24695313 Fauji Fertilizer Ratios

Fauji Fertilizers | Institute of Business Management I

Analysis of Financial Statements Final ReportSectorial Analysis of Fauji Fertilizers

2009

Submitted To: Sir Maqbool - Ur - RehmanFauji Fertilizers

12/29/2009

Acknowledgement

The compilation of this report could not have been realized without the blessings of Almighty

Allah. We are highly indebted to quite a few people who have been there from the beginning till

the completion of our research. Their undue support has been the source of inspiration for us to

complete it efficiently within time.

We would deeply like to thank our teacher Mr. Maqbool – Ur - Rehman, Assistant Professor,

Finance and Accounting, at I.o.B.M for his guidance during the project. His excessive support

has been the source of motivation to perform our best, regarding the report.

Fauji Fertilizers | Appendix II

ContentsContents .................................................................................................................... III

Company Profile ......................................................................................................... 1

Mission Statement .................................................................................................. 2

Corporate Vision ...................................................................................................... 2

Manufacturing ......................................................................................................... 2

Company Manufacturing Facilities ........................................................................... 3

Production Facilities ................................................................................................ 3

Production Efficiency ............................................................................................... 4

Company Product Line ................................................................................................ 5

Fertilizer SECTORAL OUTLOOK ................................................................................... 6

AGRICULTURE SECTOR ............................................................................................ 6

TYPES OF FERTILIZER .............................................................................................. 7

GLOBAL SCENARIO .................................................................................................. 7

PRICING ................................................................................................................... 9

International versus Local ..................................................................................... 10

DAP Prices ............................................................................................................. 11

DEMAND & SUPPLY ................................................................................................ 12

TAXES .................................................................................................................... 14

Future Outlook Sales & growth ................................................................................. 15

Company Financials .................................................................................................. 16

Balance Sheet ....................................................................................................... 16

Income Statement ................................................................................................. 17

Horizontal & Vertical Analysis ................................................................................... 18

Vertical Analysis of Balance Sheet ........................................................................ 18

Vertical Analysis of Income Statement .................................................................. 21

Horizontal Analysis of Balance Sheet .................................................................... 22

Horizontal Analysis of Income Statement .............................................................. 25

Component % age Analysis according to % age of Balance Sheet ........................ 27

Component % age Analysis according to % age of Income Statement ................. 30

Component Percentage Analysis according to Pakistani Rupees of Balance Sheet .............................................................................................................................. 32

Fauji Fertilizers | Appendix III

Component Percentage Analysis according to Pakistani Rupees of Income Statement .............................................................................................................. 34

Internal Ratio Analysis .............................................................................................. 35

LIQUIDITY RATIO .................................................................................................... 35

TURNOVER/EFFICIENCY RATIO ............................................................................... 39

SOLVENCY/LEVERAGE RATIO ................................................................................. 42

COVERAGE RATIO .................................................................................................. 44

PROFTABILITY RATIO ............................................................................................. 47

MARKET RATIO ...................................................................................................... 52

External Ratio Analysis ............................................................................................. 54

LIQUIDITY RATIO .................................................................................................... 54

TURNOVER/EFFICIENCY RATIO ............................................................................... 58

SOLVENCY/LEVERAGE RATIO ................................................................................. 62

.............................................................................................................................. 63

.............................................................................................................................. 64

COVERAGE RATIO .................................................................................................. 64

PROFTABILITY RATIO ............................................................................................. 66

.............................................................................................................................. 69

MARKET RATIO ...................................................................................................... 70

DuPont Return on Equity .......................................................................................... 71

Insight for Investors & Creditors ............................................................................... 72

Future Projections ..................................................................................................... 73

Problems & their proposed solutions with the firm ................................................... 74

References ................................................................................................................ 76

Appendix .................................................................................................................. 77

Internal Ratios of the Company ............................................................................. 77

External Ratios for Industry Average ..................................................................... 79

Fauji Fertilizers | Appendix IV

Fauji Fertilizers | Appendix V

Company Profile

The overall financial position of the company is stable, over the year which is one of the reason

of high efficiency and profitability of FFC. All the profitability ratios are also showing

increasing trend on the back of increasing Sales as well as Gross profit which is because of good

investments by the company in high yielding projects. Leverage and Liquidity ratios related to

FFC are also improving from past to present. 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.

With a vision to acquire self sufficiency in fertilizer production in the country, FFC was

incorporated in 1978 as a private limited company. This was a joint venture between Fauji

Foundation (a leading charitable trust in Pakistan) and Haldor Topsoe A/S of Denmark.

The initial authorized capital of the company was 813.9 Million Rupees. The present share

capital of the company stands at Rs. 3.0 Billion. Additionally, FFC has Rs. 1.0 Billion stakes in

the subsidiary Fauji Fertilizer Bin Qasim Limited (formerly FFC-Jordan Fertilizer Company

Limited).

FFC commenced commercial production of urea in 1982 with annual capacity of 570,000 metric

tons.

• Through De-Bottle Necking (DBN) program, the production capacity of the existing

plant increased to 695,000 metric tons per year.

• Production capacity was enhanced by establishing a second plant in 1993 with annual

capacity of 635,000 metric tons of urea.

• FFC participated as a major shareholder in a new DAPS/Urea manufacturing complex

with participation of major international/national institutions. The new company Fauji

Fertilizer Bin Qasim Limited (formerly FFC-Jordan Fertilizer Company Limited)

Fauji Fertilizers | Company Profile 1

commenced commercial production with effect from January 01, 2000. The facility is

designed to produce 551,000 metric tons of urea and 445,500 metric tons of DAP.

• This excellent performance was due to hard work and dedication of all employees and the

progressive approach and support from the top management.

• In the year 2002, FFC acquired ex Pak Saudi Fertilizers Limited (PSFL) Urea Plant

situated at Mirpur Mathelo, District Ghotki from National Fertilizer Corporation (NFC)

through privatization process of the Government of Pakistan.

This acquisition at Rs. 8,151 million represents one of the largest industrial sector transactions in

Pakistan.

Mission Statement

FFC is committed to play its leading role in industrial and agricultural advancement in Pakistan

by providing quality fertilizers and allied services to its customers and given the passion to excel,

take on fresh challenges, set new goals and take initiatives for development of profitable

business ventures.

Corporate VisionFFC vision for the 21st Century remains focused on harmonizing the Company with fresh

challenges and encompasses diversification and embarking on ventures within and beyond the

territorial limits of the Country in collaboration with leading business partners.

ManufacturingThe largest urea manufacturing facility of Pakistan consisting of two ammonia/urea units owned

by FFC is built at Goth Machhi in district Rahim Yar Khan. Goth Machhi is situated at a distance

of 2 kms from the main Lahore-Karachi highway and is adjacent to the main railway line.

Fauji Fertilizers | Appendix 2

The two plants are based on natural gas from Mari Gas Fields and have an annual designed

production capacity of 1.3 million tons of urea.

Over the years, the plants have demonstrated an operational excellence which has become a

reference for the engineering companies whose process technologies are used here. Delegations

from China, Middle East and Far East keep visiting the plant site for gaining firsthand

knowledge before deciding to purchase a new plant.

Company Manufacturing Facilities

The Company has three plants and is a shareholder in FFBL. It markets the whole production of

FFBL.

PLANT-I Goth Machhi, Sadiqabad, Rahim Yar Khan

PLANT-I Goth Machhi, Sadiqabad, Rahim Yar Khan

PLANT-III Mirpur Mathelo

PLANT-IV Fauji Fertilizer Bin Qasim Limited

Production Facilities

BASE UNIT-GOTH MACHHI (FFC-1)

Start-up: June 1982

Design Capacity

Ammonia: 330,000 Met/Year

Urea: 570,000 Met/Year

REVAMPED BASE UNIT

Capacity Enhanced: 1992


New Capacity



EXPANSION UNIT-GOTH MACHHI (FFC-2)

Start up: 1993

Design Capacity



MIRPUR MATHELO UNIT (FFC-3)

(EX-PAKSAUDI FERTILIZER LTD.)

Start up: Oct 1980

Acquition by FFC: 31 May, 2002

Merged with FFC: 1 July, 2002

Design Capacity



Production EfficiencyBoth the plants have been consistently operating in excess of designed capacity reaching as high

115% for the Base Unit and 119% for the Expansion Unit as a result of high efficient operations,

good maintenance and strong technical support.


Company Product Line

FFC is a leading manufacturing company with over 60% shares of urea manufacturing and

marketing in Pakistan.

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.

• SONA Granular

o It produces 13% of total production

• SONA DAP

o FFCL produces 31% of country’s demand. It is the sole producer of DAP.


Fertilizer SECTORAL OUTLOOK

AGRICULTURE SECTOR

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 22% to

the country's Gross Domestic Product (GDP) and employs 43% of total labor force. 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.

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.


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.

GLOBAL SCENARIO

The world grain consumption has outpaced production in six of the last seven years, with 2005

being the only exception, 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 2%

in 2007 from the historical average rate of 1.2% p.a. This has led to a widening gap between

consumption and production resulting in sharp increase in food prices in the global market.

During 2007, total global production of grains was recorded at 2.3bn tons, up 4% YoY. Despite,

the increase in production the global commodity prices have climbed significantly during the

past twelve months on the back of rising demand from emerging economies. Corn, wheat, and

rice account for about 85% of the global grain harvest (in terms of weight), while sorghum,

millet, barley, oats, and other less common grains make up the rest. China, India, and the United

States alone account for 46% of global grain production; Europe, including the former Soviet

states, grow another 21%.


In 2007, a 200mn ton jump in the global coarse grain harvest was responsible for nearly all of the

increase in the total grain harvest. Production of coarse grains a group that includes corn, barley,

sorghum, and other grains fed mainly to animals increased 10% from 985mn tons in 2006 to

1,080mn tons in 2007. During 2007, a significant amount of global corn production was used in

producing biofuels, the use of which is being promoted in developed countries (mainly EU and

USA). Governments in developed countries have been encouraging the use of biofuels primarily

due to (1) Increasing price of international crude oil and (2) Bio-fuels are environment friendly.

Out of a total of 784mn tons of corn harvested during 2007, about 255mn tons or 32.5% was

used in extracting biofuels which has resulted in sharp increase in price of the commodity.

