase is called

Creditor Turnover Ratio. It indicates the speed with which the payments are made

to the trade creditor.

Formula

Creditor Turnover Ratio

Calculation:

2005 2006 2007 2008 2009

Net Credit Purchase 9,692,236 10,023,044 7,420,310 18,594,752 27,059,566Average Trade Credit 2534672 2790449 2569574.5 4364457.5 6490254Creditor Turnover Ratio 3.8 3.6 2.9 4.3 4.2

2. Average Payment Period

It shows how many days were taken to pay trade credit by the company, it

is known as Average Payment Period (APP).

Formula

Average Payment Period

Calculation:

2005 2006 2007 2008 2009

Creditor Turnover Ratio 3.8 3.6 2.9 4.3 4.2APP 91.3 91.3 121.7 91.3 91.3


CREDITOR EFFICIENCY


113

Interpretation:

Creditor turnover has not shown a significant change as it was same in all

years from 2005 to 2009. Not many changes in average payable days as it was 91

days in 2005 and it was remained in its range till 2009. This shows that the

company was in good position. In 2007, creditor turnover was low and average

payment period is high as compared to previous years. This shows that the

company is not in good position in 2007.

11.2.4 Cycle Efficiency

It consists of operating cycle and cash conversion cycle.

1. Operating Cycle

114

-40.0

-20.0

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

2005 2006 2007 2008 2009

OPERATING CYCLE CCC

The time from the beginning of the production process to the collection of

cash from the sale of finished good is called operating cycle.

Formula

Operating Cycle

Calculation:

2005 2006 2007 2008 2009

AAI 44.7 58.2 84.9 87.9 68.6ACP 15.4 25.2 39.4 12.4 7.3Operating Cycle 60.1 83.4 124.3 100.3 75.9

2. Cash Conversion Cycle

The time from the beginning of the production process to the collection of

cash from the sale of finished goods and payment made to its suppliers is called

cash conversion cycle (CCC).

Formula

Cash Conversion Cycle

Calculation:

2005 2006 2007 2008 2009

AAI 44.7 58.2 84.9 87.9 68.6ACP 15.4 25.2 39.4 12.4 7.3APP 91.3 91.3 121.7 91.3 91.3Cash Conversion Cycle -31.1 -7.8 2.6 9.0 -15.3


CYCLE EFFICIENCY


115

Interpretation:

Operating cycle was increased from 2005 to 2007 and then it dramatically

change in 2009. Cash conversion cycle was increasing from 2005 to 2008 and then

it decreased in 2009. It decreased because the credit purchase of FFBL was

decreasing. So the greater growth in APP than the growth of ACP and AAI may

lead to the decrease of cash conversion cycle. This presents a good picture about

company credit management.

11.2.5 Assets Efficiency

It consists of total asset turnover ratio and fixed asset turnover ratio.

1. Total Asset Turnover Ratio

116

0.0

0.5

1.0

1.5

2.0

2.5

2005 2006 2007 2008 2009

0.0

0.2

0.4

0.6

0.8

1.0

1.2

FIXED ASSET TURNOVER TOTAL ASSET TURNOVER

The total assets turnover indicates that generate company turnover. Here all

assets are compared with its turnover. Normally it calculates by dividing sales

from its total assets.

Formula

Total Assets Turnover Ratio

Calculation:

2005 2006 2007 2008 2009

Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920Total Assets 24,581,446 27,681,356 29,045,971 46,771,671 36,225,182Total Assets Turnover 0.6 0.5 0.4 0.6 1.0

2. Fixed Asset Turnover Ratio

The fixed assets turnover indicates that generate company turnover. Here

fixed assets are compared with its turnover. Normally it calculates by dividing

sales from its total fixed assets.

Formula

Fixed Assets Turnover Ratio

Calculation:

2005 2006 2007 2008 2009

Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920

Fixed Assets 14,563,103 14,930,339 16,458,265 15,847,104 15,576,899

Fixed Asset Turnover 1.0 1.0 0.7 1.7 2.4


ASSETS EFFICIENCY


117

Interpretation:

The total asset turnover has been decreased from 2005 to 2007 due to

combination of an increase in total assets and in sales a slight change occurs.

Afterwards from 2008 to 2009 total asset turnover has been increased due to

combination of an increase in sales and decrease in total assets.

The fixed asset turnover has been decreased from 2005 to 2007 due to

combination of an increase in fixed assets and in sales a slight change occurs.

Afterwards from 2008 to 2009 fixed asset turnover has been increased due to

combination of an increase in sales and decrease in fixed assets.

