financial analysis of fatima fertilizer company limited

Company Profile

Fatima Group (History)

In 1988 a dynamic and radical person known as Mr. Mukhtar A. Sheikh had

conceptualized his revolutionary vision and laid the stone of a Multan based

organization which commenced its business mainly in Sugar. In subsequent years the

untiring, dedicated and missionary zeal & zest of the founders of group had woven the

net of Companies into glorified galaxy of shining Stars and named it Fatima Group. The

substantial Strategic benefits of vertical integration led him and his associates to

consider venturing into the manufacturing field of Textile, Sugar, Fertilizers, Malaises,

Trading, Mining, Power Generation, Air Line and Packing Material etc.

Over the years and by the grace of all mighty Allah the Fatima Group of

Companies now proudly stood unparallel and peerless leader in business groups of

Pakistan. It ranks amongst the top Companies of Pakistan. The group has strong

presence in most important business sectors of the region. It also has the distinction of

being one of the largest players in each sector.

Textile . Reliance Weaving Mills Ltd, the flagship company of the group was

established in 1991. Its annual turnover for the year 2013 is approx Rs. 9 billion with

the production facility of 35,520 spindles (two units) and 296 looms (two units). It is

listed on Karachi & Lahore Stock Exchanges of Pakistan.

Fertilizers. Fatima Fertilizers Ltd is the largest fertilizer complex in Pakistan with

annual production capacity of 847,000 MT. It was put into operation in 1979. Under the

privatization policy of Government of Pakistan, the management of the company was

taken over by Fatima Group on July 14, 2005.

Fatima Fertilizer Company Ltd was incorporated on 24 December 2003 as a

Public Limited Company. Fatima Fertilizer is fully integrated fertilizer complex with

annual production capacity (in MT for the year 2012) of Urea 500,000, CAN 420,000,

NP 244,000, Nitric Acid 500,000 and Amonia 500,000. It is listed on all the Stock

Exchanges of Pakistan.

NUML Multan 1 | P a g e

Sugar. Fatima Sugar Mills Limited was incorporated as a public limited company in

1988. Current production capacity is 9,500 MT per day with net profit of Rs. 786

million for the year ended September 2012.

Molasses. Reliance Commodities (Pvt) Limited is a private limited company

incorporated in 1996 and deals in export of molasses, sugar, and other commodities.

Company has earned net profit for the year ended June 30, 2012 of Rs. 862 million.

Fatima Group of Companies.

1. Fatima Energy Limited.

2. Fatima Sugar Mills Limited.

3. Fazal Cloth Mills Limited.

4. Reliance Commodities (Private) Limited.

5. Reliance Weaving Mills Limited.

6. Pakistan Mining Company Limited.

7. Air One (Private) Limited.

8. Arif Habib Corporation.

9. Arif Habib Limited.

10. Arif Habib Investments Limited.

11. Arif Habib REIT Management Limited.

12. Arif Habib DMCC.

13. Aisha Steel Mills Limited.

14. Al-Abbas Cement Industries Limited.

15. Pakistan (Private) Equity Management Limited.

16. Rozgar Microfinance Bank Limited.

17. S.K.M. Lanka Holdings (Private) Limited.

18. Sweet Water Pakistan.

19. Dairies (Private) Limited.

20. Thatta Cement Company Limited.


Landmark Events Fatima Fertilizers

Emerging History by Date

Company Incorporation and Gas Allocation.

December 2003 GSA Signing.

September 2004 Ground Breaking Signing of.

July 2005 Contracts Financial Closure.

April 2006 Contracts Achieved.

June - September 2006 Ammonia Furnace 1st Fire.

November 2006 CAN Plant Production Initial.

November 2009 Public Offering Ammonia.

January 2010 Plant Production.

March 2010 Urea Plant Production.

April 2010 NA Plant Production.

April 2012 NP Plant Production.

July 2012 Declaration of Commercial Operations.

May 2013 Conversion and Redemption of Preference Shares.