Higher corn prices prompted many a farmers in various countries (China, Brazil and the United

States) to switch to corn harvesting. Another major consumer of grains is the livestock sector,

which accounted for approximately 627mn tons (27%) in the form of feed for the cattle. 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. Global cereal stocks were expected to stand at

318mn tons by the close of the 2007 season, equivalent to about 14 percent of annual

consumption, lowest since many years. In comparison to the global scenario, Pakistan’s food

grain production has witnessed a rising trend over the years registering a 4-year CAGR (FY02-

06) of 5.7% on the back of good harvest of major crops (wheat & rice) which account for almost

84% of the total grain production of the country.


PRICING

Local Arena


Urea prices have shown a positive trend over the last few years on the back of step-wise increase

in feedstock gas prices, the primary raw-material for urea manufacturing. Government heavily

subsidizes feedstock prices in Pakistan, to keep the urea prices within affordable limits of the

farmers. A 50kg bag of urea is sold at PKR 558-565 (prices were revised upwards in Dec’07)

versus a price of approximately PKR 1000 per bag in the international market. DAP prices on the

other hand have undergone a radical increase during 2007, due to record high phosphoric acid

prices in the international market (a major raw material). Local prices of DAP are highly

correlated with their global rates since over 70% of the commodity used in the country is

imported. As a result, domestic DAP prices have surged during CY07, rising from PKR 800 per

bag at the start of the year to touch PKR 1,680 by Dec’07.

International versus Local

Urea Prices


International urea prices have escalated at a healthy 4-year CAGR (FY03-07) of 19.6%, driven

by its increased usage globally from 128mntpa in 2005 to 138mntpa in 2007. On the other hand

local urea prices have risen at a 4-year CAGR of 6.8% from FY03 to FY07. GOP heavily

subsidizes the feedstock gas prices in order to make available the fertilizer to the local farmers at

an affordable cost. Urea prices are primarily linked to the increase in feedstock gas prices, which

are expected to rise at a next 4-year CAGR of 11% going forward. Consequently we expect local

urea prices to increase at a 4-year CAGR of 5.5% for the period FY07-FY11.

DAP Prices

International DAP prices have risen sharply during 2007 (+143% YoY) on the back of rising

demand for the phosphatic fertilizer for harvesting of crops used in production of biofuels. In the


local market, price of DAP fertilizer too has followed suit and has gone up from PKR 873 per

50kg bag at the start of 2007 to around PKR 1,680 per bag at present. Despite the PKR 470 per

bag subsidy by the GOP, the hefty rise in DAP prices has caused its off-take to drop significantly

during the past few months with many farmers reverting to the use of urea. FFBL the only

producer of DAP and caters to only 31% of the DAP demand of Pakistan while the rest of the

demand is met through imports. Since the local prices are highly correlated to global prices we

estimate DAP prices to increase at a 4-year CAGR (CY07-11E) of 6.3%.

DEMAND & SUPPLY

There are nine fertilizer plants in Pakistan with a total installed capacity of 4.35mn tons

including urea, Di-ammonium phosphate (DAP), single super phosphate (SSP), calcium


ammonium nitrate (CAN), nitro phosphate (NP) and ammonium sulfate (AS). Total demand of

these fertilizers is estimated to grow at an average of 4% per annum in the medium term. The

shortfall of approximately 1.1mntpa is met through import on which GOP provides subsidies.

During FY08, the GOP allocated a sum of PKR 13.5bn for import of various fertilizers.

The graph above shows the demand trend of both major fertilizers, urea and DAP, which has

increased at a 4-year CAGR (CY02-06) of 4.6% and 7.7% respectively. Given the increase in

crop prices, low per acre usage of fertilizers, increasing awareness among the farming

community and vast cultivable land, we estimate demand growth of fertilizers to average over

4% per annum over the next 4 years.


TAXES

The government has privatized and deregulated fertilizer imports and prices. In 1986, all

subsidies on nitrogenous fertilizers were abolished followed by phosphates in 1993 and potash in

1997. Provincial quotas were abolished, provincial supply organizations in the public sector

abandoned and import controls were lifted. All imports are affected by the private sector. In

2001, the government imposed a 15 percent general sales tax on all fertilizer products. Farmers

have to pay international prices for imported products, apart from urea.

The share of the private sector in fertilizer marketing is 89 percent, compared to 11 percent for

the public sector. The private sector handles about 90 percent of the urea and 100 percent of the

DAP, the two major fertilizer products consumed in the country. A dealer network of about 8

000 retailers exists in the country. Fertilizer companies select and train the dealers. There is no

government intervention. However, under ‘Fertilizer Acts’ promulgated by provinces, fertilizer

quality is monitored by the provincial governments.


Future Outlook Sales & growth

The future outlook of the fertilizer sector is very strong because of supportive government

policies, favorable climatic conditions and gas pricing. The Economic Coordination Committee

(ECC) has directed Sui Northern Gas Pipelines Limited (SNGPL) to market an additional 100

million cubic feet a day of natural gas from the Qadirpur gas field, close to both Engro and the

FFC.

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.


Company Financials

Balance Sheet

2001(000’

Rupees)

2002(000’

Rupees)

2003(000’

Rupees)

2004(000’

Rupees)

2005(000’

Rupees)

2006(000’

Rupees)

2007(000’

Rupees)

2008(000’

Rupees)SHARE CAPITAL & RESERVESShare capital 3,000,000 3,000,000 3,000,000 3,000,000 5,000,000 5,000,000 5,000,000 5,000,000

Issued, subscribed and fully paid 2,564,959 2,564,959 2,564,959 2,949,703 4,934,742 4,934,742 4,934,742 4,934,742

Capital reserve 160,000 160,000 160,000 160,000 160,000 160,000 160,000 160,000

Reserve for issue of bonus shares

Revenue reserves 6,776,673 8,038,098 8,797,753 8,742,749 7,346,166 7,861,801 7,635,303 7,190,471

Total Shareholder’s Equity 9,501,632 10,736,057

11,522,712

12,294,907

12,440,908

12,956,543

12,730,045

12,285,213

Redeemable Capital 4,420,014 3,730,650

NON CURRENT LIABILITIES

Long Term Liabilities 223,867 1,283,481 784,570 2,868,403 981,078 1,193,750 2,671,250 5,378,214

DEFERRED TAXATION 86,000 2,690,000 2,522,000 2,407,000 2,401,000 2,396,000 2,363,526 2,431,895

CURRENT LIABILITIES

Trade and other payables 769,488 897,736 1,218,355 5,831,105 6,737,803 4,025,926 5,815,276 5,993,674

Interest and mark - up accrued 74,233 74,233 81,644 134,039 184,430 194,570

Short term borrowings 800,000 3,388,897 2,972,333 100,000 2,504,963 4,531,090 3,141,081 3,114,000

Creditors, accrued & other liabilities

1,561,004 2,829,008 2,606,854

Current portion of L.T Fin 503,151 917991 704,821 2269162 1887325 887,327 1,022,500 743,036

Taxation 527,083 975,960 329,910 598,297 1,414,418 1,305,606 1,313,106 1,778,361

Total Liabilities 4,160,726 9,009,592 8,659,536 8,872,797 12,626,153

10,883,988

11,476,393

11,823,641

Total Liab. & SHE 13,972,225

28,166,144

27,219,468

26,443,107

28,449,139

27,430,281

29,241,214

31,918,963

Prop, PLANT & Equip 1,527,227 9,516,474 9,136,537 9,180,716 9,184,727 9,607,957 10,390,490

12,730,813

GOODWILL 1,987,694 1,883,079 1,778,464 1,673,849 1,569,234 1,569,234 1,569,234

LONG TERM INVESTMENTS 2,491,364 7,077,892 7,083,151 5,765,699 6,058,006 6,409,382 6,325,129 7,744,779

L.T LOANS & ADVANCES 45,369 50,137 63,920 67,328 64,545 76,647 142,782 163,102

L.T Dep. & Prep 161,881 128,495 125,511 3,492 3,435 2,474 2,144 1,524

CURRENT ASSETS

Stores, spares and loose tools 1,229,557 1,618,373 1,686,980 1,727,309 2,154,318 2,202,053 2,407,988 3,034,268

Stock in trade 614,327 630,808 681,297 219,180 560,472 952,905 642,836 258,094

Trade debts 880,298 1,400,893 1,876,381 1,407,736 659,713 961,427 1,722,602 495,929


Loans & advances Dep. Other 1,025,100 1068419 647619 671,896 722,709 1,572,123 1,660,345 1,477,792

Short term investments 3,726,744 2,792,279 2,200,845 4,565,457 6,195,252 2,452,850 3,027,664 3,511,563

Cash and bank balances 2,270,358 1,894,680 1,834,148 1,055,830 1,172,113 1,623,229 1,350,000 931,865

9,746,384 9,405,452 8,927,270 9,647,408 11,464,577

9,764,587 10,811,435

9,709,511

Total Assets 13,972,225

28,166,144

27,219,468

26,443,107

28,449,139

27,430,281

29,241,214

31,918,963

Income Statement

2001(000’

Rupees)

2002(000’

Rupees)

2003(000’

Rupees)

2004(000’

Rupees)

2005(000’

Rupees)

2006(000’

Rupees)

2007(000’

Rupees)

2008(000’

Rupees)

Sales 11,982,414

16,786,699

21,034,629

21,027,030

25,481,121

29,950,873

28,429,005

30,592,806

Cost of sales 6,362,616 10,109,117

13,701,319

13,157,653

16,382,714

20,242,194

18,311,525

18,234,692

GROSS PROFIT 5,619,798 6,677,582 7,333,310 7,869,377 9,098,407 9,708,679 10,117,480

12,358,114

Distribution cost 1,022,139 1,457,797 1,851,170 1,766,652 2,371,208 2,746,782 2,418,793 2,668,571

Operating Profit 4,597,659 5,219,785 5,482,140 6,102,725 6,727,199 6,961,897 7,698,687 9,689,543

Finance cost 275,271 668,213 520,838 372,949 325,999 501,241 703,612 695,371

Other expenses 390,520 496,073 488,206 560,494 626,819 735,331 845,327 895,647

3,931,868 4,055,499 4,473,096 5,169,282 5,774,381 5,725,325 6,149,748 8,098,525

Other income 1,061,844 783,922 457,413 933,762 1,439,955 1,259,819 1,665,205 1,942,558

NET PROFIT BEFORE TAXATION

4,993,712 4,839,421 4,930,509 6,103,044 7,214,336 6,985,144 7,814,953 10,041,083

Provision for taxation 1,790,000 1,766,000 1,786,000 2,099,000 2,317,000 2,349,000 2,454,000 3,516,000