However, FFBL has in good position.

11.2.6 Working Capital Turnover Ratio

It creates a relationship between cost of sales and net working capital. As

working capital has direct and close relationship with cost of sales, therefore the

118

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

2005 2006 2007 2008 2009

WORKING CAPITAL TURNOVER

ratio provide useful idea of how effectively and actively working capital is being

used.

Formula

Working Capital Turnover Ratio

Calculation:

2005 2006 2007 2008 2009

Cost of Goods Sold 9,692,236 10,023,044 7,420,310 18,594,752 27,059,566

Average NWC 2652055.5 2907554.5 2242323 1932239.5 1984806

Working Capital Turnover 3.7 3.4 3.3 9.6 13.6


Interpretation:

The working capital turnover shows the slight changes in 2005 to 2007 and

afterwards it shows the positive trend from 2008 to 2009. From 2005 to 2007 net

working capital has been decreased. In 2008 net working capital is higher as

WORKING CAPITAL TURNOVER RATIO


119

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

2005 2006 2007 2008 2009

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

AAI ACP APP WCT

compared to previous year and then it decreased. But in spite of it, working capital

turnover ratio increased due to increase in sales.

11.2.7 Conclusion

Consequently the turnover ratios are in “GOOD” position. This shows that

the FFBL has an efficient working capital cycle. The cash is not tied up for long

period and collected as soon as possible. Hence firm will not face liquidity

problem.

11.3 Analysis of Long Term Risk

Thus long-term financial soundness (or solvency) of any business is

examined by calculating ratios popularly, known as leverage of capital structure

EFFICIENCY RATIOS


120

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

2005 2006 2007 2008 2009

PROPRIETORY RATIO

ratios. These ratios help us the interpreting repays long-term debt as per

installments stipulated in the contract.

The long-term financial soundness of any business can be judged by its

long-term creditors by testing its ability to pay interest charges regularly and its

ability to repay the principal as per schedule. It usually consists of:

1. Proprietory Ratio

2. Capital Gearing Ratio

3. Solvency Ratio

11.3.1 Proprietory Ratio

Proprietary ratio establishes relationship between proprietor’s funds to total

resources of the unit. Where proprietor’s funds refer to equity share capital and

Reserves, surpluses and Total resources refer to total assets. It is also known as

Equity Ratio or Net worth to total assets or shareholders equity to total equity.

Formula

Proprietory Ratio

Calculation:

2005 2006 2007 2008 2009

Proprietor’s Fund 7,727,531 8,537,696 8,508,927 10,486,371 10,659,901Total Assets 24,581,446 27,681,356 29,045,971 46,771,671 36,225,182Proprietory Ratio 0.31 0.31 0.29 0.22 0.29


PROPRIETORY RATIO


121

Interpretation:

Proprietory ratio shows the negative trend from 2005 to 2008 and

afterwards it increased. As this ratio is 0.31 times in 2005 and 2006 that indicates

69% of funds have been supplied by the outside creditors. In 2007 and 2009 this

ratio was 0.29 times that indicates that 71% of funds have been supplied by the

outside creditors. In 2008 this ratio was 0.29 times that indicates that 78% of funds

have been supplied by the outside creditors.

11.3.2 Capital Gearing Ratio

It is the ratio between the capitals plus reserves i.e. equity and fixed cost

bearing securities. Fixed cost bearing securities include debentures, long-term

mortgage long etc.

Formula

Capital Gearing Ratio

122

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2005 2006 2007 2008 2009

CAPITAL GEARING RATIO

Calculation:

2005 2006 2007 2008 2009

Equity 7,727,531 8,537,696 8,508,927 10,486,371 10,659,901

Fixed Interest Debts 10,509,084 10,714,333 10,967,095 10,065,831 8,818,028

Capital Gearing Ratio 0.74 0.80 0.78 1.04 1.21


Interpretation:

It shows the positive trend throughout the last five years. This ratio is

favorable for the company because it involves the high degree of risk as well as

the potential returns. And earnings are higher that indicates that FFBL can fulfill

its interest obligations.

11.3.3 Solvency Ratio

CAPITAL GEARING RATIO


123

0.64

0.66

0.68

0.70

0.72

0.74

0.76

0.78

2005 2006 2007 2008 2009

SOLVENCY RATIO

Solvency is the term which is used to describe the financial position of any

business which is capable to meet outside obligations in full out of its own assets.

So this ratio establishes relationship between total liabilities and total assets.