MANAGEMENT AND ORGANIZATION

Board of Directors

Mr. Arif Habib - Chairman

Mr. Fawad Ahmed Mukhtar - Chief Executive Officer

Mr. Fazal Ahmed Sheikh - Member

Mr. Nasim Beg - Member

Audit Committee -

Mr. Nasim Beg - Chairman

Mr. Fazal Ahmed Sheikh - Member

Human Resource and Remuneration Committee

Mr. Nasim Beg - Chairman

Mr. Abdus Samad - Member

Mr. Faisal Ahmed Mukhtar - Member

Mr. Rehman Naseem - Member

Chief Financial Oficer

Mr. Arif Hamid Dar

Company Secretary

Mr. Ausaf Ali Qureshi

Key Management

Mr. M. Abad Khan - Advisor to CEO

Mr. Qadeer Ahmed Khan - Director Special Projects


Mr. Muhammad Zahir - Director Marketing

Mr. Haroon Waheed - Group Head of Human Resource

Mr. Farrukh Iqbal Qureshi - General Manager Manufacturing

Mr. Asad Murad - Head of Internal Audit

Mr. Iftikhar Mahmood Baig - General Manager Business Development

Mr. Fuad Imran Khan - Chief Information Officer

Mr. Javed Akbar - Head of Procurement

Brig (R) Muhammad Ali Asif Sirhindi

- General Manager Administrative Services

Mr. Muhammad Saleem Zafar - General Manager Projects

Legal Advisors

M/s. Chima & Ibrahim - Advocates, 1-A/245, Tufail Road, Lahore Cantt.

Auditors

A. F. Ferguson & Co. - Chartered Accountants, 23-C, Aziz Avenue, Canal Bank, Gulberg V, Lahore.


General information

Registered Name: Fatima Fertilizers (private) limited.

Status: A private limited company having only two partners.

Factory Location: Machi Ghot, Rahim Yar Khan, Pakistan

Brand Name of

Products:

KISAN Urea, KISAN Nitro phosphate & KISAN Calcium

Ammonium Nitrate.

Main Products: Calcium Ammonium Nitrate, Nitro phosphate and Urea

Intermediate products: Ammonia, Nitric Acid, Nitric Acid Crystals.

Factory & Housing area 172 Acres and 130 Acres.

Plants Started: Power Plant June 24, 1978

Ammonia plant Sep 27, 1978

CAN plant Nov 26,1978

Nitric Acid plant Sep11,

1978

Urea plant Oct 01,1978

NP pant Jan12, 1979

Capacities: Ammonia Gas 313500 & CAN

450000 metric tons

Nitric Acid 441600 &

Urea 2400 metric tons

Raw Material

Requirements:

Natural Gas 52.5 M. Cubic feet (per

day)

Rock Phosphate 710 tons

(per day)

Storage capacity: N-P(unbagged) 30000 TONS

Urea (bagged) 12000 tons

Imported Rock 30000 tons

CAN (unbagged) 27000

TONS

CAN (bagged) 5000 tons

Bagging Facilities: 4500 tons per day

Foreign Sources of

Finance:

ADNOC

Asian Development Bank

City Corporation International Bank

World Bank

OPEC Special Fund


Vision

To be a world class manufacturer of fertilizers and ancillary products, with a focus on safety,quality and contribution to national economic growth and development. We will care for theenvironment and the communities we work in while continuing to create shareholders’ value.

Mission

• To be the preferred fertilizer company for farmers, business associates and suppliers throughquality and service.• To provide employees an exciting, enabling and supportive environment to excel in, beinnovative, entrepreneurial in an ethical and safe working place based on meritocracy andequal opportunity.• To be a responsible corporate citizen with a concern for the environment and thecommunities we deal with.

Our Initiatives

Farmers Support

We know our long-term success is linked to the success of the thousands of farmers

who grow crops. That’s why we work on-the-ground with farmers and educate them the

proper use of fertilizers to help improve yields.

Our CSR Initiatives

Mukhtar A. Sheikh Memorial Welfare Hospital A Kidney and

Psychiatric Hospital in Multan

Total project cost of USD 23 million approximately.

Free treatment to all workers of EOBI or ESSI.


Domestic Fertilizer Market 2013

a) The fertilizer market in 2013, exhibited a mixed trend.

b) The Nitrogen market continued to decline for the third consecutive year.

2013 (2012) MT Mil National

Capacity

Effective

Production

National

Demand

Nitrogen6.8 (5.9) 4.6 (5.5) 5.7 (6.7)

Phosphate 1.3 (1.0) 10 (10) 1.6 (1.2)

c) Urea off take further shrank by 12% in 2013 from 5.9 million tons to 5.2 million tons,

due to lower acreage on BT cotton, higher prices of urea and weakening of cotton

prices in midyear.

d) Urea demand spurred by yearend following late announcement of support increase for

wheat by the government.

e) Phosphate market for DAP increased by 7% over the year primarily due to increased

volumes in the first half of 2013 ~2013 Rabi season.

f) International prices of fertilizer (DAP) stayed around USD 600 mark for most of the

year.

