Sanaullah

(20131-16176)

FINANCIAL MANAGEMENT
















Vision and Mission Statement

Vision:
To be a premier organization focused on quality and growth, leading to
enhanced stakeholders value

Mission Statement:
Fauji Fertilizer Bin Qasim Limited is committed to remain amongst the best
companies by maintaining the spirit of excellence through sustained growth rate
in all activities, competitive price, quality fertilizer and providing safe and
conductive working environment for the employees











History of the company

Fauji Fertilizer Bin Qasim Limited is a Pakistan-based company. The Company is engaged in
manufacturing, purchasing and marketing fertilizers. The Company also invests in fertilizer raw
material manufacturing operations. The Company is a subsidiary of Fauji Fertilizer Company
Limited, which holds a 50.88% interest in the Company. Fauji Fertilizer Bin Qasim Limited
Plantsite is a modern Granular Urea and Di-Ammonium Phosphate (DAP) fertilizers
manufacturing complex, built at a cost of US$ 468 Million and located in Eastern Zone of Bin
Qasim, Karachi, with Head Office at Harley Street, Rawalpindi. Initially named as FFC-Jordan
Fertilizer Company (FJFC), wed 17th Nov 1993, with FFC (30%), FF (10%) and JPMC (10%) as
main sponsors. The company was formally listed with stock exchanges in May 1996 and
commercial production commenced wef Jan 2000. However, it continued to run in crises due to
technical, financial and managerial reasons till 2001. DAP Plant brought to suspension in 2001
due to accumulated loss of Rs. 6.5 Billion. It resumed production in Sep 2003, after a lapse of 2
years. Renamed as Fauji Fertilizer Bin Qasim Ltd. (FFBL) in 2003, as such Jordan Phosphate
Mines Co. (JPMC) had sold its entire equity in the company. Accordingly Phosphoric acid
supply agreement with Jordan was terminated. The company turned out to be profitable after 3
years i.e, by 2004 and declared 'maiden dividend' in 2004. Profitability has constantly been on
the rise since then and 2007 has been the most profitable year of the company. One of the
milestones in the success of FFBL is its accreditation of ISO certification, which was achieved in
Mar 2006 for both the Head Office and Plantsite.










Brief Operation history of company
Joint ventures:

Pakistan Maroc Phosphore S.A, (PMP) Morocco
Phosphoric Acid, being the main raw material for DAP production is being imported from
Morocco. To ensure the continuous supply of this strategic raw material to run our DAP plant at
Karachi, Office Cherifien des Phosphates (OCP), Morocco, the biggest industrial group of
Kingdom of Morocco and the Fauji Group( Fauji Foundation, FFC and FFBL) entered into a
joint venture for its uninterrupted supply. The company, named as Pakistan Maroc Phosphore
S.A(PMP) costing 2030 million Moroccan Dirhams( US$ 250 million) was formed at Morocco.
The project has successfully been completed in record time and within the budget. Commercial
production and shipment to FFBL started in April 2008 and May 2008 respectively. Plant is
designed to produce 375,000 MT per year of Phos acid thus meeting the total requirement of
DAP plant of FFBL. Surplus acid shall be sold in the international market. The Project is one of
its kinds with strategic significance of involving two of the largest business groups of two
brotherly Muslim nations i.e, Fauji Group of Pakistan and OCP Group of Morocco. Its formal
inauguration was performed by His Majesty the King of Morocco in October 2008. Dignitaries
from Pakistan also attended the ceremony.


Significant benefits associated with this project are:

Production of 375,000 metric tons of phosphoric acid per annum will not only ensure un-
interrupted supply of raw material, catering the entire post-BMR demand of DAP
requirement of FFBL, but would also be a source of profit in the form of selling out the
surplus production. This, in turn will enhance FFBL earnings in the form of dividends.
This is the first ever foreign investment by the Fauji Group. Apart from its imminent
contribution towards economic growth of Pakistan, it has added to the prestige of the
Country. May also prove a gateway for others to invest in the international market.
Long-term raw material supply guaranteed in an extremely turbulent international
market.





Investment in Fauji Cement Company Limited (FCCL) Expansion
Project

Cement industry has witnessed exceptional growth in local consumption as well as in exports in
the recent years, which has been a result of higher local construction and shortages in the region.
Cement industry is expected to maintain its growth and in order to benefit from the increasing
demand, expansion is becoming necessary for all cement manufacturers. Fauji Cement Company
Limited (FCCL), an Associated Company of FFBL, is in the process of expanding its existing
operating capacity from 1.17 MTPA to 3.51 MTPA (200% expansion). The Fauji Cement Brand
carries a premium in the market and is perceived as a better quality product. This is why FCCL
has been operating at a higher capacity than the industry over the last 5 years. FCCL operates
one of the most efficient and well-maintained cement plants in Pakistan which consumes
approximately 50% less energy with quicker production turnaround time. Its multi-fuel burning
capability allows it to use either natural gas, coal or furnace oil for its operations and further
optimizing its fuel efficiency to improve operating margins. FCCL's management is also
composed of senior technical personnel with vast experience of local cement sector.
Diversification of business will help FFBL sustain profitability and add to shareholders' value.
Since FCCL has issuing fresh equity (at Rs 16 per share having face value of Rs 10 each) in
order to finance its expansion project, FFBL has invested an amount of Rs. 300 Million, thereby
becoming a 2.7% ordinary shareholder (of revised equity) in FCCL. The plant is scheduled to
start its commercial production by the end of first Quarter 2010, INSHA ALLAH.