Formula

Solvency Ratio

Calculation:

2005 2006 2007 2008 2009

Total Liabilities 16,853,915 19,143,660 20,537,044 36,285,300 25,565,281Total Assets 24,581,446 27,681,356 29,045,971 46,771,671 36,225,182Solvency Ratio 0.69 0.69 0.71 0.78 0.71


Interpretation:

SOLVENCY RATIO


124

0.00

0.20

0.40

0.60

0.80

1.00

1.20

1.40

2005 2006 2007 2008 2009

0.64

0.66

0.68

0.70

0.72

0.74

0.76

0.78

0.80

PROPRIETORY RATIO CAPITAL GEARING RATIO SOLVENCY RATIO

Solvency ratio shows the positive trend from 2005 to 2008 and afterwards it

shows the decrease. Positive trend is not beneficial for the company because it

increase the degree of risk as well as potential returns. In 2008 it indicates that

there are 22% total assets through which the financial obligations are met. In 2009

it indicates that there are 29% total assets through which financial obligations are

met. In 2009 FFBL has in good position as compared to 2008.

11.3.4 Conclusion

Capital gearing ratio is favorable for the company because it involves the high

degree of risk as well as the potential returns. Proprietory ratio shows the negative

trend. In 2009 this ratio was 0.29 times that indicates that 71% of funds have been

supplied by the outside creditors. Solvency ratio shows the positive trend that

indicates the FFBL has not in good position. Overall, Solvency ratio analysis

seems to be “GOOD”.

11.4 Analysis of Profitability

SOLVENCY RATIO ANALYSIS


125

The main objective of a business concern is to earn profit. In general terms,

efficiency in business is measured by profitability. A low profitability may arise

due to the lack of control over expanses.

Banker’s financial institutions and other creditors look at the profitability

ratios as an indicator whether or not the firm earns substantially more than it pays

interest for the use of borrowed funds and whether the ultimate repayment of their

debt appears reasonably certain. Owners are also interested to know the return

which they can get on their investments. A profitability ratio usually consists of:

1. Percentage change ratio

2. Gross profit ratio

3. Net profit ratio

4. Operating profit ratio

5. Expenses ratio

6. Operating ratio

11.4.1 Percentage Change Ratio

The percentage change is the difference between the amount for a

comparison year and for a base year. The two most important percentage changes

are:

Net sales

Net income

1. Net Sales

The percentage change of net sales is the difference between the amount for

a comparison year and for a base year.

Formula

Net Income Percentage Change

Calculation:

126

NET SALES

100%

3%-17%119%

37%

2005 2006 2007 2008 2009

2005 2006 2007 2008 2009

NET SALES 100% 3% -17% 119% 37%


2. Net Income

The percentage change of net income is the difference between the amount

for a comparison year and for a base year.

Formula

Net Income Percentage Change

Calculation:

2005 2006 2007 2008 2009

NET INCOME 100% 0% 4% 14% 31%


NET SALES


127

NET INCOME

100%

31%

4%0%

14%

2005 2006 2007 2008 2009

Interpretation:

The percentage change in net sales and percentage change in net income

shows a positive trend these changes occur due to the fluctuation in amounts.

11.4.2 Gross Profit Ratio

Gross profit ratio is the ratio of gross profit to net sales i.e. sales less sales

returns. The ratio thus reflects the margin of profit that a concern is able to earn on

its trading and manufacturing activity. It is the most commonly calculated ratio. It

is employed for inter-firm and inter-firm comparison of trading results.

Formula

Gross Profit Ratio

Calculation:

2005 2006 2007 2008 2009

Gross Profit 4,562,528 4,684,244 4,822,578 8,226,060 9,665,354Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920Gross Profit Ratio 32% 32% 39% 31% 26%


NET INCOME


128

0%

5%

10%

15%

20%

25%

30%

35%

40%

2005 2006 2007 2008 2009

GROSS PROFIT

Interpretation:

Gross profit ratio showed the positive trend from 2005 till 2007 and

afterwards it declined. The increase in cost incurred during 2007 is mainly due to

the increase in consumption of raw material. This improvement is mainly due to

the increase in the production capacity of the plants for which the raw material

was excessively used to utilize production facility and to meet the market demand.

Due to this, gross profit margin of the company 2008 decreased. However, due to

higher sales, the gross profit increased in 2009. So, in 2009 gross profit ratio is

decreased.

11.4.3 Net Profit Ratio

GROSS PROFIT RATIO


129

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009

NET PROFIT

Net profit ratio expresses the relationship between net profit after taxes and

sales. This ratio is the measure of the overall profitability. Net profit is arrived at

after taking into account both the operating and non-operating items of incomes

and expenses. The ratio indicates what portion of the net sales is left for the

owners after all expenses have been met.