Operational Performance ~ 2013

a) Year 2013 was challenging but successful.

b) Dehumidification Unit was successfully installed and commissioned at CAN Plant,

enabling ~200 T/Day increase in plant throughput in humid summer season.

c) Reliability of NP plant has considerably improved.

d) As a result of major efforts, consistent improvement in HSE Performance was

noticed. The yearend ‘Total Recordable Injury Rate (TRIR) was 0.22.

e) Company has launched an “Excellence plan” to achieve excellence in all areas of its

operation

f) The ‘Integrated Management System’ (IMS) certification by third party auditors is

planned by end 2013.


Ammonia Plant Revam for 1800 MT

a) Revamp study for 1800 MT is now complete.

b) Basic Engineering contract for 1800 MT is being awarded. Detail Engineering

contractors are also being engaged in parallel.

c) Revamp shall be executed in 2015.

d) In view of very attractive payback, Waste gas boiler project at Ammonia Plant is

being done ahead of Revamp study and targeted to complete by Mid of 2014. This

project will boost company profits by lowering Fuel gas bill significantly.

e) Numerous projects in hand to improve reliability and efficiency of the fertilizer

complex, which shall be completed phase wise within next 2~3 years.

Future Outlook

The industry will continue to grapple with the issues like:

a) Gas curtailment in the next year also.

b) This is likely to result in expensive imports again.

c) Capacity within the country continuously lying idle.

d) Continued decline in usage of nitrogenous fertilizer, which will eventually reduce

yields raising the specter of food insecurity.

Earliest possible restoration of gas to the local industry will lead to:

a) Reduction in prices.

b) Foreign exchange saving along with reduced burden of subsidy.

c) Enhanced usage of fertilizers to previous levels at least.

d) Yield improvement to counter food insecurity.

The Company with its unique product portfolio and the growing awareness of the Farming

community is well placed to secure a strong foothold. The continuing marketing, channel,

farmer services and logistics thrusts will drive differentiation and bolster our sales in 2013.


Financial Statements(For the year ending Dec 2013)

Balance Sheet (as at December 31, 2013) (Rupees in thousands) 2013 2012

EQUITY AND LIABILITIES, CAPITAL AND RESERVESOrdinary shares of Rs 10 each 21,000,000 21,000,000Preference shares of Rs 10 each 4,000,000 4,000,000Issued, subscribed and paid up share capital 21,000,000 20,000,000Ordinary shares of Rs 10 each - 4,000,000Preference shares of Rs 10 each 1,790,000 790,000Share premium 6,160,354 3,264,865Accumulated profit 28,950,354 28,054,865NON CURRENT LIABILITIESLong term finance 27,023,742 34,457,218Dividend & markup payable to related parties 2,917,615 2,217,219Deferred liabilities 4,841,255 1,807,018 34,782,612 38,481,455CURRENT LIABILITIESTrade and other payables 4,996,727 4,650,956Accrued finance cost 499,478 1,890,932Short term finance - secured 2,690,246 -Current portion of long term finance 4,085,379 3,032,833Provision for taxation - 236,207CONTINGENCIES & COMMITEMENTS 12,271,830 9,810,928 76,004,796 76,347,248ASSETSNON CURRENT ASSETS Property, plant and equipment 65,882,892 66,827,913Intangible assets 33,881 -Capital work in progress 1,662,461 1,287,735 67,579,234 68,115,648Long term Investments 85,190 -Long term deposits 11,361 5,481

67,675,785 68,121,129CURRENT ASSETSStores and spares 3,230,805 1,930,679Stock in trade 2,507,927 1,215,014 Trade debtors 138,480 195,840Loans, advances, deposits, prepayments and other receivables 1,467,655 1,045,225Cash and bank balances 984,144 3,839,361 8,329,011 8,226,119 76,004,796 76,347,248

Profit and Loss Account


for the year ended Dec 31, 2013 2013 2012Sales 29,518,623 14,833,343Cost of Sales -12,252,427 -4,740,961Gross Profit 17,266,196 10,092,382Distribution Cost -1,233,944 -337,946Administrative Expenses -738,792 -417,225

15,293,460 9,337,211Finance Cost -5,773,821 -3,063,055Other Operating Expenses -506,135 -320,398