Description of the product mix


Granular Urea (Sona Urea)
With its state of the art Fertilizer Plant, Fauji Fertilizer Bin Qasim Limited is the only Granular
Urea manufacturer in Pakistan.
Urea is a synthetic organic compound containing 46 % nitrogen in amide form
Available in the form of white solid prills. free flowing for easy application
Being hygroscopic, urea is packed in moisture proof high density Polythene bags

Di Ammonium Phosphate (Sona DAP)
Fauji Fertilizer Bin Qasim Limited is the pioneer of premium quality DAP fertilizer
manufacturing in Pakistan. Our DAP plant is the only facility of its kind in the country. Our
product meets international quality standards.
DAP contains the second most important nutrient element, phosphorous besides nitrogen
Available in free flowing granular form
Granules are stronger, harder and of uniform size





Organogram




FINANCE DEPARTMENT ORGANOGRAM



J.D OF MAJOR FINANCE DEPARTMENT POSITIONS
1. CHIEF FINANCIAL OFFICER
Oversee Accounts Payable and Accounts Receivable and ensure a disaster recovery
plan is in place
Oversee business insurance plans and health care coverage analysis.
Oversee the maintenance of the inventory of all fixed assets; including assets
purchased assuring all are in accordance with federal regulations.
Maintain relations with external auditors and investigate their findings and
recommendations.
Develop Company's lT/ERP structure and manage it with alternatives/disaster
recovery programs.
Develop financial and tax strategies and manage all tax matters.
Train the Finance & corporate unit and other staff on raising awareness
andknowledge of financial management matters
Oversee all purchasing and payroll activity for staff and participants.
Monitor banking activities of the organization.


2. HEAD of TREASURY, BILLING & FINANCIAL PLANNING
Currently handling a total exposure of approximately Rs.50 billion including funded
(long/short term) and non-funded facilities availed from different banks.
Daily dealing with banks and managing relationships with 20 commercial banks.
Assessing companys borrowing requirements.
To negotiate mark-up rates for Working Capital Facilities with different banks.
Placement of funds.
Preparation of annual budget and quarterly reporting of all variances to
Management.
Preparation of Cash flow Projections of the company.
Responsible for internal reporting for every conducted transaction.
Establishment/retirement of Letters of Credits.
Dividend remittance.
To ensure compliance with regulatory requirements
Simultaneously reporting to the regulatory authorities like State Bank of Pakistan.
To seek approvals from State Bank of Pakistan for remittances to foreign suppliers.
Coordination for the credit rating of the company
Coordination for valuation of assets of the company.
3. SENIOR MANAGER TAXATION
Looking after all tax related matters of the Company including filing of returns
statements, tax audits and overall guidance to the staff on tax implications of routine
transactions.
Calculation of deferred tax working for financial statements.
4. MANAGER ACCOUNTS & PAYABLES
Preparation of monthly financial statements of the Company.
Preparation off annual budget of the Company based on monthly projected financial
statements.
Preparation of 10 years financial projection model of the Company.
Overall review of maintenance of general ledgers for proper recording of all items
in appropriate ledgers.
Any special tasks assigned by CFO for presentation to the Board.

Swot Analysis


PROFIT & LOSS ACCOUNT ANALYSIS:

Profit & Loss Account (Rs In Millions)
HORIZONTAL ANALYSIS
2013 R.s 13 Vs 12 % 2012 R.s 12 Vs 11 % 2011 R.s
Sales 54455 13.66 47911 (14.24) 55,869
Cost Of Sales 39942 9.58 36450 1.95 35,753
Gross Profit 14513 26.63 11461 (43.03) 20,116
Selling & Distribution Expenses 3453 29.52 2666 4.39 2,554
Administrative Expenses 1048 6.94 980 26.13 777

10012 28.11 7815 (53.44) 16,785
Finance cost 1515 (16.85) 1822 67.46 1088
Other operating Expenses 629 11.33 565 (52.00) 1177

7868 44.95 5428 (62.62) 14520
Other Income 494 (52.73) 1045 (36.67) 1650
Net Profit Before Tax 8362 29.18 6473 (59.97) 16170
Tax 2749 28.94 2132 (60.54) 5403
Profit after taxation 5613 29.30 4341 (59.68) 10767

COMMENTS ON P&L ANALYSIS:

SALES:
2012 vs 2011:
The sales for the year 2012 have shown the significant decline by 14.24% as
compared with last year. The main reasons are low production due to gas curtailment,
imposition of Gas Infrastructure Development Cess (GIDC) and there was also low demand due
to floods and over supply position due to import of Urea by GoP. Sona Urea sales for the year
2012 were 279 thousand tonnes which were lower by 36% as compared to 433 thousand
tonnes sales during the same period of 2011 due to shortage of the gas supply. As far as Sona
DAP sales concerns, 611 thousand tonnes were sold in 2012 which are 8% lower as compared
to 662 thousand tonnes sales of year 2011.