Formula

Net Profit Ratio

Calculation:

2005 2006 2007 2008 2009

Net Profit 2,449,109 2,444,858 2,540,033 2,899,621 3,784,365Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920Net Profit Ratio 17% 17% 21% 11% 10%


Interpretation:

NET PROFIT RATIO


130

Sales for the year 2009 as compared to the year 2008, depicts a growth by

211% due to sale of higher units in the market. Moreover, these sales do not

include subsidies which are provided by the government. However, as the prices

of DAP in the international market have been declined so it is expected that the

prices in the local market will also decline.

In this situation, the government will not provide any subsidy as the prices

will be within the affordability of farmers. The decrease in prices will enhance the

demand in the market and to give further boost to the sales of fertilizer’s

manufacturers and influence the yield by the farmers. The profit margin of the

company fluctuates in a range of 10-20%.

Profitability of the company is dependent on its net income. The higher the

income the better the profitability or there is an inverse relation of sales i.e. the

lower the sales the higher the profit margin.

11.4.4 Operating Profit Ratio

Operating net profit ratio is calculated by dividing the operating net profit

by sales. This ratio helps in determining the ability of the management in running

the business.

Formula

Operating Profit Ratio

Calculation:

2005 2006 2007 2008 2009

Operating Profit 3,190,360 3,160,200 3,622,580 6,241,813 7,028,027Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920Operating Profit Ratio 22% 21% 30% 23% 19%


131

0%

5%

10%

15%

20%

25%

30%

2005 2006 2007 2008 2009

OPERATING PROFIT

Interpretation:

The Operating profit ratio shows an increasing trend from 2005 to 2007.

And from 2007 it shows the negative trend because the operating expenses were

increased. It is expected that it will increase more in next future because of

expansion plan and increasing demand of fertilizers in all over the world.

11.4.5 Expenses Ratio

OPERATING PROFIT RATIO


132

Expense ratios are calculated to ascertain the relationship that exists

between operating expenses and volume of assets. It indicates the portion of sales

which is consumed by various operating expenses.

It consists of selling and distribution expenses and administration expenses.

1. Selling and Distribution Expenses

It is calculated by dividing the selling and distribution expenses to net sales.

Formula

Expense Ratio

Calculation:

2005 2006 2007 2008 2009

Selling Expenses 1,257,698 1,420,401 1,068,629 1,776,864 2,236,123Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920Expense Ratio 9% 10% 9% 7% 6%

2. Administration Expenses

It is calculated by dividing the administration expenses to net sales.

Formula

Expense Ratio

Calculation:

2005 2006 2007 2008 2009

Admin Expenses 114,470 103,643 131,369 207,383 401,204

Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920

Expense Ratio 1% 1% 1% 1% 1%


EXPENSES RATIO


133

0%

2%

4%

6%

8%

10%

12%

2005 2006 2007 2008 2009

ADMIN EXPENSES SELLING EXPENSES

Interpretation:

Expense ratio consists of the administrative expenses and selling and

distribution expenses. This indicates the portion of sales which is consumed by

various operating expenses. Admin expenses throughout all the years are equal

that indicates that the FFBL spent less money on it. It saved the money and does

the other expenses like as more spent on the selling and distribution expenses.

Selling and distribution expenses throughout the years showed the negative trend.

It indicates that lower this ratio results the lower operating ratio. It is expected that

it will be decrease in near future because of better facilities provided by the

Government.

11.4.6 Operating Ratio

134

64%

66%

68%

70%

72%

74%

76%

78%

80%

82%

2005 2006 2007 2008 2009

OPERATING RATIO

The ratio is determined by comparing the cost of the goods and other

operating expenses with net sales.

Formula

Operating Ratio

Calculation:

2005 2006 2007 2008 2009

Operating Cost 11,064,404 11,547,088 8,620,308 20,578,999 29,696,893Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920Operating Ratio 78% 79% 70% 77% 81%


Interpretation:

OPERATING RATIO


135

Operating ratio throughout all the years showed the positive trend. This

operating ratio is higher that showed that FFCL is not in good position because

there was small margin of profit available for the purpose of payment of dividend

and creation of reserves. But in 2007 dramatically change occurred that declined

the operating ratio. This showed that the company is in good position in 2007

because there is greater profitability and management efficiency of the concern.

11.4.7 Conclusion

Overall the analysis of profitability of FFBL showed the “GOOD” position.

