Fauji Fertilizer Bin Qasim Limited

“Fauji Fertilizer Bin Qasim Limited”
Financial Analysis Report
Supervised by:
Miss Ayesha Riaz
Submitted by:
Zakia Abid
Roll# 06-54
BBA (Hons) 8th semester
Department of Management Sciences
University of Education
Okara Campus
DEDICATION
I dedicate it to my respected and beloved parents. Without their
patience, understanding support, and most of love all, the completion of this
work is not possible. I dedicate it to my respected and honorable teacher
Miss Ayesha Riaz, who helps me very much in finding data.
ii
ACKNOWLEDGEMENT
I bow my head to Almighty Allah with gratitude. I would like to
express gratitude to all those who gave me the possibility to complete this
assignment. I am greatly thankful and show the sincere respect to our
respected teacher Miss Ayesha Riaz. Without their guidance, I was not able
to understand it and achieve its basic goal. Our teacher provides us the real
guideline to accomplish this task. Her spiritual personality and kindness
gave us courage to do this assignment. I am also greatly thankful to my
respected parents, who pray for me. Without the support of our parents, I
am nothing. With the guidance of my parents, I accomplish this task easily.
Zakia Abid
iii
FINAL APPROVAL
This is to certify that we have read project submitted by Zakia Abid
and it is our judgement that this report is of sufficient standard to warrant
its acceptance by University of Education Okara Campus for BBA (Hons)
degree.
Professor Dr. Shafiq Khan
Director
UE Okara Campus. Signature
Mr. Rai Imtiaz Hussain
Head of Department
Miss Ayesha Riaz
Supervisor
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Table of Contents
1. Introduction
2
1.1 Agriculture Sector 2
1.2 Economic Environment
4
1.3 Types of Fertilizer 6
1.4 Global Scenario
7
1.5 Pakistan Fertilizer Industry
10
1.5.1 Fertilizer Industry Brief 11
1.5.2 Market Situation 12
Future Outlook and Growth 14
2. Company Profile 16
2.1 Company Information 16
2.2 Fauji Fertilizer Bin Qasim Limited 17
2.2.1 Vision 19
2.2.2 Mission 19
2.2.3 Core Values 20
2.2.4 Products 20
2.2.5 ISO Certification 21
3. Industry Analysis 24
v
3.1 Porter’s Five Forces 24
3.1.1 Supplier Power 25
3.1.2 Buyer Power 25
3.1.3 Potential Entrants 26
3.1.4 Threat of Substitutes 26
3.1.5 Degree of Competitive Rivalry 27
4. External Environment 29
4.1 PEST Analysis 29
4.1.1 Political/Legal Factors 30
4.1.2 Economic Factor 30
4.1.3 Social Factor 31
4.1.4 Technological Factor 32
5. Internal Environment 34
5.1 SWOT Analysis 34
5.1.1 Strengths 35
5.1.2 Weaknesses 36
5.1.3 Opportunities 36
5.1.4 Threats 37
6. Boston Consulting Group Matrix 39
6.1 BCG Matrix 39
6.2 Strategies under BCG Matrix 40
7. Summarized Financial Statements 42
7.1 Income Statement 42
7.2 Balance Sheet 45
8. Common Size/Component Percentage Analysis 51
8.1 Introduction 51
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8.2.1 CGS, GP and Net Profit 55
8.3.1 Total Assets 62
8.3.2 Total Equity and Liabilities 64
8.4 Conclusion 66
9. Trend Percentage Analysis
68
9.1 Introduction 68
9.2.1 Net Sales 72
9.2.2 Cost of Sales 74
9.2.3 Gross Profit 76
9.2.4 Net Profit 78
9.3.1 Total Assets 85
9.3.2 Total Liabilities 87
9.4 Conclusion 89
10. Dollar and Percentage Changes
91
10.1 Introduction 91