9,013,504 5,953,758Other operating Income 67,033 133,810Profit Before Tax 9,080,537 6,087,568Taxation -2,969,418 -1,970,593Profit for the year 6,111,119 4,116,975Earnings per Share - Basic (in Rupees) 2.86 1.90


Pattern of Shareholdingfor the year ended Dec 31, 2013

Categories of Shareholders SharesHeld

%

Directors, Chief Executive Officer, and their spouse and minor children

714,648,874 34.03

Associated Companies, undertakings and related parties 960,091,411 45.72

Executives 645,421 0.03

Public Sector Companies and Corporation 11,515,338 0.55

Banks, Development Financial Institutions, Non Banking Financial Institutions, Insurance Companies, Takaful, Modarabas and Pension Funds 87,932,669 4.19

Mutual Funds 17,334,064 0.83

General Public

Local 223,593,997 10.65

Foreign 787,012 0.04

Foreign Companies 30,330,361 1.44

Others 53,120,853 2.53

Total 2,100,000,000 100.00


Financial AnalysisKey Performance Indicators

2013 2012

PROFITABILITY

Gross profit % 58.49 67.77

EBITDA % 55.35 66.48

Operating profit % 50.09 60.79

Profit before tax % 30.76 41.04

Net profit % 20.7 27.75

Return on equity % 21.11 14.67

Return on total assets % 8.04 5.39

LIQUIDITY / ACTIVITY

Current ratio Times 0.68 0.84

Quick / Acid test ratio Times 0.47 0.71

Cash from operations to sales Times 0.24 0.5

Inventory turnover Times 6.58 3.64

Fixed assets turnover Times 0.43 0.22

Total assets turnover Times 0.39 0.2

CAPITAL STRUCTURE

Debt : Equity 52:48:00 57:43:00

Interest cover Times Times 2.57 2.99

INVESTMENT / MARKET

Basic earnings per share Rs 2.86 1.9


Balance Sheet - Vertical Analysis 2013 2012

PKR % PKR %Non-Current Assets Fixed Capital Expenditure 67,579 88.91% 68,116 89.22%Deferred Tax Asset - Long Term Investments 85 0.11% - Long Term Deposits 11 0.01% 5 0.01%Total Non-Current Assets 67,676 89.04% 68,121 89.23%Current Assets Stores and Spares 3,231 4.25% 1,931 2.53%Stock-in-Trade 2,508 3.30% 1,215 1.59%Trade Debts 138 0.18% 196 0.26%Loans, Advances, Deposits and Prepayments 1,468 1.93% 1,045 1.37%Cash and Bank Balances 984 1.29% 3,839 5.03%Total Current Assets 8,329 10.96% 8,226 10.77%Total Assets 76,005 100.00% 76,347 100.00%Share Capital and Reserves Issued, Subscribed and Paid-up Capital 21,000 27.63% 20,000 26.20%Preference Shares - 4,000 5.24%Share Deposit Money for Ordinary Shares - Hedging Reserve - Share Premium 1,790 2.36% 790 1.03%Accumulated Profit / (loss) 6,160 8.10% 3,265 4.28%Total Share Capital and Reserves 28,950 38.09% 28,055 36.75%Non-Current Liabilities Long Term Finance 27,024 35.56% 34,457 45.13%Dividend and Markup Payable to Related Parties 2,918 3.84% 2,217 2.90%Deferred Liabilities 4,841 6.37% 1,807 2.37%Advance against Preference Shares - Bills Payable - Total Non-current Liabilities 34,783 45.76% 38,481 50.40%Current Liabilities Trade and Other Payables 4,997 6.57% 4,651 6.09%Accrued Finance Cost 499 0.66% 1,891 2.48%Short Term Finance Secured 2,690 3.54% Current Portion of Long Term Loans 4,085 5.37% 3,033 3.97%Derivative Financial Instruments Provision for Taxation 236 0.31%Total Current Liabilities 12,272 16.15% 9,811 12.85%Total Liabilities and Equity 76,005 100.00% 76,347 100.00%