NET PROFIT AFTER TAXATION

3,203,712 3,073,421 3,144,509 4,004,044 4,897,336 4,636,144 5,360,953 6,525,083

Earnings per share 12.49 11.98 12.26 8.11 9.92 9.39 10.86 13.22

No. of Shares Outstanding 256,496 256,496 256,496 493,474 493,474 493,474 493,474 493,474


Horizontal & Vertical Analysis

Vertical Analysis of Balance Sheet

2001 2002 2003 2004 2005 2006 2007 2008

SHARE CAPITAL & RESERVESShare capital 21.47

%10.65

%11.02

%11.35

%17.58

%18.23

%17.10

%15.66

%Issued, subscribed and fully paid 18.36

%9.11% 9.42% 11.15

%17.35

%17.99

%16.88

%15.46

%Capital reserve 1.15% 0.57% 0.59% 0.61% 0.56% 0.58% 0.55% 0.50%Reserve for issue of bonus shares

Revenue reserves 48.50%

28.54%

32.32%

33.06%

25.82%

28.66%

26.11%

22.53%

Total Shareholder’s Equity 68.00%

38.12%

42.33%

46.50%

43.73%

47.23%

43.53%

38.49%

Redeemable Capital 31.63%

13.25%

NON CURRENT LIABILITIES

Long Term Liabilities 1.60% 4.56% 2.88% 10.85%

3.45% 4.35% 9.14% 16.85%

DEFERRED TAXATION 0.62% 9.55% 9.27% 9.10% 8.44% 8.73% 8.08% 7.62%CURRENT LIABILITIES

Trade and other payables 5.51% 3.19% 4.48% 22.05%

23.68%

14.68%

19.89%

18.78%

Interest and mark - up accrued 0.00% 0.00% 0.27% 0.28% 0.29% 0.49% 0.63% 0.61%Short term borrowings 5.73% 12.03

%10.92

%0.38% 8.81% 16.52

%10.74

%9.76%


11.17%

10.04%

9.58%

Current portion of L.T Fin 3.60% 3.26% 2.59% 8.58% 6.63% 3.23% 3.50% 2.33%Taxation 3.77% 3.47% 1.21% 2.26% 4.97% 4.76% 4.49% 5.57%

29.78%

31.99%

31.81%

33.55%

44.38%

39.68%

39.25%

37.04%

Total L & SHE 100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%


As we know that FFC is a leading manufacturing company with over 60% shares of urea

manufacturing and marketing in Pakistan. Let see how they progressed in perspective of all their

Assets and liabilities over the years.

The number of shares issued till 2004 was same after which they increased. The company after

2004 raised some share capital to raise fund as their value was Going Up. Although the

shareholder’s equity section was increasing but it was reducing in percentage as compared to the

assets section. The reduction was around 20 to 30 percent.

The long term liabilities also started increasing from year to year and till 2008 it almost doubles

from the previous years. The amount of deferred taxation also was being reduced which seems

that the company started paying off their deferred tax instead to defer it to the next upcoming

years.

In the year 2001 and 2002 we see the redeemable capital which vanished in the upcoming years

which tells us the story that the company position is getting good and strong after year 2002 that

they were not in the need of urgent funds by issuing some temporary shares.

The trade and other payables increased by a huge amount in percentage from year 2004 which

tells the company increased the liabilities in greater proportion of percentage over the last six

years.

The short term borrowing was also been seen but they did not increased that much as the trade

and other payables and remained consistent over the years.

Creditors, accrued & other liabilities was just seen in the year 2001 and 2002 after which

company completely get rid of this liability.

The taxation amount was quiet high as around 30 to 40 percent all of the years being analyzed.


The current liability section was around 30 to 40 percent which tells that the company is been

paying most of their liabilities in the one year’s period for the last eight years.

2001 2002 2003 2004 2005 2006 2007 2008Prop, PLANT & Equip 10.93

%33.79

%33.57

%34.72

%32.28

%35.03

%35.53

%39.88

%GOODWILL 7.06% 6.92% 6.73% 5.88% 5.72% 5.37% 4.92%LONG TERM INVESTMENTS

17.83%

25.13%

26.02%

21.80%

21.29%

23.37%

21.63%

24.26%

L.T LOANS & ADVANCES

0.32% 0.18% 0.23% 0.25% 0.23% 0.28% 0.49% 0.51%

L.T Dep. & Prep 1.16% 0.46% 0.46% 0.01% 0.01% 0.01% 0.01% 0.00%CURRENT ASSETSStores, spares and loose tools

8.80% 5.75% 6.20% 6.53% 7.57% 8.03% 8.23% 9.51%

Stock in trade 4.40% 2.24% 2.50% 0.83% 1.97% 3.47% 2.20% 0.81%Trade debts 6.30% 4.97% 6.89% 5.32% 2.32% 3.50% 5.89% 1.55%Loans & advances Dep. Other

7.34% 3.79% 2.38% 2.54% 2.54% 5.73% 5.68% 4.63%

Short term investments

26.67%

9.91% 8.09% 17.27%

21.78%

8.94% 10.35%

11.00%

Cash and bank balances

16.25%

6.73% 6.74% 3.99% 4.12% 5.92% 4.62% 2.92%

69.76%

33.39%

32.80%

36.48%

40.30%

35.60%

36.97%

30.42%

Total Assets 100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

Since the company position starts getting better from year 2002 the Fixed assets section

increased in huge amount 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 company position as it start getting better and better from year 2002 they also invested lot of

their money in the long term investments which tells how better the company is and how much

better they are improving financially.

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 company also made a lot of percentage in short term investment which tells how much the

company is in investing in short term projects to raise more money and this amount was much

better in percentage.

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.

Vertical Analysis of Income Statement

2001 2002 2003 2004 2005 2006 2007 2008

Sales 100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

Cost of sales 53.10%

60.22%

65.14%

62.57%

64.29%

67.58%

64.41%

59.60%

GROSS PROFIT 46.90%

39.78%

34.86%

37.43%

35.71%

32.42%

35.59%

40.40%

Distribution cost 8.53% 8.68% 8.80% 8.40% 9.31% 9.17% 8.51% 8.72%Operating Profit 38.37

%31.09

%26.06

%29.02

%26.40

%23.24

%27.08

%31.67

%Finance cost 2.30% 3.98% 2.48% 1.77% 1.28% 1.67% 2.47% 2.27%Other expenses 3.26% 2.96% 2.32% 2.67% 2.46% 2.46% 2.97% 2.93%

32.81%

24.16%

21.27%

24.58%

22.66%

19.12%

21.63%

26.47%

Other income 8.86% 4.67% 2.17% 4.44% 5.65% 4.21% 5.86% 6.35%NET PROFIT BEFORE TAXATION

41.68%

28.83%

23.44%

29.02%

28.31%

23.32%

27.49%

32.82%


Provision for taxation 14.94%

10.52%

8.49% 9.98% 9.09% 7.84% 8.63% 11.49%


26.74%

18.31%

14.95%

19.04%

19.22%

15.48%

18.86%

21.33%

As we seen the company’s strengthens from year 2002 it improved in all kinds of section. If we

talk about their sales are increasing a lot year after years. So because of this the cost of goods

sold also increased in much greater amount but in the year 2008 they not only increased their

sales but also reduced the cost of sales expense by around 5 percent which is quiet good for

future sales growth the profits.

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.

Horizontal Analysis of Balance Sheet2001 2002 2003 2004 2005 2006 2007 2008


%100.00

%100.00

%100.00

%166.67

%166.67

%166.67

%166.67

%Issued, subscribed and fully paid

100.00%

100.00%

100.00%

115.00%

192.39%

192.39%

192.39%

192.39%

Capital reserve 100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%


Reserve for issue of bonus sharesRevenue reserves 100.00

%118.61

%129.82

%129.01

%108.40

%116.01

%112.67

%106.11

%Total Shareholder’s Equity

100.00%

112.99%

121.27%

129.40%

130.93%

136.36%

133.98%

129.30%


84.40%

NON CURRENT LIABILITIES 100.00%

61.13%

223.49%

76.44%

93.01%

208.13%

419.03%

Long Term Liabilities 100.00%

573.32%

350.46%

1281.30%

438.24%

533.24%

1193.23%

2402.41%

DEFERRED TAXATION 100.00%

3127.91%

2932.56%

2798.84%

2791.86%

2786.05%

2748.29%

2827.78%

CURRENT LIABILITIESTrade and other payables 100.0

0%116.67

%158.33

%757.79

%875.62

%523.20

%755.73

%778.92

%Interest and mark - up accrued

100.00%

100.00%

109.98%

180.57%

248.45%

262.11%

Short term borrowings 100.00%

423.61%

371.54%

12.50%

313.12%

566.39%

392.64%

389.25%


100.00%

181.23%

167.00%

Current portion of L.T Fin 100.00%

182.45%

140.08%

450.99%

375.10%

176.35%

203.22%

147.68%

Taxation 100.00%

185.16%

62.59%

113.51%

268.35%

247.70%

249.13%

337.40%

Total Liabilities 100.00%

216.54%

208.13%

213.25%

303.46%

261.59%

275.83%

284.17%

Total Liab. & SHE 100.00%

201.59%

194.81%

189.25%

203.61%

196.32%

209.28%

228.45%

Prop, PLANT & Equip 100.00%

623.12%

598.24%

601.14%

601.40%

629.11%

680.35%

833.59%

GOODWILL 100.00%

94.74% 89.47% 84.21% 78.95% 78.95% 78.95%

LONG TERM INVESTMENTS 100.00%

284.10%

284.31%

231.43%

243.16%

257.26%

253.88%

310.87%

L.T LOANS & ADVANCES 100.00%

110.51%

140.89%

148.40%

142.27%

168.94%

314.71%

359.50%

L.T Dep. & Prep 100.00%

79.38% 77.53% 2.16% 2.12% 1.53% 1.32% 0.94%

CURRENT ASSETSStores, spares and loose tools

100.00%

131.62%

137.20%

140.48%

175.21%

179.09%

195.84%

246.78%

Stock in trade 100.00%

102.68%

110.90%

35.68% 91.23% 155.11%

104.64%

42.01%


Trade debts 100.00%

159.14%

213.15%

159.92%

74.94% 109.22%

195.68%

56.34%

Loans & advances Dep. Other

100.00%

104.23%

63.18% 65.54% 70.50% 153.36%

161.97%

144.16%

Short term investments 100.00%

74.93%

59.06%

122.51%

166.24%

65.82%

81.24%

94.23%

Cash and bank balances 100.00%

83.45% 80.79% 46.51% 51.63% 71.50% 59.46% 41.04%

Total Current Assets 100.00%

96.50%

91.60%

98.98%

117.63%

100.19%

110.93%

99.62%

Total Assets 100.00%

201.59%

194.81%

189.25%

203.61%

196.32%

209.28%

228.45%

The company increased their share capital in the year 2005 and it is still the same until now.