10.4 Conclusion 100
11.Ratio Analysis
102
11.1 Analysis of Short Term Financial Position 102
11.1.1 Net Working Capital 103
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11.1.2 Current Ratio 104
11.1.3 Acid Test Ratio 105
11.1.4 Absolute Liquid Ratio 107
11.1.5 Conclusion 108
11.2 Analysis of Efficiency 109
11.2.1 Inventory Efficiency 109
11.2.2 Debtor Efficiency 111
11.2.3 Creditor Efficiency 113
11.2.4 Cycle Efficiency 115
11.2.5 Assets Efficiency 117
11.2.6 Working Capital Turnover Ratio 119
11.3 Analysis of Long Term Risk 121
11.3.1 Proprietory Ratio 121
11.3.2 Capital Gearing Ratio 122
11.3.3 Solvency Ratio 124
11.4Analysis of Profitability 126
11.4.1Percentage Change Ratio 126
11.4.2 Gross Profit Ratio 128
11.4.3 Net Profit Ratio 130
11.4.4 Operating Profit Ratio 131
11.4.5 Expense Ratio 133
11.4.6 Operating Ratio 135
11.5 Analysis of Return 137
11.5.1 Return on Assets 137
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11.5.2 Return on Investment 138
11.5.3 Return on Equity 140
12. Cross Sectional Analysis
143
12.1 Introduction 143
12.4 Short Term Financial Position Analysis 148
12.5 Profitability Analysis 150
12.6 Return Analysis 152
12.7 Efficiency Analysis 154
12.8 Long Term Financial Position Analysis 156
12.9 Conclusion 157
13. Conclusion 159
14.Future Projections
161
15. Recommendations
163
16. Annexure 165
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1
1. Introduction
Pakistan is agriculture country. Pakistan has moved from an economy
heavily dependent on the agriculture to a relatively balanced economy based on
services, industry and agriculture. Fertilizer usage in Pakistan is low. The greater
demand is expected to continue in the future as economic growth continues. Due
to excess demand, it is expected to keep reserves in the next years after which
manufactures will be forced to fight for market share.
Pakistan’s fertilizer manufactures have low resource costs due to feed stock
gas subsidy advanced by Government. Through this subsidy manufactures are able
to get feed stock gas at lower rates than the market which improves their
profitability. The current excess demand situation has promoted capacity
expansions which gave profits in 2014. The surplus amount is exported to
neighboring countries. Stock presents an attractive opportunity to take exposure in
high growth stocks at low costs.
1.1 Agriculture Sector
Pakistan is agriculture country and agriculture is the larger part of Pakistan
economy. The undeniable importance of the agriculture sector to the economy of
Pakistan is reflected in its contribution to national output, employment and export
earnings. This sector contributes 20.8% to the country's Gross Domestic Product
(GDP) and employs 43% of total labor force. As per experts estimation the share
of agriculture cannot go down further, as many industrial sector such textile, sugar
and fertilizer are also depend on agriculture. These industries provide input, as
well as derived input from agriculture. However, in the future, the share of
agriculture in overall GDP is estimated to start rising as the population demand for
food rises.
2
AGRICULTURAL AS A % OF GDP
Source: Economic Survey of Pakistan
Growth in this area of Economy is vital for poverty alleviation, as about 66