Gross profit ratio throughout the years showed good position. This improvement is

due to the increase in the production capacity of the plants for which the raw

material was excessively used to utilize production facility and to meet the market

demand. Net profit ratio throughout all the years showed the positive and negative

trend. The higher the income the better the profitability or there is an inverse

relation of sales i.e. the lower the sales the higher the profit margin.

Operating profit ratio throughout all the years showed the negative trend. It

is expected that operating profit ratio will increase more in next future because of

expansion plan and increasing demand of fertilizers in all over the world.

Operating ratio throughout all the years showed the positive trend. As lower this

ratio, better is the position because there is greater profitability and management

efficiency of the concern.

11.5 Analysis of Return

136

Basic purpose of this test is to assist decision maker in efficiently allocating

and using economic resources. In deciding where to invest their money, equity

investor wants to know how efficiently companies utilize resources. The most

common method of evaluating with which financial resources are employed to

compute the rate of return earned on the resources. It includes:

1. Return on assets

2. Return on investment

3. Return on equity

11.5.1 Return on Assets

Return on assets is used to evaluate whether management has earned a

reasonable return with the assets under the control. Return on assets measure the

efficiency with which the management has utilized the assets under its control,

regardless of whether these assets were financed with debt or equity capital.

Return on assets is an indicator of how profitable a company is before leverage,

and is compared with companies in the same industry.

Formula

Return on Assets

Calculation:

2005 2006 2007 2008 2009

Net Profit 2,449,109 2,444,858 2,540,033 2,899,621 3,784,365Average Total Assets 23274195 26131401 28363663.5 37908821 41498426.5ROA 8% 7% 7% 6% 9%


RETURN ON ASSETS


137

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

2005 2006 2007 2008 2009

RETURN ON ASSETS

Interpretation:

Return on assets shows the negative trend from 2005 to 2008. This decrease

occurs due to the increase in total assets specially fixed assets while net income

after subtracting the compensation from GOP is also low as compared to the

average total assets. This is mainly due to the poor equipment and obsolete

technological equipment used in process. In 2009 it showed the positive trend that

indicates that the FFBL improved its position in the industry.

11.5.2 Return on Investment

Return on investment (ROI) indicates the percentage of return on the total

capital employed in the business. It is also called overall profitability ratio.

Formula

Return on investment

Calculation:

2005 2006 2007 2008 2009

138

0%

5%

10%

15%

20%

25%

30%

35%

40%

2005 2006 2007 2008 2009

RETURN ON INVESTMENT

EBIT 3,190,360 3,160,200 3,622,580 6,241,813 7,028,027

Capital Employed 18,236,615 19,252,029 19,476,022 20,552,202 19,477,929

ROI 17% 16% 19% 30% 36%

Graphical representation

Interpretation:

Return on investment showed the positive trend throughout all the years. It

improved its position that indicates that the FFBL is in good position. It increased

due to the lower interest rate. The whole situation concludes that ROI is increasing

year by year due to the higher returns than the total capital employed in business.

11.5.3 Return on Equity



139

0%

5%

10%

15%

20%

25%

30%

35%

40%

2005 2006 2007 2008 2009

RETURN ON EQUITY

The Return on Equity ratio looks only at return earned by management on

the shareholder investment. ROE measures a firm's efficiency at generating profits

from every unit of shareholders' equity. The company’s ROE shows how well a

company uses investment funds to generate earnings growth.

Formula

Return on Equity

Calculation:

2005 2006 2007 2008 2009

Net Profit 2,449,109 2,444,858 2,540,033 2,899,621 3,784,365

Equity 7,727,531 8,537,696 8,508,927 10,486,371 10,659,901

ROE 32% 29% 30% 28% 36%


Interpretation:

RETURN ON EQUITY


140

0%

5%

10%

15%

20%

25%

30%

35%

40%

2005 2006 2007 2008 2009

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

ROI ROE ROA

Return on equity showed the positive and negative trend throughout all the

years. The company’s ROE shows how well a company uses investment funds to

generate earnings growth. ROE decreased in 2006 and 2008. In 2009, it showed

the growth in ROE due to increase in the net income and equity as compared to the

last year.

11.5.4 Conclusion

Return on investment indicates the percentage of return on the total capital

employed in the business. Return on assets is used to evaluate whether

management has earned a reasonable return with the assets under the control. The

Return on Equity ratio looks only at return earned by management on the

shareholder investment. Overall the FFBL showed the “GOOD” position because

its ROI is in good position that gives the higher return.