Because of this the company’s issued, subscribed and fully paid section also increased. The total

shareholder equity section increased from year 2002 because from year 2002 the company

position was becoming better in all perspective.

The company’s noncurrent liabilities increased in huge amount from year 2007 and in year 2008.

The Long Term Liabilities and deferred taxation also increased by a huge amount in percentage

over the last two to three years as compared to last eight years.

The trade and other payable section also increased by a huge amount especially from year 2004

so the company increased most of their liabilities in this section. The company also increased the

short term borrowing amount by a much greater percentage from year 2005 until now which tells

the company really increased most of their liabilities in this particular section.

So overall the taxation, total liabilities and SHE section increased in much greater percentage

from year 2002 and until now which tells how much the company increased their liabilities.

The fixed assets section increased by a very greater proportion in percentage as the company’s

position started getting better from year 2002 until now. The percentage increase in the fixed

assets was very huge which tells how much the company has invested to buy more fixed assets to

increase their production and sales.


The company also invested a lot in the long term investments from year 2002 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 also made lot of short term investments over the last 7 years as

well just like long term investments.

So over the last seven years we see how much the FFC has improved in perspective of all kinds

of noncurrent and especially current assets and how better they are managing it.

Horizontal Analysis of Income Statement

2001 2002 2003 2004 2005 2006 2007 2008

Sales 100.00%

140.09%

175.55%

175.48%

212.65%

249.96%

237.26%

255.31%


158.88%

215.34%

206.80%

257.48%

318.14%

287.80%

286.59%

GROSS PROFIT 100.00%

118.82%

130.49%

140.03%

161.90%

172.76%

180.03%

219.90%

Distribution cost 100.00%

142.62%

181.11%

172.84%

231.98%

268.73%

236.64%

261.08%

Operating Profit 100.00%

113.53%

119.24%

132.74%

146.32%

151.42%

167.45%

210.75%

Finance cost 100.00%

242.75%

189.21%

135.48%

118.43%

182.09%

255.61%

252.61%

Other expenses 100.00%

127.03%

125.01%

143.53%

160.51%

188.30%

216.46%

229.35%

100.00%

103.14%

113.77%

131.47%

146.86%

145.61%

156.41%

205.97%

Other income 100.00%

73.83%

43.08%

87.94%

135.61%

118.64%

156.82%

182.94%


100.00%

96.91%

98.73%

122.21%

144.47%

139.88%

156.50%

201.07%


98.66%

99.78%

117.26%

129.44%

131.23%

137.09%

196.42%


100.00%

95.93%

98.15%

124.98%

152.86%

144.71%

167.34%

203.67%

As we know the FFC’S position started getting stronger and stronger from year 2002 they

improved in almost all kinds of sections in which they can earn profit increase their sales and


make more money by every ways by buying assets, short term investments and long term

investment and huge amount of loans.

Since the company bought lot of 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 2002 and continued their

progress until now.

As the increase in the sales we know the cost of sales also increased so the amount of cost of

sales was also quiet high but the company did make some efforts in year 2008 to reduce its cost

of sales in order to make much more profit.

Since the increase in sales much in greater proportion as compare to cost of sales the company’s

gross profit also rose year after year.

With all the increase in the sales and cost of sales the distribution cost also rose with greater

proportion as compare to last eight years.

Due to all the steps taken by the company to reduce their expenses with the increase in the sales

that company also made a huge amount of operating profit which better tells the company’s

position that how better they are getting year after year. This progress tells us also one more

thing that the company will really earn a lot of profit with increased sales the future as well.

Other expense also rose with the increase in the sales and as compared to the country’s condition

this up and down will continue in upcoming years so the company should be aware of it and

should have primitive measures for it.

Other income also rose which tells how better they are managing in almost neglecting the

increase in other expense means that although the other expense also rose but the other income is

playing a big role in order to decreases its effects so the overall before tax and after tax profit

should be good.


The before tax profit was also high year after year from year 2002 and still rising over the last

eight years.

The taxation amount also rose especially in the year 2008 due to the increased taxes but the

company’s good progress is not affected by it.

The FFC’s net profit after taxation also rose to much greater proportion over all the last eight

years but raised much in year 2008 as compare to the last few years due to the increased demand

and supply.

Component % age Analysis according to % age of Balance Sheet2001 2002 2003 2004 2005 2006 2007 2008


%100.00

%100.00

%100.00

%166.67

%100.00

%100.00

%100.00

%Issued, subscribed and fully paid

100.00%

100.00%

100.00%

115.00%

167.30%

100.00%

100.00%

100.00%

Capital reserve 100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

Reserve for issue of bonus sharesRevenue reserves 100.00

%18.61% 9.45% -

0.63%-

15.97%7.02% -

2.88%-5.83%

Total Shareholder’s Equity

100.00%

12.99%

7.33% 6.70% 1.19% 4.14% -1.75%

-3.49%


-15.60%

NON CURRENT LIABILITIESLong Term Liabilities 100.0

0%473.32

%-

38.87%

265.60%

-65.80

%

21.68%

123.77%

101.34%

DEFERRED TAXATION 100.00%

3027.91%

-6.25%

-4.56%

-0.25% -0.21%

-1.36%

2.89%

CURRENT LIABILITIESTrade and other payables 100.0

0%16.67

%35.71

%378.6

0%15.55

%-

40.25%

44.45%

3.07%


Interest and mark - up accrued

100.00%

0.00% 9.98% 64.17%

37.59%

5.50%

Short term borrowings 100.00%

323.61%

-12.29

%

-96.64

%

2404.96%

80.88%

-30.68

%

-0.86%


100.00%

81.23% -7.85%

-100.00

%Current portion of L.T Fin 100.0

0%82.45

%-

23.22%

221.95%

-16.83

%

-52.98

%

15.23%

-27.33

%Taxation 100.00

%85.16% -

66.20%

81.35%

136.41%

-7.69%

0.57% 35.43%

100.00%

116.54%

-3.89%

2.46% 42.30%

-13.80

%

5.44% 3.03%

Total L & SHE 100.00%

101.59%

-3.36%

-2.85%

7.59% -3.58%

6.60% 9.16%

Prop, PLANT & Equip 100.00%

523.12%

-3.99%

0.48% 0.04% 4.61% 8.14% 22.52%

GOODWILL -5.26%

-5.56%

-5.88% -6.25%

0.00% 0.00%

LONG TERM INVESTMENTS 100.00%

184.10%

0.07% -18.60

%

5.07% 5.80% -1.31%

22.44%

L.T LOANS & ADVANCES 100.00%

10.51% 27.49%

5.33% -4.13% 18.75%

86.29%

14.23%

L.T Dep. & Prep 100.00%

-20.62%

-2.32%

-97.22

%

-1.63% -27.98

%

-13.34

%

-28.92

%CURRENT ASSETSStores, spares and loose tools

100.00%

31.62% 4.24% 2.39% 24.72% 2.22% 9.35% 26.01%

Stock in trade 100.00%

2.68% 8.00% -67.83

%

155.71%

70.02%

-32.54

%

-59.85

%Trade debts 100.00

%59.14% 33.94

%-

24.98%

-53.14%

45.73%

79.17%

-71.21

%Loans & advances Dep. Other

100.00%

4.23% -39.39

%

3.75% 7.56% 117.53%

5.61% -10.99

%Short term investments 100.00

%-

25.07%-

21.18%

107.44%

35.70% -60.41

%

23.43%

15.98%

Cash and bank balances 100.00 - - - 11.01% 38.49 - -


% 16.55% 3.19% 42.43%

% 16.83%

30.97%

100.00%

-3.50% -5.08%

8.07% 18.84%

-14.83

%

10.72%

-10.19

%Total Assets 100.0

0%101.59

%-

3.36%-

2.85%7.59% -

3.58%6.60% 9.16%

The revenue reserve is that part of profit that has not been given to the shareholder but retained

in the business for further growth. Hence the company increased it in the year 2002 and 2003 by

19 and 10 percent respectively but since the company’s position was getting better and better

year after year this revenue reserve declined a lot and still declining as the company is not

relying on this particular item.

The shareholder’s equity section did rise all the years but in the last two years it declined by 2

and 3.5 percent in year 2007 and 2008 respectively.

There was variation in the long term liabilities and deferred taxation but the long term liability

rose by a drastic percentage especially in the year 2008 as compared to deferred taxation which

rose only by a very fewer percentage.

The short term borrowings rose drastically in the year 2005 but later on they declined in the last

two years. The total Liability and SHE also rose drastically in the year 2002 but after that it

increased at very smaller percentage.

The fixed asset portion of the company also rose from year 2002 which was vey vast of around a

523 percent increase and later on it increased at a slow proportion in percentage. But this

particular section is still increasing.

The firm’s short term and long term investment rose also over the last eight years or so. But the

long term investment rose very much I the year 2002 which was almost around a 184 percent

increase and the short term investment rose very much in the year 2005 which was almost around

a 108 percent increase.


The firm’s Stock in trade and Trade debts also declined by a huge percent in the year 2008 which

was around 60 and 70 percent respectively. This tells how better the company is managing their

inventory and their decline in the account receivables section.

So overall the firm’s total assets rose over the last eight years but they raised much in the year

2002 by around 102 percent which tells that from year 2002 the firm’s position was getting very

strong in Pakistan.

Component % age Analysis according to % age of Income Statement

2001 2002 2003 2004 2005 2006 2007 2008

Sales 100.00%

40.09%

25.31%

-0.04%

21.18%

17.54%

-5.08%

7.61%


58.88%

35.53%

-3.97%

24.51%

23.56%

-9.54%

-0.42%

GROSS PROFIT 100.00%

18.82%

9.82% 7.31% 15.62%

6.71% 4.21% 22.15%

Distribution cost 100.00%

42.62%

26.98%

-4.57%

34.22%

15.84%

-11.94

%

10.33%

100.00%

13.53%

5.03% 11.32%

10.23%

3.49% 10.58%

25.86%

Finance cost 100.00%

142.75%

-22.06

%

-28.39

%

-12.59

%

53.76%

40.37%

-1.17%

Other expenses 100.00%

27.03%

-1.59%

14.81%

11.83%

17.31%

14.96%

5.95%

100.00%

3.14% 10.30%

15.56%

11.71%

-0.85%

7.41% 31.69%

Other income 100.00%

-26.17

%

-41.65

%

104.14%

54.21%

-12.51

%

32.18%

16.66%


100.00%

-3.09%

1.88% 23.78%

18.21%

-3.18%

11.88%

28.49%


-1.34%

1.13% 17.53%

10.39%

1.38% 4.47% 43.28%


100.00%

-4.07%

2.31% 27.33%

22.31%

-5.33%

15.63%

21.71%


The firm’s position is quiet visible which we can measure from its sales which is rising year after

year especially from year 2002 which was 40 percent and continuing to increase over the last few

years or so.