percent of rural population is directly or indirectly dependent on the agriculture
sector for sustenance. Pakistan’s major source of foreign exchange earnings is the
textile sector which also relies on agricultural performance. The major crops of
Pakistan are wheat, cotton, rice and sugarcane, which make up 7% of the country’s
GDP.
AGRICULTURAL GROWTH VERSUS GDP GROWTH
Source: Economic Survey of Pakistan 3

Fertilizer has a significant contribution in increasing crop yields and
productivity. Proper application of nutrients helps in efficient utilization of limited
natural resources such as land and water. Fertilizers improve crop yield by
removing the deficiency of chemical elements taken from the soil by harvesting,
grazing, leaching or erosion. Coupled with improved seeds, better insecticides and
more effective fungicides, chemical fertilizers play a vital role in boosting
agricultural output. With proper farmer education and increased awareness, the
fertilizer off-take can improve substantially. Nutrient application in suitable
quantities can further improve farm productivity, thereby helping in eradicating
poverty.
1.2 Economic Environment
Fertilizer consumption world wide is highly correlated with
macroeconomic growth of the country. Likewise, Pakistan has witnessed robust
economic growth in the last few years. The strong economic performance has been
accompanied by an increase in agriculture growth, per acre yield and resultant
demand. So, Pakistan’s economy is expected to grow.
Pakistan’s agriculture output has suffered in the recent past due to adverse
weather conditions and crop spoilage. The government is committed to improve
agriculture performance through the following measures:
i. Irrigation system improvement
ii. Subsidy to farmer
iii. Encouraging use of fertilizer
iv. Above average credit disbursement
As a result of these policies, yield per hectare of Pakistan is showing
gradual improvement although it is low as compared to the other countries. So,
Agriculture is expected to grow because of government policies and better
irrigation.
4
YIELD PER HECTARE (SELECTED COUNTRIES)
Source: IFA
The low yield can be explained in a large part by the low fertilizer use in
Pakistan. Fertilizer consumption in Pakistan stands at 165.2kg/hectare.
CONSUMPTION KG/HECTARE
Source: IFA
The fertilizer policy aimed at providing low cost fertilizers to the farmer so
as to enable them to improve yields. It encourages manufacturers to invest in the
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country and subsidizes their most important feed stock gas rates. In the future
these measures are expected to results in great use of fertilizers and thereby create
demand for it.
Generally, fertilizer consumption closely follows production in a country
subject to the availability of raw materials and also because of the relation between
fertilizers consumption and economic growth.
1.3 Types of Fertilizer
Urea, which represents 65% of total fertilizer consumed and di-ammonium
phosphate (DAP), which accounts for 18%, are the main types of fertilizer used in
Pakistan, but there is a total of eight different fertilizer products which fall into
three categories. Urea, along with calcium ammonium nitrate (CAN) and
ammonium sulphate (AS) together make up almost three fourths of total fertilizer
consumption and come under the nitrogenous category.
Under the phosphatic category which makes up about 27%, is DAP, triple
super phosphate (TSP), single super phosphate (SSP) and nitro phosphate (NP).
And under the last category, potassic is sulphate of potash which makes up only
1%. Since the soil in Pakistan generally tends to be deficient in nitrogen, urea is
the most used fertilizer. DAP is used, as most phosphatic fertilizers are to counter
the effect of the acidic urea and maintain levels of fertility in the soil.
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1.4 Global Scenario
The world grain consumption has outpaced production in six of the last
seven years, in which production superseded supply due to favorable weather in
almost all the major grain producing countries. With the growing demand of food
and rapid increase in demand for biofuels, the grain consumption growth has
witnessed an increase of 5% in 2009 from the historical average rate of 1.5% p.a.
This has led to a widening gap between consumption and production resulting in
sharp increase in food prices in the global market.
CONSUMPTION OF EACH SECTOR
Source: State Bank of Pakistan
This growth was spurred by the rise in food demand by the burgeoning
world population. Attaining higher production given the same amount of land can
be done through three ways:
i. Turning more land into arable land through better irrigation
ii. Using High Yielding Seeds (HYS)
iii. Using fertilizers to improve soil content
Improvement in soil content is the most convenient and frequently followed
method. Moreover, it has gained widespread use as food demand rises.
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WORLD FERTILIZER CONSUMPTION
180
160
Source: FAO, IFA
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
140
stored by governments, a good measure of the global cushion against poor
harvests and rising prices continues to decline.
WORLD GRAIN PRODUCTION vs CONSUMPTION
120
llion Tons
100
Source: FAO, IFA
8
The international Fertilizer Association (IFA) produces forecast of world
fertilizer usage and production. Following estimates are taken from IFA. Till the
year 2030, the increasing world population and higher standards of living in
developing countries will demand a substantial increase in global cereal
production. Problem in supply-demand are likely to occur because agricultural
production in developing countries is not keeping pace with this increase in
demand.
DEMAND FOR FOOD FOR HUMANS AND ANIMALS
Source: IFPRI
The increase in demand can be met through increase in cultivated area;