ANALYSIS OF RETURN


141

12. Cross Sectional Analysis

12.1 Introduction

142

Cross sectional analysis is used to compare the company’s financial

performance to the industry’s average performance. It means the analysis of

financial ratios of company with the same ratios of the different companies in the

same industry. An analyst does this in order to find the company with its healthiest

financial status. This is helpful in making informed investment decisions.

Cross sectional analysis is done by using the some basic ratios of the

industry in which the firm under analysis belongs to (and specifically, the average

of all the firms of the industry) as benchmarks or the basis for our company’s

overall performance evaluation. The benchmark usually chosen is the average ratio

value for all the firms in an industry for the time period.

In cross sectional analysis, ratios are used and compared between several

firms of the same industry in order to draw conclusions about an entity's

profitability and financial performance.

Criteria:

Comparison of different fertilizer firm as Fauji Fertilizer Bin Qasim

Limited, Engro Chemical Pakistan Limited, and Fauji Fertilizer Company Limited

financial ratios at the same point in time from 2005 to 2009, involves comparing

the firm’s ratios to those of other firms in its industry or to industry averages.

Actual calculations are as under…..


Cross sectional analysis of sales, cost of goods sold, and net profit is as:

143

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

2005 2006 2007 2008 2009

FFCL FFBL ECPL

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

2005 2006 2007 2008 2009

FFCL FFBL ECPL

Amounts:

2005 2006 2007 2008 2009Sales

FFCL 39,757,510 44,680,986 40,688,779 57,433,698 72,914,811FFBL 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920 GOODECPL 18,756,820 20,240,035 34,120,611 40,973,047 58,152,368

CGS FFCL 26,074,950 30,265,238 25,731,835 36,829,444 47,574,610FFBL 9,692,236 10,023,044 7,420,310 18,594,752 27,059,566 GOODECPL 14,072,832 15,097,181 26,138,366 30,111,348 44,658,196

Net Profit FFCL 6,395,259 6,250,971 6,594,095 8,769,347 10,598,506FFBL 2,449,109 2,444,858 2,540,033 2,899,621 3,784,365 BETTERECPL 2,283,783 2,138,842 2,833,788 4,206,690 3,718,802


SALES


COST OF GOODS SOLD


144

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

2005 2006 2007 2008 2009

FFCL FFBL ECPL

Interpretation:

Cross sectional analysis shows that FFBL has a good position in market on

the basis of its income statement as compare to the other market players. It stands

3rd on the basis of sales and cost of goods sold and 2nd on the basis of profits.

12.3 Balance Sheet

NET PROFIT


145

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

2005 2006 2007 2008 2009

FFCL FFBL ECPL

Cross sectional analysis of current assets, current liabilities, and equity is

as:

Amounts:

2005 2006 2007 2008 2009Current Assets

FFCL 20,463,506 20,461,126 21,593,297 37,770,114 33,108,426FFBL 9,266,673 11,322,594 11,161,328 28,492,569 18,443,765 BETTERECPL 5,261,432 8,710,860 24,279,441 20,661,003 19,923,726

Current Liabilities

FFCL 18,707,783 18,687,259 20,666,876 37,610,128 34,389,137FFBL 6,344,831 8,429,327 9,569,949 26,219,469 16,747,253 BETTERECPL 2,907,331 6,397,441 9,604,833 12,279,929 15,970,218

Equity FFCL 15,411,567 16,741,909 16,486,640 18,410,468 19,336,001FFBL 7,727,531 8,537,696 8,508,927 10,486,371 10,659,901 GOODECPL 7,540,790 9,796,171 18,006,690 23,547,731 29,344,395


CURRENT ASSETS


CURRENT LIABILITIES


146

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

2005 2006 2007 2008 2009

FFCL FFBL ECPL

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

2005 2006 2007 2008 2009

FFCL FFBL ECPL

Interpretation:


the basis of its balance sheet as compare to the other market players. It stands 2nd

on the basis of current assets and current liabilities and 3rd on the basis of equity.

12.4 Short Term Financial Position Analysis

EQUITY


147

0

0.5

1

1.5

2

2.5

3

2005 2006 2007 2008 2009

FFCL FFBL ECPL

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2005 2006 2007 2008 2009

FFCL FFBL ECPL

Cross sectional analysis of short term financial position focuses on Current

ratio and quick ratio.