Also with the increase in sales the cost of sales also rise but the company did really well in

reducing their cost of sales by almost 10 percent in the year 2007 and around 1 percent in year

2008 which tells that the company is really making efforts in order to increase their sales and

reduce their cost of sales in order to increase the gross profit for the longer term and so far they

have been successful.

The firm’s distribution cost also rose a lot but the company did very well especially in the year

2004 and year 2007 in which they reduced their distributing cost but since in the year 2008 it

rose much due to rising oil prices and the deterioration of the economy of Pakistan which

affected every organization in Pakistan but the company still did well in order to cope such

challenges and did not let such kind of cost disturbs their profits.

The company did well in maintaining as well as increasing their operating profit over all the last

eight years and this tells us that the company is measuring such steps in order to increase the

profitability of the company.

The finance cost also rose too much all of the years since they really have taken lot of loans from

the creditors but overall this did not affected them that much because in the last few years the

short term investments income overcome such costs so the overall effect of this cost was

negligible especially since the last five years or so.

The other expense rose all over the years but the company did well I order that this particular

item do not increase much and effect their profitability and so far over the last eight years or so

they did well in order to keep it just enough that does not affect their profitability.

Since the firm’s did well in reducing most of their expense and increased sales the company did

very well especially in order make a before tax profit much high as compared to the after tax

profit. Since the firm is making more profit especially in the year 2008which was very tough for


all the organization in Pakistan but they did still very well although the taxation amount in the

year 2008 was quiet high around 44 percent but still made a heavy profit which was a very good

thing because the year 2008 was not much that good for most of the organization but they

maintained their journey of increased sales and profits and the reduction in most of the expense

like cost of sales, distribution expenses etc.

Component Percentage Analysis according to Pakistani Rupees of Balance Sheet

2002 2003 2004 2005 2006 2007 2008Revenue reserves 126142

5 75965

5 (55004) (13965

83)515635 (22649

8)(444832

)Total Shareholder’s Equity 123442

5 78665

5 772195 146001 515635 (22649

8)(444832

) NON CURRENT LIABILITIES 128348

1 (49891

1)208383

3 (18873

25)212672 147750

0 270696

4 Long Term Liabilities (22386

7)

DEFERRED TAXATION 2604000

(168000)

(115000)

(6000) (5000) (32474) 68369

CURRENT LIABILITIES Trade and other payables 128248 32061

9 461275

0 906698 (27118

77)178935

0 178398

Interest and mark - up accrued

74233 7411 52395 50391 10140

Short term borrowings 2588897

(416564)

(2872333)

2404963

2026127

(1390009)

(27081)


1268004

(222154)

(2606854)

Current portion of L.T Fin 414840 (213170)

1564341

(381837)

(999998)

135173 (279464)

Taxation 448877 (646050)

268387 816121 (108812)

7500 465255

Total Liabilities 4848866

(350056)

213261 3753356

(1742165)

592405 347248

Total Liab. & SHE 14193919

(946676)

(776361)

2006032

(1018858)

1810933

2677749


Prop, PLANT & Equip 798924

7 (37993

7)44179 4011 423230 782533 234032

3 GOODWILL 198769

4 (10461

5)(10461

5)(10461

5)(10461

5)

LONG TERM INVESTMENTS 4586528

5259 (1317452)

292307 351376 (84253) 1419650

L.T LOANS & ADVANCES 4768 13783 3408 (2783) 12102 66135 20320 L.T Dep. & Prep (33386) (2984) (12201

9)(57) (961) (330) (620)

CURRENT ASSETS Stores, spares and loose tools

388816 68607 40329 427009 47735 205935 626280

Stock in trade 16481 50489 (462117)

341292 392433 (310069)

(384742)

Trade debts 520595 475488

(468645)

(748023)

301714 761175 (1226673)

Loans & advances Dep. Other

43319 (420800)

24277 50813 849414 88222 (182553)

Short term investments (934465)

(591434)

2364612

1629795

(3742402)

574814 483899

Cash and bank balances (375678)

(60532)

(778318)

116283 451116 (273229)

(418135)

(340932)

(478182)

720138 1817169

(1699990)

1046848

(1101924)

Total Assets 14193919

(946676)

(776361)

2006032

(1018858)

1810933

2677749

If we talk about the component percent analysis to dollar of balance sheet we see the revenue reserve section which declined a lot especially in the year 2004, 2005, 2007 and 2008. As we know that the revenue reserve is that part of profit that has not been given to the shareholder but retained in the business for further growth. But since the company started getting better in the early 90’s they started declining this particular item since they did not feel of keeping this particular item.

The total shareholder’s equity section also declined a lot especially in the year 2007 and year

2008 which was mostly due to the decline in the revenue reserve portion so this tells that the

company was totally shifting mostly towards the debts side as compared to equity portion of the

balance sheet.


The deferred taxation amount also declined to very big figures especially from year 2002 till

2007 which tells that company started paying mostly instead of deferring it on the next coming

years or so.

Overall the total liabilities and SHE section increased most of the year except year 2003, 2004

and year 2006.

The asset portion especially the fixed assets increased a lot which tells that the company really

invested a lot in order to get machineries properties in order to expand their business with the

increasing demand and supply of the country.

There was also a lot of long term and short term investment being made by the company in most

of the last eight years in order to make more profit and for the betterment of the organization.

There was a lot decline in the Cash and bank balances section probably due to the company

investing in the long term and short term projects in order to make more profits.

Overall the company’s assets rose very much especially in the last two year mean year 2007 and

2008 by almost 1,810,933,000 and 2,677,749,000 Pakistani rupees respectively.

Component Percentage Analysis according to Pakistani Rupees of Income Statement

2002 2003 2004 2005 2006 2007 2008

Sales 4804285

4247930

(7599) 4454091

4469752

(1521868)

2163801

Cost of sales 3746501

3592202

(543666)

3225061

3859480

(1930669)

(76833)

GROSS PROFIT 1057784

655728 536067 1229030

610272 408801 2240634

Distribution cost 435658 393373 (84518) 604556 375574 (327989) 249778 Operating Profit 622126 262355 620585 624474 234698 736790 1990856 Finance cost 392942 (147375

)(147889

)(46950) 175242 202371 (8241)

Other expenses 105553 (7867) 72288 66325 108512 109996 50320


123631 417597 696186 605099 (49056) 424423 1948777 Other income (277922

)(326509

)476349 506193 (180136

)405386 277353


(154291)

91088 1172535

1111292

(229192)

829809 2226130

Provision for taxation (24000) 20000 313000 218000 32000 105000 1062000 NET PROFIT AFTER TAXATION

(130291)

71088 859535 893292 (261192)

724809 1164130

If we see the income statement percentage analysis to dollars amount we see that how much the

sales amount rose over the last few year or so especially the most sales rose in the year 2003,

2005, 2006 and 2008. Especially in the year 2008 we know how much this difficult year was

that for every organization in Pakistan.

The cost of sales also rose much is amount but as we see that in year 2007 and 2008 the company

did really well in order to reduce the amount with a very greater proportion.

Since there was an increase in sales mostly and a reduction in the cost of sales the gross profit

rose to vast proportion especially over the last year.

The company really made a very good operating profit which in some of the years line 2003,

2004, 2005 and 2008 the finance cost was also less which tells that the company was getting rid

from most of their liabilities and wanted to stand on their own. Overall the company enjoyed lot

of profits as compared to expense and the company did all the last eight years or so.

Internal Ratio Analysis

LIQUIDITY RATIO

2001

2002 2003

2004 2005 2006

2007 2008

CURRENT RATIO 2.34

1.04 1.03

1.09 0.91 0.90

0.94 0.82


QUICK RATIO 2.19

0.97 0.95

1.06 0.86 0.81

0.89 0.80

CASH FLOW LIQUIDITY RATIO

1.88

1.04 0.70

1.49 1.07 0.34

0.90 1.07

AVERAGE COLLECTION PERIOD

26.82

30.46

32.56

24.44

9.45 11.72

22.12

5.92

AVERAGE INVENTORY DAYS

35.24

22.78

18.15

6.08 12.49

17.18

12.81

5.17

PAYABLE DAYS 89.55

102.14

89.43

161.76

150.12

72.59

115.91

119.97

Current Ratio:

The current ratio deteriorated from the last four years. The reasons for this are that the current

liabilities increased in much greater proportion as compared to current assets. The biggest reason

is that the company started the company started increasing more liabilities and the reduction in

assets was mostly due to cash and cash balances, trade debts and stock in trade.

Quick Ratio:


The quick ratio as it is clear from the ratios over the last eight years which tells that the company

was really quiet good in managing their cash but it is not very good but they maintained it over

the last six years or so.

Cash Flow Liquidity Ratio:

As we know this ratio is the best ratio for the measure of liquidity of the firm. This tells how

much the firm is better in managing their cash and cash equivalents in managing against their

current liabilities so overall the last eight years the company did very well in not only

maintaining their cash against the company’s current liabilities.


Average Collection Period:

The company was very good in drastic improvement in this particular ratio. One particular

reason for this one was the reduction the net account receivables and an increase in sales. The

company’s receivables collection came to almost 6 days which phenomenal thing for any

organization to improve that much.

Average Inventory Days:

The company was very superior in extreme improvement in this particular ratio as well. One

particular reason for this one was the reduction the inventory and an increase in cost of sales. The


company’s inventory came to 5 days which is also a dream to achieve as well because we usually

do not see such improvement.

Payable Days:

The payable days rose too much which tells that the company increased their payables as

compared to cost of sales which was declining a little bit since the last two years. The company

was not good in managing their payables that much as compared to other two ratios like average

inventory days and average collection period.