Balance Sheet - Horizontal Analysis NUML Multan 14 | P a g e

2013 13’ vs 12’ 2012 PKR Change PKRNon-Current Assets Fixed Capital Expenditure 67,579 -0.8% 68,116Deferred Tax Asset - - Long Term Investments 85 - -Long Term Deposits 11 107.3% 5Total Non-Current Assets 67,676 -0.7% 68,121Current Assets Stores and Spares 3,231 67.3% 1,931Stock-in-Trade 2,508 106.4% 1,215Trade Debts 138 -29.3% 196Loans, Advances, Deposits and Prepayments 1,468 40.4% 1,045Cash and Bank Balances 984 -74.4% 3,839Total Current Assets 8,329 1.3% 8,226

Total Assets 76,005 -0.4% 76,347 Share Capital and Reserves Issued, Subscribed and Paid-up Capital 21,000 5.0% 20,000Preference Shares - -100.0% 4,000Share Deposit Money for Ordinary Shares - Hedging Reserve - Share Premium 1,790 126.6% 790Accumulated Profit / (loss) 6,160 88.7% 3,265Total Share Capital and Reserves 28,950 3.2% 28,055 Non-Current Liabilities Long Term Finance 27,024 -21.6% 34,457Dividend and Markup Payable to Related Parties 2,918 31.6% 2,217Deferred Liabilities 4,841 167.9% 1,807Advance against Preference Shares - - - Bills Payable - - - Total Non-current Liabilities 34,783 -9.6% 38,481 Current Liabilities Trade and Other Payables 4,997 7.4% 4,651Accrued Finance Cost 499 -73.6% 1,891Short Term Finance Secured 2,690 - Current Portion of Long Term Loans 4,085 34.7% 3,033Derivative Financial Instruments Provision for Taxation -100.0% 236Total Current Liabilities 12,272 25.1% 9,811Total Liabilities and Equity 76,005 -0.4% 76,347

Profit and Loss Account - Vertical Analysis 2013 2012 PKR Million % PKR Million %


Sales 29,519 100% 14,833 100%Cost of sales -12,252 -42% -4,741 -32%

Gross Profit 17,266 58% 10,092 68%Distribution cost -1,234 -4% -338 -2%Administrative expenses -739 -3% -417 -3%Finance cost 15,293 52% 9,337 63%

Other operating expenses -5,774 -20% -3,063 -21%

-506 -2% -320 -2%9,013 31% 5,954 40%

Other operating income 67 0.20% 134 0.90%

Profit Before Tax 9,081 31% 6,088 41%Taxation -2,969 -10% -1,971 -13%

Profit for the year 6,111 21% 4,117 28%

Profit and Loss Account - Horizontal Analysis

2013

Change2012

PKR Million PKR MillionSales 29,519 99% 14,833Cost of sales -12,252 158% -4,741

Gross Profit 17,266 71% 10,092Distribution cost -1,234 265% -338Administrative expenses -739 77% -417

15,293 64% 9,337Finance cost -5,774 88% -3,063Other operating expenses -506 58% -320

9,013 51% 5,954Other operating income 67 50% 134Profit Before Tax 9,081 49% 6,088Taxation -2,969 51% -1,971

Profit for the year 6,111 48% 4,117

Profitability Ratios


1. GP Margin. Gross Profit / Sales


Calculation 2013 201217,266,196 / 29,518,623

= 58.49%.10,092,382 / 14,833,343

= 68.04%Interpretation. The Decrease in GP Margin is less comparing to year 2012

indicates that Financial Costs have increased.

2013 201252545658606264666870

GP Margin

GP Margin

2. Operating Profit. EBIT (fin cost + EBT) / SalesCalculation 2013 2012

14,854,358 / 29,518,623

= 50.32%.9,150,623 / 14,833,343

= 61.69%Interpretation. The Decrease of 10% in Operating profit is due to increase in

Finance Cost and other expenses.

2013 20130

10203040506070

O.P

O.P

3. Profit before Tax. EBT / Sales

Calculation 2013 20129,080,537 / 29,518,623

= 30.76%.6,087,568 / 14,833,343

= 41.04%Interpretation. The Decrease in Profit before tax comparing to Sales shows that


the financial Cost and Operating Expenses have increased more than year 2012.

2013 20120

10

20

30

4050

PBT

PBT

4. Net Profit Margin. Net profit after tax / Net SalesCalculation 2013 2012

6,111,119/ 29,518,623

= 20.70%.4,116,975 / 14,833,343


Finance Cost.

2013 20120

5

10

15

20

25

30

NPM

NPM

5. Return On Equity. Net Income / Total Equity

Calculation 2013 20126,111,119/ 28,950,354

= 21.11%.4,116,975/ 28,054,865

= 14.67%Interpretation. There is no major increase/ change in the Equity but the Net


Income has increased by 7%.