however, this appears only as a possibility in Africa and Latin America. In most
other parts of the world the increase in demand must be met through greater yield,
which will most certainly require increased use of fertilizers.
Growth in production is expected to outpace fertilizer consumption.
According to IFA estimates world urea supply is expected to reach 180.8mntpa in
2011 from 148.2mntpa in 2010. Most of the forecasted increase in fertilizer
capacity is expected to arise from China and Saudi Arabia.
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1.4 Pakistan Fertilizer Industry
Pakistan’s economy is agriculture based country; however our cultivable
land is deficient in nutrient contents. This deficiency can only be overcome
through the balanced use of fertilizer. Presently, there are ten manufacturing units
in Pakistan. Out of these, four units are located in the public sector and six are
operating in the private sector. The province-wise distribution of units confirms
that 5 units are located in Punjab, 3 in Sindh and 2 in the NWFP.
Fertilizer production is concentrated in nitrogenous fertilizers, which
comprises 85% of all fertilizers produced in the country. Although other types of
fertilizers are also produced in Pakistan, the bulk of whose demand is imported.
The main reason for this concentration on nitrogenous fertilizers is that its main
raw material i.e. natural gas is cheaply available in the country. The raw material
for other fertilizers such as potassium and phosphate has to be imported. The local
fertilizer companies meet almost 80% of Pakistan’s Fertilizer requirement. The
total installed capacity is over 5,124 million tones per annum. It mainly comprises
of 4,180 million tones for urea and remaining for NP, DAP, CAN and SSP.
FERTILIZER COMPANIES
20%
80%
Local manufactures Import
Source: Economic Survey of Pakistan
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1.4.1 Fertilizer Industry Brief
PARTICULARS DESCRIPTIONS
Sector Fertilizer Industry
Sector Life Cycle Expansion stage

Type of Industry Growth Industry
GDP 20.8%
Fertilizer industry is fast growing industry, being aided by

Government of Pakistan, as it is associated with agriculture.
Pakistan, being an agriculture country will have to support
Historical Performance
all industries which are directly related to Agriculture to
ensure maximum benefits as well as maximum production.
Current the sector is growing with almost 35% rate.
• Dawood Hercules Company Ltd,

• Fauji Fertilizers Company Ltd,
Market Player
• Fauji Fertilizers Bin Qasim Company Ltd,
• Engro Chemicals Pakistan Ltd,
Threats Supplier (Raw material), Consumer (Less purchasing power)
Inflation rate, Interest rate, Environmental problems,

Risks & mitigation
Political instability
• Overall profitability of fertilizer sector increased 45%
Financial Indicators • Increased in fertilizer demand by 20%
• Fertilizer sector is the 2nd largest consumer of gas
1.4.2 Market Situation
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The fertilizer industry in Pakistan has an oligopoly structure. The products
are differentiated and there are 9 firms in the industry. Four of them are listed and
other is unlisted. The entry or exit of a single player can affect pricing. There is no
single dominant industry leader.
Urea demand showed the growth approximately 5% in fiscal year 2009.
The characteristics of fertilizer are such that the farmers cannot do without it. It
dissipates quickly in the soil and is removed in large quantities by the crops that
they need it. So, demand of urea will increase in the following years, if we showed
the focus on agriculture to achieve the desired food.
UREA GROWTH
Source: NFDC, IGI Research

DAP GROWTH (mn MT)
DAP demand showed the growth approximately 35% in fiscal year 2009. In
fiscal year 2008, DAP growth is low due to soaring of international DAP prices
and after that in 2009 it stabilized the demand of DAP in local market. So, demand
of DAP will decrease in the following years according to NFDC and IGI research.
12

The four largest firms are deemed to be price setters. These are called
market players. These include:
i. Fauji Fertilizers Company Limited
ii. Engro Chemical Pakistan Limited
iii. Fauji Fertilizers Bin Qasim Limited
iv. Dawood Hercules Company Limited
PRODUCTION OF 4 COMPANIES
Source: Company Reports and NFDC
13
Market share are shown. Through this analysis, it is expected that the
manufactures will grow through expansion.
MARKET SHARE
1.4.3 Future Outlook and Growth

