Fauji Fertiliser Bin Qasim

The Company began its business in 1993 as Fauji Jordan Fertiliser Company (FJFC), a joint venture of Fauji Foundation, Fauji Fertiliser and Jordan Phosphate Mines Company (JPMC). It planned to produce, for the first time in Pakistan, 1,670 metric tons per day of Granulated Urea and 1,350 metric tons of Di-Ammonia phosphate (DAP).
The company was formally listed with stock exchanges in May 1996 and commercial production commenced w.e.f. January 2000. However, it continued to run in crises due to technical, financial and managerial reasons till 2001. DAP Plant brought to suspension in 2001 due to accumulated loss of Rs 6.5 billion. It resumed production in September 2003, after a lapse of two years.
In 2003, after JPMC sold its shares, it was renamed as Fauji Fertiliser Bin Qasim Limited (FFBL). The major shareholders are FFC (51 percent) and Fauji Foundation (17 percent). It is a listed company with authorised and paid up capital of Rs 11,000 million and Rs 9,341 million, respectively. One of the milestones in the success of FFBL is its accreditation to ISO certification, which was achieved in March 2006 for both the Head Office and Plant site.
FFBL Plant site is a modern Granular Urea and Di-Ammonium Phosphate (DAP) fertiliser manufacturing Complex built at a cost of US $468 million and located in Eastern zone of Bin Qasim, Karachi.
FINANCIAL HIGHLIGHTS FFBL witnessed a troublesome CY12 in terms of profitability as the earnings more than halved in relation to a year earlier. The chief reasons for subdued performance were a slowdown in local urea sales in the market coupled with heavy presence of imported urea at cheap rates in the market.
Moreover, the extended gas curtailment by the government to the fertiliser sector also led to a slowdown in production and reduced gross profit margins. The inventory stockpile as a result of slow off-take was seen at very high levels.
Sona DAP production dropped down to 648,000tonnes in CY12, lower than 662,000 tonnes production in CY11. In CY12, DAP sales declined by eight percent year-on-year due to the increase in the DAP imports as compared to the previous year. FFBL's sales revenue for CY12 declined by 14 percent year-on-year. The lower sales were primarily attributable to availability of imported fertilisers at reduced rates by GoP along with the lower urea price anticipation in 4Q12 and poor crop economics.
The extended gas curtailment proved to be another major issue for FFBL as it faced massive curtailment of feedstock gas supply which made difficult for the company to maintain its production levels. The local urea prices at the same time also crippled, hurting the sale revenue considerably.
The gross profit for the CY12 dropped down at 43 percent as the flagship DAP product's margins narrowed. Global Phosacid contacts were settled at higher prices in relation to the previous year, which had a telling impact on gross margins. Recall that Phosacid is a crucial ingredient in DAP production.
FUTURE OUTLOOK Gas curtailment is expected to continue in the near future as power sector is expected to get first priority in gas allocation. According to Gas Allocation and Management Policy 2005, fertiliser plants are at the second priority after domestic and commercial sector due to which gas curtailment issue will remain a major obstacle for fertiliser sector to increase its production or avoid compounded inventories in the stock.
The Company has reportedly shown interest in meat processing business as Pakistan's meat exports have been growing at a healthier pace. FFBL aims to take advantage of meat processing business and feels its potential in Pakistani market. As for the DAP market, the prices are expected to benefit FFBL in the near future as DAP margins are on the rise, following favourable Phosacid pricing.

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FAUJI FERTILIZER BIN QASIM

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Rs (mm)                      CY08      CY09      CY10      CY11      CY12

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Sales                      26,821    36,725    43,257    55,869    47,911

Cost of sales              18,595    27,060    29,794    35,753    36,450

Gross loss /Profit          8,226     9,665    13,463    20,116    11,461

Distribution costs          1,777     2,236     2,585     2,554     2,666

Finance cost                2,792     1,460       934     1,088     1,821

PROFIT AFTER TAXATION       2,900     3,784     6,514    10,767     4,338

EPS (Rs)                     3.10      4.05      6.97     11.53      4.64

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