2013 20120

5

10

15

20

25

ROA

ROA

6. Return On Total Assets. Net Income / Total AssetsCalculation 2013 2012

6,111,119 / 76,004,796

= 8.04%4,117,000 / 76,347,000


Finance Cost and other expenses.

2013 20120123456789

ROA

ROA

Liquidity/Activity Ratios7. Current Ratios. Current Assets / Current Liabilities

Calculation 2013 20128,329,011 / 12,271,830 8,226,119 / 9,810,928


= 0.68 Times. = 0.84 Times.Interpretation. The Liabilities have decreased by 1.6 Times than the last year. A

Good sign of company as they have increased their Assets and reduced the liabilities.

2013 20120

0.10.20.30.40.50.60.70.80.9

C.A

C.A

8. Quick Ratios. Current Assets —Inventory / Current LiabilitiesCalculation 2013 2012

[8329011 – (3230805 + 2507927)] / 12,271,830

= 0.21 Times

[8226119 – (1930679 + 1215014)] / 9,810,928

= 0.52 Times

Interpretation. The Assets have decreased in year 2013, but on other hand the

increase in liabilities indicate that the company has good business in year 2013. The

increase in Inventory also shows increase in the production.

2013 20120

0.51

1.52

2.53

Quick Ratio

Quick Ratio

9. Cash Ratio. Cash / Current Liabilities

Calculation 2013 2012984,144 / 12,271,830

= 0.08 Times3,839,361/ 9,810,928

= 0.39 TimesInterpretation. The Decrease in Cash reflects that more money has been

invested in the business and the production has increased.


2013 20120

0.050.1

0.150.2

0.250.3

0.350.4

0.45

Cash Ratio

Cash Ratio

10. Inventory Turn Over. CGS / InventoryCalculation 2013 2012

12,252,427 / 5,738,732= 2.14 Times

4,740,961/ 3,145,693= 1.51 Times

Interpretation. The Increase in CGS indicates that the production is more by

0.63 times than 2012. The Business has expanded.

2013 20120

0.5

1

1.5

2

2.5

Inventory Turnover

Inventory Turnover

11. Fixed Asset Turn Over. Sales/Fixed Assets

Calculation 2013 201229,518,623 / 67,675,785

= 0.44 Times14,833,343 / 68,121,129

= 0.22 TimesInterpretation. There is very marginal change in the Fixed Assets but the Sales

has doubled in year 2013.


2013 20120

0.050.1

0.150.2

0.250.3

0.350.4

0.450.5

FA Turnover

FA Turnover

12. Total Asset Turn Over. Sales/Total AssetsCalculation 2013 2012

29,518,623 / 76,004,796

= 0.39 Times14,833,343 / 76,347,248

= 0.19 TimesInterpretation. Sales have doubled and there is marginal increase in the Total

Assets.

2013 20120

0.050.1

0.150.2

0.250.3

0.350.4

0.45

TTA Turnover

TTA Turnover

13. A/R Turnover. Sales/ Acct ReceivablesCalculation 2013 2012

29,518,623 / 138,480,000= 0.21 Times

14,833,343 / 195,840,000= 0.08 Times

Interpretation. Sales have increased and on the other hand there is substantial

change of 0.13 times in the A/R. This shows that Credit Sales have decreased and Cash

Sales have increased.


2013 20120

0.05

0.1

0.15

0.2

0.25

A/R Turnover

A/R Turnover

Capital Structure ratios 14. Debt To Total Assets. Total Debt / Total Assets

Calculation 2013 201247,054,442 / 76,004,796

= 61.91%.48,292,383 / 76,347,248

= 63.25 %.Interpretation. The Debts have decreased by 1.34% which shows that company

is focusing on decreasing the debts.

2013 201261

61.5

62

62.5

63

63.5

DTA

DTA

15. Interest Coverage Ratio. EBIT / Interest LiabilitiesCalculation 2013 2012EBT + Fin Cost =

EBIT14,854,358 / 5,773,821

= 2.57 Times

9,150,623 / 3,063,055

= 2.99 Times

Interpretation. The Interest Liabilities and EBIT have increased due to

substantial Increase in the production and overall business.