The industry’s future outlook of the fertilizer sector is very strong because
of supportive government policies, favorable climatic conditions and gas pricing.
Short term outlook appears encouraging with significant projections for strong
demand for our fertilizers. In the long term, the Company is committed to achieve
sustained levels of operations at demonstrated operating efficiencies through focus
on their fundamental strengths.
Customs duty of 5% was withdrawn from imported urea. A similar
withdrawal was done on imported DAP fertilizer last year this will not affect local
manufacturers The medium to long term projected demand supply gap situation
together with commissioning of their BMR projects with enhanced urea
production capacities would further consolidate their market presence and allow
improved returns to the Company and its stakeholders.
14
15
2. Company Profile
2.1 Company Information
16
Fauji Fertilizer Bin Qasim limited
Company Name
Manufacturing & Purchasing & Marketing
Nature of Business
Third highest share in market
Share in Market
Date of Formation 17th November, 1993
GDP 20.8%
• Granular Urea (Sona Urea)

Products
• Di Ammonium Phosphate (Sona DAP)
• Lahore Stock Exchange

Listed in • Karachi Stock Exchange
• Islamabad Stock Exchange
Registered Office 73-Harley Street, Rawalpindi, Pakistan
Plot # EZ/1/P-1, Eastern Zone,

Location of Factory
Bin Qasim, Karachi, Pakistan
Chairman Lt Gen Hamid Rab Nawaz, HI(M), (Retired)
Chief Executive Lt Gen Anis Ahmed Abbasi, HI(M), (Retired)
Company Secretary Brig Javed Nasir Khan, SI(M), (Retired)
• Lt Gen Malik Arif Hayat, HI(M), (Retired)

• Mr Qaiser Javed
• Brig Arif Rasul Qureshi, SI(M), (Retired)
Board of Directors
• Brig Rahat Khan, SI(M), (Retired)
• Dr Nadeem Inayat
• Brig Liaqat Ali, TI(M), (Retired)
• Brig Jawaid Rashid Dar, SI(M), (Retired)
Chief Financial Officer Syed Aamir Ahsan
KPMG Taseer Hadi & Co Chartered

Auditors Accountants, 6th Floor, State Life Building,
Jinnah Avenue, Islamabad.
Orr Dignam & Co

Advocates, 17
Legal Advisors 3-A, Street 32, Sector F-8/1,
2.2 Fauji Fertilizer Bin Qasim Limited
Fauji Fertilizer Bin Qasim Limited Plantsite is a modern Granular Urea and
Di-Ammonium Phosphate (DAP) fertilizers manufacturing complex, built at a cost
of US$ 468 Million and located in Eastern Zone of Bin Qasim, Karachi, with Head
Office at Harley Street, Rawalpindi.
Initially named as FFC-Jordan Fertilizer Company (FJFC), wef 17th Nov
1993, with FFC (30%), FF (10%) and JPMC (10%) as main sponsors. The
company was formally listed with stock exchanges in May 1996 and commercial
production commenced wef Jan 2000. However, it continued to run in crises due
to technical, financial and managerial reasons till 2001. DAP Plant brought to
suspension in 2001 due to accumulated loss of Rs. 6.5 Billion. It resumed
production in Sep 2003, after a lapse of 2 years.
Renamed as Fauji Fertilizer Bin Qasim Ltd. (FFBL) in 2003, as such Jordan
Phosphate Mines Co. (JPMC) had sold its entire equity in the company.
Accordingly Phosphoric acid supply agreement with Jordan was terminated.
Performance & Production:
FFBL fertilizer complex is state of the art manufacturing facility with
advanced Distributed Control System for safe and efficient operation. The
phosphoric acid being raw material for DAP plant is imported from Morocco and
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initially stored in tanks at Port Qasim. Design capacity viz-a-viz actual production
of Plants is as under:
Manufacturing Plants Production (Metric Ton / Day)