2013 vs 2012:
Sales for the year 2013 have shown improvement as compared with last year.
The reason behind this is the ever highest production and sales of DAP by selling 773 thousand
tonnes which is due to fall in international prices of Phosphoric acid and DAP as well as decline
in local prices.










Cost of Sales:

Comments:
There was 1.95 % increase in cost of sale of 2012 as compared with last year.
Raw material consumed was increased due to increase in the price of raw material internationally
as well as locally in 2012. But in 2013, cost of raw material remained same. Packing material in
2012 decreased due to decrease in the production and increased in 2013 due to increase in the
production of DAP and Urea however cost per bag remained approximately 29rs. Due to
increase in the fuel and gas prices for power production, there was also increase in 2012 as well
as 2013. In 2012 the company has not achieved the enough profit due to which employees that
are working on the plant have given only 5 to 6% rise in their salaries but in 2013 annual rise in
salaries is 9 to 10% and also includes employees retirement benefits. PQA has decreased their
maintenance charges in 2012 and increased in 2013 that resulted in rent, rates and taxes account.
Travel and conveyance expenses are those that are incurred for the purpose of the plant. Repairs
and maintenance varies year to year whenever there is requirement of maintenance of machinery
or equipment, company quickly go for it. The expenses related to the plant includes
communication, establishment and other expenses were decreased in 2012 as compared with last
year and increased in 2013. Depreciation is increasing year to year because of the purchasing of
the fixed assets every year.
Selling and Distributive Expense



Comments:
Fauji Fertilizer Company do the marketing for FFbls products so they charge
expenses like salaries, wages and benefits which were decreased in 2012 due to low production
as well as sales but increased in 2013 due to high sale of the DAP so their benefits and
increment are based on their sales performance. Rent, rates and taxes and technical services
vary year to year. Travel and conveyance, sales promotion and advertisement are increasing
every year because of meetings for marketing purposes and heavy advertisements for the
promotion of the products. Warehousing expenses vary depends on the amount of stock to be
stored. In 2012 depreciation decreased almost 50% but increased in 2013 because FFC has
purchased the new assets for the marketing purpose.






Comments:
In 2012, employees were given less increments in their salaries due to low profit
in the financial year because of the gas curtailment but in 2013 one general raise of 14 to 17%
and annual increment of 10 to 12% was given to the employees as well as employees
retirement benefits in respect of gratuity, provident fund and compensated absences were
provided by the company. Travel and conveyance are increasing year to year because of high
use of transportation for the employees. Repairs and maintenance of the vehicles and building
varies. Rent, rates and taxes includes car token, excise tax of the vehicles and rent of the
vehicles that are hired for the employees conveyance and it varies as per need. Listing fees is
increasing every year and FFbl is listed in Stock exchange, Rawalpindi Chambers of Commerce &
Industry (RCCI) and Fertilizer Association so they are increasing their listing fees annually and
company have to pay thats why increase in listing fee. In 2012, company has paid the donation
of Rs. 95213 thousand out of which 50000 was paid to the project of Fauji Foundation.
Company has not paid donation in 2013. Legal and professional charges have boost annually for
the legal documentation purposes.




Finance Cost


Comments:
Financial charges have increased to 1821 million from 1088 million in 2012 due to the
higher utilization of the working capital lines. This includes exchange loss of Rs. 435 million on account
of devaluation of Pak Rupee against the US Dollar. In 2013 financial charges have decreased to Rs. 1515
million from Rs. 1821 million due to less utilization of working capital lines owing to higher sales
collections. This also includes exchange loss of Rs. 376 million on account of devaluation of Pak Rupee .
against the US Dollar . Mark up on short term borrowings in 2012 was high due to large amount of the
borrowings and low in 2013 due to fewer amounts of borrowings. Workers profit participation fund was
also high in 2012 and low in 2013.


Comments
WPPF was low in 2012 as compared with the last year because it depends on the
profitability of the company and increased in 2013 due to increase in profits. Welfare fund also contains
some % of the profit that is given for the workers welfare so it varies with the companys policy. In 2012
property written off was 96704 million and become nil in 2013 it means that company has sold out or
removed from their books because property was no more useful for the company. Auditors annual fee
is fixed that they charge from the FFBl . Other income includes income from financial assets which was
decreased in 2012 as compared with last year because of low bank balance and term deposits and high
in 2013 due to high bank balance and term deposits. Company beard loss on sale of investments in 2012
and gain on sale of investment in 2013. Scrap sales vary depends on the amount of useless stock.


TAXATION:

Comments
The Government of Pakistan has exempted independent power providers with income
tax. But the company has to bare other taxes such as taxes on imports, development cost etc . And the
above taxes are recorded as import taxes and development taxes which were paid by the company. In
2012 tax rate was 60% as compared with last year but in 2013 tax rate reduced to 28.94%
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