TURNOVER/EFFICIENCY RATIO

TURNOVER/EFFICIENCY RATIO2001 2002 2003 2004 2005 2006 2007 2008

RECEIVABLE TURNOVER 13.61 11.98 11.21 14.94 38.62 31.15 16.50 61.69INVENTORY TURNOVER 10.36 16.03 20.11 60.03 29.23 21.24 28.49 70.65PAYABLE TURNOVER 4.08 3.57 4.08 2.26 2.43 5.03 3.15 3.04FIXED ASSET TURNOVER 7.93 1.79 2.34 2.29 2.77 3.12 2.74 2.40TOTAL ASSET TURNOVER 0.86 0.60 0.77 0.80 0.90 1.09 0.97 0.96


Receivables Turnover:

The receivables improved phenomenally by almost 45 times in a year which was a very big

improvement as compared to last eight years. This tells how much better the company has

improved in managing their receivables into cash. This also tells that the company is very good

in receivables collection. It is an important indicator of a company’s financial and operational

performance.

Inventory Turnover:

The same was with the inventory turnover which also improved severely just like the receivables

collection. This tells how much better the company has improved in managing their efficient


management of inventory. This also ensures that the company is very good in managing their

inventory as much as been required according the requirements.

Payable Turnover:

The payable turnover declined a lot as compared to other two turnover ratios. It is

not good for long term as compared to their position and the way they are going

this ratio also should be improved so they can better improve this ratio as well.

Fixed Asset Turnover:


The fixed asset turnover was just fine which tells that the company is just fine in managing their

fixed assets. The big reason for this that this ratio did not increased that much is due to that the

company from the last few years was increasing their fixed asset portion as compared to sales.

So the company still was good in managing their assets as compared to sales.

Total Asset Turnover:

The total asset turnover was just good which tells that how better the company is efficient in the

management of all their assets as compared to sales. The reason for this was because of the

increased in both the things one is the sales and the other are the total assets but the total assets

increased in much percentage as compared to sales.

SOLVENCY/LEVERAGE RATIOSOLVENCY/LEVERAGE RATIO

2001 2002 2003 2004 2005 2006 2007 2008DEBT RATIO 32% 62% 58% 54% 56% 53% 56% 62%LTD TO CAPITALIZATION 2% 11% 6% 19% 7% 8% 17% 30%DEBT TO EQUITY 47% 162% 136% 115% 129% 112% 130% 160%


Debt Ratio:

This tells how better the company the how better the company is good in order to pay off their

loan in times. The percentage increased in a percentage in as compared from the last five years.

This tells that the company increased their debt as compared to total assets.

LTD to Capitalization:

This ratio also rose from the last few six years which tells the company increased the long term

debts in permanent financing of the firm. Debt implies risk but the company still did very well

overall the past few years.


Debt to Equity:

The capital structure of the firm tells us that it is more debt financed as compared to equity

financed. There were two reasons for that one is the increase in debt and the other was the

decrease in equity.

COVERAGE RATIO

COVERAGE RATIO2001 2002 2003 2004 2005 2006 2007 2008

TIMES INTEREST EARNED 16.7

0

7.81 10.5

3

16.3

6

20.6

4

13.8

9

10.9

4

13.93

FIXED CHARGE COVERAGE RATIO 6.67 7.07 3.89 20.3

1

18.9

5

-0.79 8.40 11.74

CASH COVERAGE 13.8

1

12.3

9

9.43 24.2

0

25.6

6

5.89 13.8

8

17.23


CASH FLOW ADEQUACY RATIO 0.61 1.56 0.71 3.50 2.02 -0.06 0.69 0.72

Times Interest Earned:

The times interest earned increased in the last few years. This tells that the company was

covering their interest expense almost 14 times in a year which is good. The reason for the

increase was mostly due to the increase in operating profit as compared to interest expense.

Fixed Charge Coverage Ratio:


The fixed charge coverage ratio tells how better the company is good in managing the interest

expense from the cash flow from operations. This ratio increased not only because of the

increase in cash generated from operations but also because of the reduction in interest expense.

Cash Coverage:

The cash coverage was also very good. The company improved very much too almost 17 times

to pay the interest paid by the company. So this tells that the company’s ability of the firm to

cover its interest payment on taxes by cash improved very much.


Cash Flow Adequacy Ratio:

The cash flow adequacy ratio was just satisfactory as which tells that the company was just not

able to pay dividends, capital expenditure and debt repayments from the cash generated by their

operations.

PROFTABILITY RATIO


PROFTABILITY RATIO2001 2002 2003 2004 2005 2006 2007 2008

GPM 46.90

%

39.78

%

34.86

%

37.43

%

35.71

%

32.42

%

35.59

%

40.40%

OPM 38.37

%

31.09

%

26.06

%

29.02

%

26.40

%

23.24

%

27.08

%

31.67%

NPM 26.74

%

18.31

%

14.95

%

19.04

%

19.22

%

15.48

%

18.86

%

21.33%

CASH FLOW MARGIN 15.33

%

28.15

%

9.64% 36.02

%

24.24

%

-1.32% 20.80

%

26.69%

ROE 33.72

%

28.56

%

27.29

%

32.57

%

39.36

%

35.78

%

42.11

%

53.11%

ROA 32.91

%

18.53

%

20.14

%

23.08

%

23.65

%

25.38

%

26.33

%

30.36%

GPM:

The company’s GPM rose to much greater percentage year after year over the last six years. The

biggest reason for this was mostly due to the increased profit as compared to the increase in

sales. The most reason is mostly due to that the most of the expense reduced over the last two

years.


OPM:

The operating profit also rose to much greater percentage over the last six years. The major

reason for this was mostly due to the amplified profit as compared to the increase in sales. The

most reason for this is same which is mostly due to that the most of the expense reduced over the

last two to three years.

NPM:


The net profit margin also rose over the past few years. The reason for this is mostly because of

reduction in cost of sales and distribution expense. So overall the company did very well in

managing and improving their almost all their profits by a much better percentage.

Cash Flow Margin:

This particular ratio also improved especially over the last two years or so and this trend is

continuing. The sales were increasing in much proportion as compared to cash flow generated

from operations so this ratio does not seems to be increasing that much as compared to other

ratios.


ROE:

This particular ratio also increased to a much greater portion as with the other profitability ratios.

One reason was same as the increase in net income over the last four years or so and also a

decline in the shareholder’s equity section. 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.

ROA:


This ratio also improved over all the past years but not that much because of the increase in total

assets and the operating profit did not rose that much as the total assets. This ratio is a useful

number for comparing competing companies in the same industry. Return on assets is an

indicator of how profitable a company is before leverage, and is compared with companies in the

same industry.

MARKET RATIO

MARKET RATIO2001 2002 2003 2004 2005 2006 2007 2008

EPS 12.49 11.98 12.26 8.11 9.92 9.39 10.86 13.22DPS 9.44 8.48 8.81 7.63 9.84 7.63 12.11 14.24DIVIDEND PAYOUT 76% 71% 72% 94% 99% 81% 112% 108%

EPS:


Earnings per share (EPS) are the earnings returned on the initial investment amount. The EPS as

it is clear from the above chart that this ratio improved over the last five years or so and still

continuing as far seen the position of the company.

DPS:

Dividends Per share also rose to very greater proportion in percentage over the last three years

but this is a good improvement especially after year 2003 from which the dividend percentage

rose.


Dividend Payout:

The dividend payout ratio also raised much from year 2003 and until now it was still rising

which tells how much better the company is giving their Dividend over earnings per share. The

trend from the chart seems to be reasonable and the investors will be happy from the company so

as the management of the company because year after year they have been earning profits and

increasing every year.

External Ratio Analysis

LIQUIDITY RATIO

LIQUIDITY RATIO 2001 2002 2003 2004 2005 2006 2007 2008CURRENT RATIO 2.34 1.04 1.03 1.09 0.91 0.90 0.94 0.82Sectorial Average 1.62 2.94 2.09 2.15 1.99 1.27 2.09 1.91QUICK RATIO 2.19 0.97 0.95 1.06 0.86 0.81 0.89 0.80Sectorial Average 1.45 2.72 1.90 2.01 1.67 1.08 1.81 1.59CASH FLOW LIQUIDITY RATIO 1.88 1.04 0.70 1.49 1.07 0.34 0.90 1.07Sectorial Average 1.28 2.67 1.71 1.76 1.50 0.88 1.49 1.09AVERAGE COLLECTION PERIOD 26.82 30.46 32.56 24.44 9.45 11.72 22.12 5.92


Sectorial Average 25.37 26.73 40.54 32.76 17.97 14.21 21.71 4.28AVERAGE INVENTORY DAYS 35.24 22.78 18.15 6.08 12.49 17.18 12.81 5.17Sectorial Average 38.97 35.89 23.77 17.45 32.73 31.83 53.75 48.08PAYABLE DAYS 89.55 102.1

489.43 161.7

6150.1

272.59 115.9

1119.9

7Sectorial Average 64.64

758.33

984.20

389.51

195.17

867.83

183.74

872.04

4

If we compare the liquidity ratio of this company with the fertilizer sector we see that the current

ratio during the last six years is been 50 percent of the sector which means that the company is

way behind the industry average.


But this is not only with the current ratio the past performance of quick ratio is also the same its

trend was also 50 percent during the last six years or so. So both the current ratio and the quick

ratio seem to lag behind the industry average. As far the position of the company the

management should also take some steps to match the industry average so they can lead in every

term in Pakistan.

From the cash flow liquidity ratio we can say that the company did very well specially over in

the year 2008 to match with the industry average. Since this ratio cash flow liquidity ratio is the

best measure of the liquidity of the company. The company did well to at least come towards the

industry level.


The average collection period also seems to be very good of the FFC’s which from the graph is

visible that the company is meeting the industry average and also competing which is very good

for the organization which tells that the company is very good in receivables collection.

But in the average inventory days the company lags behinds very much as compared to the

industry average. In the early 90’s the company was good but later on the company lag behind

the industry average by more than 50 percent which is not good especially over the last two

years.


In the payable days the company led from the front and from the above chart it is clear that the

company was way better than the industry average which is very good. So after watching all the

liquidity ratios performance the company was fine overall in which they performed well with the

industry average but they should try to improve their current and quick ratio as well since there

ratios tells how much risky the company is but company position is so good that they should not

be doing things like because they are already leading.