2013 20122.32.42.52.62.72.82.9

33.1

IC Ratio

IC Ratio

16. Debt To Equity. Debt : EquityCalculation 2013 2012

47,054,442 / 28,950,354

= 162.53 %

48,292,383 / 28,054,865

= 172.14%

Interpretation. Due to the focused orientation of the company the Debts have

reduced by 10.39%. This shows a Positive trend in the company’s future.

2013 2012156158160162164166168170172174

DTE

DTE

Investment/ Market Ratio

17. Basic Earnings Per Share Ratio. Net Income / No Of Shares

Calculation 2013 20126,111,119 / 2,100,000 4,116,975 / 2,100,000


= Rs 2.91 = Rs 1.96Interpretation. The Profit on Share has increased by Rs 0.95 per Share. This

shows a Positive trend in the Company and the production and sales comparing to last

year have increased manifolds.

2013 20120

0.5

1

1.5

2

2.5

3

3.5

EPS

EPS


SWOT Analysis1. STRENGTHS

a) Capital Intensive nature of the sector.

b) The players operating in this sector are financially strong.

c) All the fertilizer plants are producing at more than 100 percent installed capacity

of utilization.

d) Govt supports in the form of subsidy.

e) Cheap labor.

f) Heavy demand.

g) Well established distribution sector.

h) An agro based economy.

i) Broad range of main and mid products.

j) Central location of plant.

k) Broad production range.

l) Monopoly in Calcium Ammonium Nitrate & Nitro Phosphate production Support

from Ministry.

m) Experience in production and marketing of product.

2. WEAKNESSES

a) Low capacity as compared to demand (demand supply gap).

b) Due to existence of black market and heavy demand farmers had to pay above

the stated price.

c) Technological backwardness and Lack of local resources.

d) Urea made by Fatima is of more powdered form as compared to the urea made by

FFC and other urea producers.

e) Obsolete plant with high operating cost.

f) Govt. compellations especially for the pricing policy.

g) Monetary sensitiveness to foreign exchange exposure.

h) Dependence on imported feed stock suppliers and special repair/ maintenance

facilities.

i) Environmental problem & proximity to urban area.

j) Limitation in achieving NITROPHOSPHATE product quality, design

specifications.


k) Too much centralization effects timely decision making.

l) Unsatisfactory Product quality of urea.

m) No proper sales promotion.

n) Placement and number of warehouses.

o) Lack of long term planning, decisions are made keeping in view the short-term

benefits.

p) Lack of financial budgets for implementation at decisions.

q) Too much cost consciousness that affects the long run impact and profits.

3. OPPORTUNITIES

a) As the demand is high compared to supply, fertilizer sector has an opportunity to

expand capacity to fulfill the local demand.

b) Export.

c) Introduction of BT crops.

d) Improvement in product quality.

e) Expansion of plants to meet the demand more efficiently.

f) Proper sales promotion.

g) Proper placement or warehouses.

h) Delegation of authority so that decisions can be made at the spot without any

delay.

i) Long term profits or benefits should be preferred over short-term profits. Quality

should be improved gradually with the results and trends in market.

4. THREATS

a) Scarce water resources.

b) Load-shedding of gas.

c) Hike in fuel prices.

d) Taxes.

e) Removal of subsidy.

f) Rising global prices of fertilizer products.

g) Government intervenes to stabilize the prices.

h) Low product quality of competitive product (urea) is a major threat

i) Major competitors are FFC, ENGRO CHEMICALS and DHC.

j) Market share threat for Urea.


NFC FFC ENGRO

25-26% 48% 24-25%

a) In market the 50-kg bag of Fatima is sold at rs.330 while engro and dhc at

rs.360sell that bag but even they are more effective.

b) Fatima Fertilizer is giving almost negligible incentives to the customers while ffc

and engro are running efficient promotional schemes to attract the customer.

c) Fatima Fertilizer is also lagging behind in providing the product at the right time

and place customer has to wait 3 to 4 days to load be second truck while at the

warehouses of ffc and engro-chemical customer immediately gets the product- so

the placement of warehouses is a threat. Neml has 6 warehouses in Multan region

while fec has 16 warehouses in that region.

d) The packaging of ffc is also better than Fatima.

e) Imported fertilizers are also a threat to local industry selling at rs.310 in the

market for a 50kg bag.


PESTEL ANALYSISPolitical Trend.

a) Political trends are always in favor of this industry. The Government has provided

incentives under Fertilizer Policy, 2001, to encourage fertilizer production in the

country.

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

subsidy on production and import of fertilizers.