Amounts:

2005 2006 2007 2008 2009Current Ratio

FFCL 1.09 1.09 1.04 1 0.96FFBL 1.46 1.34 1.17 1.09 1.1 BETTERECPL 1.81 1.36 2.53 1.68 1.24

Quick Ratio

FFCL 0.86 0.84 0.81 0.72 0.78FFBL 1.21 1.15 0.97 0.82 0.92 BETTERECPL 0.84 0.82 1.93 0.92 0.83

Absolute Liquid Ratio

FFCL 0.77 0.64 0.59 0.33 0.73FFBL 1.14 0.97 0.86 0.79 0.88 GOODECPL 0.52 0.42 1.36 0.55 0.54


CURRENT RATIO


QUICK RATIO


148

0

0.2

0.4

0.6

0.8

1

1.2

1.4

2005 2006 2007 2008 2009

FFCL FFBL ECPL

Interpretation:


the basis of its liquidity as compare to other market players. It stands 2nd on the

basis of current ratio and quick ratio and 3rd on the basis of absolute liquid ratio.

12.5 Profitability Analysis



149

0%

5%

10%

15%

20%

25%

30%

35%

40%

2005 2006 2007 2008 2009

FFCL FFBL ECPL

Cross sectional analysis of profitability position focuses on gross profit

margin, net profit margin and operating profit margin.

Amounts:

2005 2006 2007 2008 2009Gross Profit Ratio

FFCL 34% 32% 37% 36% 35%FFBL 32% 32% 39% 31% 26% BETTERECPL 25% 25% 23% 27% 23%

Net Profit Ratio


Operating Profit Ratio



GROSS PROFIT RATIO


NET PROFIT RATIO


150

0%

5%

10%

15%

20%

25%

2005 2006 2007 2008 2009

FFCL FFBL ECPL

0%

5%

10%

15%

20%

25%

30%

2005 2006 2007 2008 2009

FFCL FFBL ECPL

Interpretation:


the basis of its profitability as compared to other market players. It stands 2nd on

the basis of gross profit ratio, net profit ratio and operating profit ratio.

OPERATING PROFIT RATIO


151

0%

10%

20%

30%

40%

50%

60%

2005 2006 2007 2008 2009

FFCL FFBL ECPL

12.6 Return Analysis

Cross sectional analysis of profitability focuses on gross profit margin, net

profit margin and operating profit margin.

Amounts:

2005 2006 2007 2008 2009ROI


ROE


ROA

FFCL 22% 21% 22% 25% 27%FFBL 8% 7% 7% 6% 9% GOODECPL 24% 16% 13% 10% 7%




152

0%

10%

20%

30%

40%

50%

60%

2005 2006 2007 2008 2009

FFCL FFBL ECPL

0%

5%

10%

15%

20%

25%

30%

2005 2006 2007 2008 2009

FFCL FFBL ECPL

Interpretation:


the basis of its returns as compared to other market players. It stands 2nd on the

basis of ROI and ROE and 3rd on the basis of ROA.

RETURN ON ASSETS


RETURN ON EQUITY


153

0

1

2

3

4

5

6

7

8

2005 2006 2007 2008 2009

FFCL FFBL ECPL

12.7 Efficiency Analysis

Cross sectional analysis of efficiency focuses on inventory turnover, debtor

turnover and creditor turnover.

Amounts:

2005 2006 2007 2008 2009Inventory Turnover

FFCL 7 7 5 5 6FFBL 8 6 4 4 5 GOODECPL 8 5 7 5 7

Debtor Turnover


Creditor Turnover



INVENTORY TURNOVER


DEBTOR TURNOVER


154

0

5

10

15

20

25

30

35

40

45

50

2005 2006 2007 2008 2009

FFCL FFBL ECPL

0

1

2

3

4

5

6

7

8

9

2005 2006 2007 2008 2009

FFCL FFBL ECPL

Interpretation:


the basis of its efficiency as compared to other market players. It stands 3 rd on the

basis of inventory turnover, debtor turnover and creditor turnover.

CREDITOR TURNOVER


155

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2005 2006 2007 2008 2009

FFCL FFBL ECPL

12.8 Long Term Financial Position Analysis

Cross sectional analysis of long term financial position focuses on solvency

ratio.

Amounts:

2005 2006 2007 2008 2009Solvency Ratio

FFCL 0.68 0.66 0.69 0.75 0.72FFBL 0.69 0.69 0.71 0.78 0.71 BETTERECPL 0.48 0.51 0.63 0.71 0.78


Interpretation:


the basis of its long term financial position as compared to other market players. It

stands 2nd on the basis of solvency ratio.

SOLVENCY RATIO


156

12.9 Conclusion




According to the Cross Sectional Analysis,


the basis of its returns as compare to the other market players. All the profits are

increasing as per industry. But due to poor sales, low volume profits are also

obtained. FFBL’s performance is also improving and gross profits is increased that

capture industry average coupled with better relative increase in selling, general

expenses. Returns are increasing. Return on Assets is decreased that may create

problem in management. But company has sufficient finance to fulfill the

liabilities hence firm will not face liquidity problems.