TURNOVER/EFFICIENCY RATIO

TURNOVER/EFFICIENCY RATIO 2001 2002 2003 2004 2005 2006 2007 2008RECEIVABLE TURNOVER 13.6

111.98 11.21 14.94 38.6

231.15 16.50 61.69

Sectorial Average 16.3 23.00 11.28 17.97 33.1 39.33 23.67 88.76


6 5INVENTORY TURNOVER 10.3

616.03 20.11 60.03 29.2

321.24 28.49 70.65

Sectorial Average 10.18

11.84 16.20 29.72 15.68

13.37 14.44 23.16

PAYABLE TURNOVER 4.08 3.57 4.08 2.26 2.43 5.03 3.15 3.04Sectorial Average 7.36 7.02 9.12 10.73 7.56 9.69 12.51 14.33FIXED ASSET TURNOVER 7.93 1.79 2.34 2.29 2.77 3.12 2.74 2.40Sectorial Average 4.25 3.18 2.84 2.41 2.63 2.17 2.05 2.48TOTAL ASSET TURNOVER 0.86 0.60 0.77 0.80 0.90 1.09 0.97 0.96Sectorial Average 0.62

50.5302 0.5792 0.6263 0.75

70.7409 0.5428 0.5513

From the receivable turnover it is clear that over the last eight years the company performed very

well to meet the industry average which is god for the company as they led and matched the

industry average most of the time.


The inventory turnover for the company from the last four years was not that good. The company

should make some efficient steps in order to better maintain their inventory as well as come at

least to the industry average because the ratios like inventory turnover should be better and

should meet the industry average.

The payable turnover of the company was good as compared to the industry average. The

company led from the front and from the above chart it is clear that the company was way better

than the industry average which is very good.


This particular ratio was meeting the industry average over the last 7 years which tells how better

and efficient is the company is managing their fixed assets. That is a good achievement to at least

maintain from several years to the industry average.

The total asset turnover of the company was a bit higher as compared to the industry average. So

after seeing the turnover ratios we can conclude that the company mostly did very well in not

only meeting the industry average but also maintaining from couple of years which is not good


especially in Pakistan to show some consistent performance as far as the economy and condition

of Pakistan from some two to three years.

SOLVENCY/LEVERAGE RATIO

SOLVENCY/LEVERAGE RATIO 2001 2002 2003 2004 2005 2006 2007 2008DEBT RATIO 32% 62% 58% 54% 56% 53% 56% 62%Sectorial Average 27% 54% 53% 52% 50% 51% 55% 58%LTD TO CAPITALIZATION 2% 11% 6% 19% 7% 8% 17% 30%Sectorial Average 13% 30% 25% 25% 21% 17% 33% 36%DEBT TO EQUITY 47% 162% 136% 115% 129% 112% 130% 160%Sectorial Average 92% 136% 110% 91% 92% 79% 122% 129%

The debt ratio of the company seems to meet the industry average and fractionally over the

industry average. The percentage increased in a percentage in as compared from the last five

years. This tells that the company increased their debt as compared to total assets. But the

industry average is almost the same as the FFC’s so it seems that the company is meeting the

average industry.


The LTD to capitalization of the company is less than the industry average over the last eight

years. This tells the company increased the long term debts in permanent financing of the firm

but they kept this ratio a bit less than the industry average.


The debt to equity show the capital structure of the company which is more debt financed than

equity financed and the company was bit forward as compared to the industry average over the

last seven years.

COVERAGE RATIO

COVERAGE RATIO 2001 2002 2003 2004 2005 2006 2007 2008TIMES INTEREST EARNED 16.70 7.81 10.53 16.36 20.64 13.89 10.94 13.93Sectorial Average 20.16 5.93 11.53 15.58 11.56 7.77 6.22 4.92FIXED CHARGE COVERAGE RATIO 6.67 7.07 3.89 20.31 18.95 -0.79 8.40 11.74Sectorial Average 23.31 8.30 27.25 13.43 13.23 4.96 8.29 7.50CASH FLOW ADEQUACY RATIO 0.61 1.56 0.71 3.50 2.02 -0.06 0.69 0.72Sectorial Average 0.76 1.12 0.76 1.52 1.05 0.25 0.25 1.22


The time interest earned of the company is way better than the industry average. This tells that

the company was covering their interest expense almost better than the industry average which is

very good for the company to not only matching industry requirements but also exceeding their

levels.

The fixed charge coverage ratio tells how better the company is good in managing the interest

expense from the cash flow from operations. As compared to the industry average they are quiet

competent as they are meeting the industry average.


The cash flow adequacy ratio of the company was comparable to the industry average. The cash

flow adequacy ratio was just satisfactory as which tells that the company was just not able to pay

dividends, capital expenditure and debt repayments from the cash generated by their operations.

PROFTABILITY RATIO

PROFTABILITY RATIO 2001 2002 2003 2004 2005 2006 2007 2008GPM 46.90% 39.78% 34.86% 37.43% 35.71% 32.42% 35.59% 40.40%Sectorial Average 30.10% 33.64% 31.16% 30.43% 31.85% 30.53% 33.34% 34.90%OPM 38.37% 31.09% 26.06% 29.02% 26.40% 23.24% 27.08% 31.67%Sectorial Average 17.53% 23.85% 21.69% 22.53% 23.84% 22.02% 25.54% 27.78%NPM 26.74% 18.31% 14.95% 19.04% 19.22% 15.48% 18.86% 21.33%Sectorial Average 2.25% 21.39% 24.30% 23.39% 34.07% 24.87% 63.86% 22.90%CASH FLOW MARGIN 15.33% 28.15% 9.64% 36.02% 24.24% -1.32% 20.80% 26.69%Sectorial Average 12.19% 15.65% 19.96% 21.88% 19.88% 6.86% 14.07% 3.42%ROE 33.72% 28.56% 27.29% 32.57% 39.36% 35.78% 42.11% 53.11%Sectorial Average 9.49% 12.49% 12.81% 12.91% 17.65% 15.30% 19.17% 13.68%ROA 32.91% 18.53% 20.14% 23.08% 23.65% 25.38% 26.33% 30.36%Sectorial Average 18% 24% 24% 25% 33% 28% 37% 29%


The company’s GPM rose to much greater percentage year after year over the last six years. This

tells that all the year the company was ahead of the industry average and enjoying profit every

year more than the industry average.

The operating profit was also high This tells that all the year the company was ahead of the

industry average and enjoying profit every year more than the industry average. The operating

profit also rose to much greater percentage over the last six years.


The net profit margin also rose over the past few years more than the industry average except

year 2007 in which the industry made more use of it but overall the industry was inconsistent in

performance and maintaining their NPM. The net profit margin also rose over the past few years.

The reason for this is mostly because of reduction in cost of sales and distribution expense. So

overall the company did very well in managing and improving their almost all their profits by a

much better percentage.


This particular ratio also improved especially over the last two years or so and this trend is

continuing and it is still better mostly all over the years if compared to the industry average.

This particular ratio also increased to a much greater portion as with the other profitability ratios.

The company also led all the last eight years from the front and really exceeded the industry

average by quiet a big margin which is not easy to do when your competitors are not that bad.


ROA also kept and maintained the industry average which was good for the company which

showed how consistent they were in meeting and mostly exceeding in maintaining the

profitability of the company as compared to the industry during the last eight years or so.

MARKET RATIO

MARKET RATIO 2001 2002 2003 2004 2005 2006 2007 2008EPS 12.49 11.98 12.26 8.11 9.92 9.39 10.86 13.22Sectorial Average 11.46 14.87 18.36 17.36 28.25 24.67 51.14 31.58DIVIDEND PAYOUT 76% 71% 72% 94% 99% 81% 112% 108%Sectorial Average 82.48% 85.94% 65.29% 64.24% 64.04% 61.82% 44.99% 43.37%

EPS of the company was not that good as compared to the industry average which tells that they

were not earnings on returned on the initial investment amount. Earnings per share (EPS) are the

earnings returned on the initial investment amount. The EPS as it is clear from the above chart

that this ratio improved over the last five years or so and still continuing as far seen the position

of the company.


The dividend payout ratio also quiet high over all the years as compared to the industry average.

The dividend payout ratio also raised much from year 2004 and until now it was still rising

which tells how much better the company is giving their Dividend over earnings per share. The

trend from the chart seems to be reasonable and the investors will be happy from the company so

as the management of the company because year after year they have been earning profits and

increasing every year.

DuPont Return on Equity

Five Component Disaggregation

Profitability Turnover Solvency ROETaxes Financing Operations

N.I/EBT EBT/EBIT EBIT/Sales N.I/Sales Sales/Avg.T.A N.I/Avg.

T.A

Avg. T.A/Avg.

S.E

N.I/Avg.

S.E2001

0.64 1.09 38.37% 26.74% 0.57 15.21% 2.22 33.72%

200 0.64 0.93 31.09% 18.31% 0.80 14.59% 1.96 28.56%


22003

0.64 0.90 26.06% 14.95% 0.76 11.35% 2.40 27.29%

2004

0.66 1.00 29.02% 19.04% 0.78 14.92% 2.18 32.57%

2005

0.68 1.07 26.40% 19.22% 0.93 17.84% 2.21 39.36%

2006

0.66 1.00 23.24% 15.48% 1.07 16.59% 2.16 35.78%

2007

0.69 1.02 27.08% 18.86% 1.00 18.92% 2.23 42.11%

2008

0.65 1.04 31.67% 21.33% 1.00 21.34% 2.49 53.11%

The Du Pont identity breaks down Return on Equity five distinct elements. The return on equity

(ROE) ratio is a measure of the rate of return to stockholders. From the above table it is clear

from the above DuPont analysis that over the past few years the return on equity section of the

company rose very much.

We see the N.I/EBT column over the last eight years remained consistent and the same was with

the EBT/EBIT section and we did not see much bigger changes in this column as well. If we now

talk about EBIT/Sales and N.I/Sales this section was sound as well as it is clear from the above

table that overall the last eight years the company did well in maintaining it as well.

Although the Sales/Avg. totals assets section we saw changes but they also became to better

position during the last few years. The N.I/Avg. T.A, Avg. T.A/Avg. S.E we also see that there

was no problem in these two columns as well they were consistent and became better and better

over the last two years especially. So the DuPont analysis of this company tells us the company

is very good in all kinds of distinct elements and this tells how better the company is.

Insight for Investors & Creditors

Looking at Pakistan's corporate earnings over the past year and the story they tell for the future

leaves investors with a lot left to hope for. Most sectors of the economy proved disappointing for

shareholders, with some sectors being completely inactive. Amidst such a market, however, the


fertilizer sector has shown stable and consistent results; with the key players performing

extremely well in terms of profitability and being spurred on by racing demand.

The government is likely to keep input costs low for some time to come because local

manufacturers are determined to pass on all such increases to consumers. This will preserve the

industry's growth, expansion and move towards self-sufficiency; the entry barriers for new firms

have already been discussed.