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

with the same concession/ exemption as applicable to new plants.

d) The Government is providing concessionary feed stock gas to the fertilizer plants for

production of urea.

e) Import of Rock Phosphate and Phosphorous by manufacturers of fertilizer is free

of customs duty.

f) Tax relaxation has also been offered by the Government.

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

of fertilizer.

h) Gas price has been fixed for 10 years for new investments.

i) Gas for balancing, modernization, replacement expansion for existing plants has been

filed for 7 years.

Economical Trend:

a) 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.

b) Import by manufacturers of Rock Phosphate and Phosphorous of fertilizer Free

of customs duty.

c) Tax relaxation has been offered in order to attract new entrants

d) 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.

e) 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.


f) Ban on export of fertilizer is also imposed so that economic stability would be gain.

Social Trends:

a) 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. Making

bio fertilizer has now become Old usage and farmers don’t prefer to use it against

artificial fertilizer.

Technological Trend:

a) 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

b) 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.

c) 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.

d) 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).

Legal Trend:

a) Strengthening the Fertilizer Review Committee.

b) Rationalization of quotas to private marketing organizations.

c) Setting up of transport sub-agencies.

d) Replacement of volumetric bagging machines at Port Karachi by weight baggers, to

ensure accuracy.NUML Multan 31 | P a g e

e) Drafting and enactment of fertilizer legislation to provide a legal framework within

which marketing agencies and dealers should operate in a privatized system.

f) Pursuing low-cost storage options in high consumption areas, and purchasing off-

season at a discount.

g) Postponing widespread custom blending until inland bulk handling is practiced.

Environmental Trend:

a) Chemical fertilizer in the form of salts, when added to soils gets converted into ionic

forms after dissolving in the soil solution. They are relatively safer than pesticides

which exhibit toxic properties on living systems. However, all the quantities

of fertilizers applied to the soil are not fully utilized by plants. About 50 per cent

of fertilizers applied to crops are left behind as residues. Though, inorganic fertilizers

are not directly toxic to man and other life forms, they have been found to upset the

existing ecological balance. The nutrients escape from the fields and are found in

excessive quantities in underground water, rivers, lakes and coastal waters.

b) Fertilizers can become a source of pollution when they are used in excess. Among the

three macro (N-P-K) fertilizers being used at present, only potassium fertilizer is not

yet considered a source of environmental pollution. The other substances like nitrogen

(urea or calcium ammonium nitrate) and phosphorus (DAP or MAP) fertilizers, if

used unreasonably, can cause environmental pollution and mainly through increase

of nitrate in agricultural products, drinking water, entropication of water sources and

increase of cadmium.

c) Another hazard associated with excessive use of nitrogenous fertilizers is the gaseous

loss of nitrogen, into the atmosphere. High doses of carbon dioxide and ammonia that

escape into the atmosphere both from fertilizer manufacturing plant sand soils affect

human health. Further the oxides of nitrogen have been reported to adversely affect

the ozone layer.

d) The oxides of nitrogen cause respiratory diseases like asthma, lung cancer and

bronchitis.

e) Cadmium accumulation in agricultural products is also an important problem

of pollution. Cadmium exposures result in kidney damage, bone deformities, and

cardiovascular problems.


Recommendations 1. Strict quality control and monitoring should be there to prevent import of sub-

standard products and to curb adulteration and other malpractices prevailing in this

sector.

2. The problem of logistics should be looked into. Transportation through railway (being

cheaper) especially during peak seasons should be made available.

3. There is a need to educate the farmers on balanced fertilizer use so as to neutralize the

adverse impacts of constant use of nitrogenous fertilizers.

4. Fatima fertilizers are giving almost negligible incentives to the customers while FFC

and ENGRO are running efficient promotional schemes to attract the customer.

Fatima Fertilizers should give more incentives to the customers.

5. Fatima fertilizers should develop more ware houses to early provision of fertilizers to

the customers.

6. The packaging should be improved to compete with the other companies in the field.

7. The staff should be decreased to avoid unnecessary extra expenditures on Pay and

allowances.

8. Short and bare minimum documentation should be made to provide easiness and

comfort to the customers.


Reference www.fatima-group.com www.slideshare.net/index/annual-report-fatima-fertilizer www.kse.com.pk En.wikipedia.us/Fatima-fertilizer-company-limited/


http://www.kse.com.pk/

http://www.slideshare.net/index/annual-report-fatima-fertilizer

http://www.fatima-group.com/