157

13. Conclusion

Overall the fertilizer industry showed the proper but sustainable growth

with good profitability. The strength of this sector can be derived from the

agriculture sector that is the most important contributor to Pakistan’s GDP. The

government supports in agriculture and fertilizer industry are vital variables in the

social development of the country. Therefore, the fertilizer industry offers the safe

and good opportunities to the banks.

The company mainly manufactures and market fertilizers. FFBL offered the

good shareholder returns and demand is also rising so that the manufacturers

expand its capacity to accommodate in the industry with its other market players.

That’s why; we can say that the FFBL has sound fundamentals and significant

potential for the future. FFBL opened the more opportunities for the investors

related the capacity for the export of fertilizer.

The government keep the input costs low for some time to come because it

know that the local manufactures are determined to pass on all such increases to

consumers. So, this preserves the industry’s growth and expansion and move

towards the satisfied condition, the entry barriers for new firms arise.

FFBL’s can lend to its short term debts to its lenders because its short term

capacity is good. The company can pay its bills soon and its collects its receivable

in good time period. So, it can open the great and sound opportunities for the

lenders.

We can say that the company achieved its goals and showed the customer

satisfaction. It maintains its growth and shows the healthy increase in the profits in

the five years.

159

14. Future Projections

The Company is actively looking out for further diversification

opportunities by either going for own projects or participating with other investors

in opportunities like privatization, Liquefied Natural Gas (LNG) Terminal,

Independent Power Projects, Cement Sector etc. If the company would be able to

continue its current stability and investments in profitable projects then the

company would be able to increase its market share as well as profitability.

The company is also investing in Fauji Cement Company Limited (FCCL).

Fauji Cement Company Limited (FCCL), an Associated Company of FFBL, is in

the process of expanding its existing operating capacity from 1.17 MTPA to 3.51

MTPA (200% expansion). The Fauji Cement Brand carries a premium in the

market and is perceived as a better quality product. This is why FCCL has been

operating at a higher capacity than the industry over the last 5 years.

Pakistan is having more than enough availability of both DAP and ‘lately

imported’ Urea during the first quarter 2009. At current price levels, there does not

seem any need of DAP subsidy. Timely disbursement of promised wheat support

price to the farmers must be ensured, in order to improve their cash cycle.

The FFBL continue to take proactive measure to mitigate potential risks and cope

with challenges to company’s profitability arising from the current economic

climate.

However, despite challenges mentioned earlier, the company expects to

have highest production and sales during 2009 and accordingly, good results by

the end of Year 2009.

161

15. Recommendations

On the basis of SOWT analysis and other firm analysis these

recommendation are generated.

Fauji Fertilizer Bin Qasim Ltd. is one of the top Fertilizer production plants

of Pakistan enjoying satisfactory reputation throughout the country.

Fauji Fertilizer Bin Qasim Limited is a subsidiary of Fauji Fertilizer

Company Limited (existing client) and the only fertilizer complex in

Pakistan producing DAP fertilizer and granular urea making significant

contribution towards agricultural growth of the country.

Investment in Pak-Marco Phosphore (PMP) by FFBL ensures uninterrupted

supply of phosphoric acid at a cheaper price, which is a major raw material

for manufacturing DAP.

Generally with Pakistan being a net importer for DAP (70% demand met

through imports), producers used to have a cost edge over importers owing

to fixed cost throughout the year. Being a sole producer of DAP in

Pakistan, FFBL avails scores of benefits as compared to other suppliers.

FFBL enjoys an assured demand for its domestically manufactured product

as well as imports. Strong identity and recognition of brand “Sona” give an

edge to FFBL over its competitors.

Additionally, the augmented demand gives propensity to fertilizer plants to

capture more and more market share and to get leading position in the

industry.

The level of training is lower and also lack of knowledge is available.

That’s why FFBL must focus on hiring the new persons and provide the

need and new technology to the employees.

163

16. Annexure

All data and information are gathered from the annual reports of Fauji

Fertilizer Bin Qasim Limited…………

www.ffbl.com.pk

http://www.google.com.pk

http://www.kse.com.pk/

http://www.sbp.org.pk/

http://www.brecorder.com/

http://www.investopedia.com

165

http://www.brecorder.com/

http://www.sbp.org.pk/

http://www.google.com.pk/

http://www.ffbl.com.pk/

fauji fertilizer bin qasim limited

Documents