This sector has offered excellent shareholder returns and demand is still on the rise as

manufacturers expand aggressively to accommodate this increase. So it is probably fair to

conclude that the industry has sound fundamentals and significant potential for the future.

A particularly bright spot for the sector is the capacity for the export of fertilizer; if investors are

worried about over-supply in the next few years, both India and China are the world's largest

urea importers, and other markets such as Iran, Bangladesh, Sri Lanka and Thailand are also not

too far away.

Future Projections

FFC has progressed remarkably from its inception in 1978 till to date. Three projects in a Span of

less than 20 years have been set up. Each of these have incurred an investment of Over 300

million US$ amounting to one of the largest investments in Pakistan. This Performance record is

considered unparalleled in the country and matches high standards anywhere in the world. At


this point in time, the company is preparing to harmonize itself with new century. Building on

the foundations of the last 20 years, the company is confident to take on the new challenges.

FFC’s vision for the 21st century looks for diversification and establishing projects beyond the

territorial limits of the country in collaboration with world famous international industrial

holdings. The list of different projects that are being evaluated at present are:

• Oil Refinery

• Paper Mill Project

• Software Development House

• Off-Shore Fertilizer Complex

• Mineral Acid Production

• Petrochemical

• refurbish of existing FFC facilities

Problems & their proposed solutions with the firm

During the peak demand period the three urea manufacturers, Engro, Fauji and Pak Saudi, face

serious logistic problems. This include availability of trucks and railway wagons, heavy traffic

and frequent traffic jams on National Highway as all these units are located within a radius of


100 kilometers. The manufacturers have been demanding, for a long time, of the government to

expand the roads but the problem still persists.

Size of the company is very large which produces administrative problems. The company should

focus on this particular problem because if this one is improved the company will improve more

financially.

There are new competitors in the industry. Adding some new unit can enhance the production

capacity of the plants. Company is in a position to set up a new plant in the country. Having a

strong financial position company can start production of the new product line.

No availability of railway wagons. The company should take some steps with the government in

order to improve their distribution and reduce their expense more as they are doing it without it.

There is an unstable use of fertilizer.

Due to rising demand the company is importing urea instead of producing. The company should

try to increase their capacity by adding more units. Adding some new unit can enhance the

production capacity of the plants. Having a strong financial position company can start

production of the new product line. If FFC decides for the export of Urea it can earn much better

revenues. Availability of natural gas from Iran can help setting up a new Urea plant in that

vicinity and thus meeting the demand of Urea in the country at cheap Rates.

There is a phenomenal increase in the prices of basic feedstock’s. Of this problem there is no

such solution because since there is a lot of global disorder going all over the world this

particular effect will be solved later.

There is a difficult coexistence between public and private fertilizer producer/importer.

Future fertilizer demand the company’s position is so better that they should try to add more

units as the company is financially very strong. Company is having strong dealer network all


over country that helps in proper availability even in far-flung areas.FFC has developed a well

planned network of 170 field warehouses to ensure that fertilizers is available to the farmers

uninterrupted.

References

http://www.ffc.com.pk/contents/annualrep.htm

http://www.google.com.pk


http://www.google.com.pk/

http://www.ffc.com.pk/contents/annualrep.htm

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

http://www.kse.com.pk/market-data/history_by_date.php?id=1&sid=1.20

http://www.sbp.org.pk/

http://www.brecorder.com/

Appendix

Internal Ratios of the Company


http://www.brecorder.com/

http://www.sbp.org.pk/

http://www.kse.com.pk/market-data/history_by_date.php?id=1&sid=1.20

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

LIQUIDITY RATIO2001 2002 2003 2004 2005 2006 2007 2008

CURRENT RATIO 2.34 1.04 1.03 1.09 0.91 0.90 0.94 0.82QUICK RATIO 2.19 0.97 0.95 1.06 0.86 0.81 0.89 0.80CASH FLOW LIQUIDITY RATIO 1.88 1.04 0.70 1.49 1.07 0.34 0.90 1.07AVERAGE COLLECTION PERIOD 26.82 30.46 32.56 24.44 9.45 11.72 22.12 5.92AVERAGE INVENTORY DAYS 35.24 22.78 18.15 6.08 12.49 17.18 12.81 5.17PAYABLE DAYS 89.55 102.14 89.43 161.76 150.12 72.59 115.91 119.97

TURNOVER/EFFICIENCY RATIO2001 2002 2003 2004 2005 2006 2007 2008

RECEIVABLE TURNOVER 13.61 11.98 11.21 14.94 38.62 31.15 16.50 61.69INVENTORY TURNOVER 10.36 16.03 20.11 60.03 29.23 21.24 28.49 70.65PAYABLE TURNOVER 4.08 3.57 4.08 2.26 2.43 5.03 3.15 3.04FIXED ASSET TURNOVER 7.93 1.79 2.34 2.29 2.77 3.12 2.74 2.40TOTAL ASSET TURNOVER 0.86 0.60 0.77 0.80 0.90 1.09 0.97 0.96

SOLVENCY/LEVERAGE RATIO2001 2002 2003 2004 2005 2006 2007 2008

DEBT RATIO 32% 62% 58% 54% 56% 53% 56% 62%LTD TO CAPITALIZATION 2% 11% 6% 19% 7% 8% 17% 30%DEBT TO EQUITY 47% 162% 136% 115% 129% 112% 130% 160%

COVERAGE RATIO2001 2002 2003 2004 2005 2006 2007 2008

TIMES INTEREST EARNED 16.70 7.81 10.53 16.36 20.64 13.89 10.94 13.93FIXED CHARGE COVERAGE RATIO

6.67 7.07 3.89 20.31 18.95 -0.79 8.40 11.74

CASH COVERAGE 13.81 12.39 9.43 24.20 25.66 5.89 13.88 17.23CASH FLOW ADEQUACY RATIO 0.61 1.56 0.71 3.50 2.02 -0.06 0.69 0.72

PROFTABILITY RATIO2001 2002 2003 2004 2005 2006 2007 2008

GPM 46.90%

39.78%

34.86%

37.43%

35.71%

32.42%

35.59%

40.40%

OPM 38.37%

31.09%

26.06%

29.02%

26.40%

23.24%

27.08%

31.67%

NPM 26.74%

18.31%

14.95%

19.04%

19.22%

15.48%

18.86%

21.33%

CASH FLOW MARGIN 15.33%

28.15%

9.64% 36.02%

24.24%

-1.32% 20.80%

26.69%

ROE 33.72 28.56 27.29 32.57 39.36 35.78 42.11 53.11%


% % % % % % %ROA 32.91

%18.53

%20.14

%23.08

%23.65

%25.38

%26.33

%30.36%

MARKET RATIO2001 2002 2003 2004 2005 2006 2007 2008

EPS 12.49 11.98 12.26 8.11 9.92 9.39 10.86 13.22DPS 9.44 8.48 8.81 7.63 9.84 7.63 12.11 14.24DIVIDEND PAYOUT 76% 71% 72% 94% 99% 81% 112% 108%

External Ratios for Industry Average

2001 2002 2003 2004 2005 2006 2007 2008LIQUIDITY


Current Ratio 1.62 2.94 2.09 2.15 1.99 1.27 2.09 1.91Quick Ratio 1.45 2.72 1.90 2.01 1.67 1.08 1.81 1.59Cash Flow Liquidity Ratio 1.28 2.67 1.71 1.76 1.50 0.88 1.49 1.09Average Collection Period 25.37 26.73 40.54 32.76 17.97 14.21 21.71 4.28Average Inventory Days 38.97 35.89 23.77 17.45 32.73 31.83 53.75 48.08Average Payable Days 64.65 58.34 84.20 89.51 95.18 67.83 83.75 72.04

TURNOVER/EFFICIENCYReceivables Turnover 16.36 23.00 11.28 17.97 33.15 39.33 23.67 88.76Inventory Turnover 10.18 11.84 16.20 29.72 15.68 13.37 14.44 23.16Payable Turnover 7.36 7.02 9.12 10.73 7.56 9.69 12.51 14.33Fixed Asset Turnover 4.25 3.18 2.84 2.41 2.63 2.17 2.05 2.48Total Asset Turnover 0.63 0.53 0.58 0.63 0.76 0.74 0.54 0.55

SOLVENCY/LEVERAGEDebt Ratio 27.28

%54.00% 53.17% 51.83

%49.85

%51.48

%55.49% 58.25%

Long Term Debt To Capitalization

12.88%

30.01% 25.18% 24.76%

20.86%

16.89%

33.47% 36.16%

Debt To Equity Ratio 92.07%

135.56%

109.79%

91.43%

92.33%

79.42%

121.75%

129.36%

COVERAGE Times Interest Earned 20.16 5.93 11.53 15.58 11.56 7.77 6.22 4.92Cash Coverage Ratio 23.31 8.30 27.25 13.43 13.23 4.96 8.29 7.50Fixed Charge Coverage Ratio 23.88 486.61 14.67 14.10 11.52 0.57 5.24 4.36Cash Flow Adequacy Ratio 0.76 1.12 0.76 1.52 1.05 0.25 0.25 1.22

PROFTABILITYGross Profit Margin 30.10

%33.64% 31.16% 30.43

%31.85

%30.53

%33.34% 34.90%

Operating Margin 17.53%

23.85% 21.69% 22.53%

23.84%

22.02%

25.54% 27.78%

Net Profit Margin 2.25% 21.39% 24.30% 23.39%

34.07%

24.87%

63.86% 22.90%

Cash Flow Margin 12.19%

15.65% 19.96% 21.88%

19.88%

6.86% 14.07% 3.42%

Return On Asset 9.49% 12.49% 12.81% 12.91%

17.65%

15.30%

19.17% 13.68%

Return On Equity 17.71%

24.30% 24.10% 24.62%

33.29%

28.44%

36.50% 29.20%

Cash Return On Asset 8.50% 8.36% 10.39% 8.88% 8.31% 8.98% 7.30% -2.89%


MARKET Earnings Per Share 11.46 14.87 18.36 17.36 28.25 24.67 51.14 31.58Price to Earning 4.12 7.00 9.24 10.60 8.46 8.69 7.58 4.86Dividend Payout 82.48

%85.94% 65.29% 64.24

%64.04

%61.82

%44.99% 43.37%

Dividend Yield 12.75%

7.30% 7.10% 29.97%

5.01% 16.19%

1.68% 3.60%


Documents

24695313 Fauji Fertilizer Ratios