Original Actual (Approx)
Urea Granular 1670 1920
DAP 1350 2230 (After Revamp)
Ammonia 1270 1570 (After Revamp)
Our Distinction
FFBL is the only fertilizer complex in Pakistan producing DAP fertilizer
and Granular Urea thus making significant contribution towards agricultural
growth of the country by meeting 45% of the demand of DAP and 13% of Urea in
domestic market.
2.2.1 Vision
• Be a leading fertilizer company with a diverse product base
• Keep exploring other project investment opportunities to remain
progressive, flexible and viable
• Continue to excel in operations
• Commitment to business ethics, safety,
health, environment and involvement in
the community
• Remain a good corporate citizen
• Be one of the best corporate employers
2.2.2 Mission
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Pursue as a team, the progressive strategy based on the principle of
maintaining the spirit of excellence to remain among the best companies for
delivering competitively priced quality products, achieving sustainable growth rate
in all activities and generating optimum profits to the satisfaction of all
stakeholders.
2.2.3 Core Values

Our business success is dependent on trusting relationships. Our reputation
is founded on the integrity of the Company’s personnel and our commitment to
our principles of:
 Quality assurance
 Integrity and honesty
 Confidentiality
 Respect for people and team work
 Safety and health
 Corporate image
2.2.4 Products
1. Granular Urea (Sona Urea)
With its state of the art Fertilizer Plant, Fauji Fertilizer Bin Qasim Limited
is the only Granular Urea manufacturer in Pakistan.
 Urea is a synthetic organic compound containing 46 % nitrogen in amide
form
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 Available in the form of white solid prills. free flowing for easy application
 Being hygroscopic, urea is packed in moisture proof high density Polythene
bags.
2. Di Ammonium Phosphate (Sona DAP)

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
21
2.2.5 ISO Certification
The company has developed and implemented following three international
standards to improve in quality, environment, health & safety.
Certification Description Audit Company

ISO 9001 - 2000 Quality Management System
ISO 14001 - 2004 Environmental Management System
Bureau of Veritas
Occupational Health & Safety Assessment
OHSAS 18001 - 1999 Quality International
Series
(BVQI)
Our work practices, emissions and safety procedures at the Head Office and
Plant Site were verified by the world renowned International Certification Agent,
Ms BVQI during Mar 2006. We achieved this honor for all three standards in the
first attempt.
22
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3. Industry Analysis
3.1 Porter’s Five Forces
Fauji Foundation is taken from the company logo "Increasing our outreach
through sustainable growth". Fauji Fertilizer Bin Qasim Limited (FFBL) is a
Pakistani fertilizer manufacturing; purchasing and marketing company is a
primary target for an analysis using Michael Porter’s 5-Forces Model (“5-
Forces”).
We have applied the 5-Forces Analysis into the respective divisions:
1. Supplier Power
2. Barriers to Entry
3. Threat of Substitutes
4. Buyer Power
5. Competitive rivalry
Graphical Representation
24
3.1.1 Supplier Power
The term 'suppliers' comprises all sources for inputs that are needed in order
to provide goods or services. Supplier Power is analyzed though supplier
concentration, importance of volume to supplier, differentiation of inputs,
switching costs of firms in the industry.
 In this industry supplier has a high bargaining power, as most of them are
Foreign Groups.
 Concentration is low. They act as separate groups competing for the same
project.
 High Switching cost because it is difficult to contract with other groups and
deal with them.
 No threat of forward integration.
 Suppliers are powerful if there are only a few suppliers, a large number of
purchasers, and significant costs of switching suppliers.
25
3.1.2 Buyer Power
Fauji Fertilizer Bin Qasim Limited (FFBL) ensures sellout production to
Pakistani and international customers, due to flexible demand delivery and low
down payments.
 Buyers have power over when they are concentrated, purchase a significant
portion of new production, and pose a credible threat to purchases from
competitors.
 Although Buyers are large in numbers and purchases a large quantity as
well, but buyers do not have a bargaining power.
 Customers have low margins and are price sensitive.
3.1.3 Potential Entrants

Economies of scale, product differentiation, capital requirements, switching
costs and government policy all affect the industry. There are number of barriers
to entry such, as capital requirements, government policies, reputation of existing
firms and ecological surveys.
 Huge capital requirement is one of the greatest barriers for entry.
 Government Policies and regulation are also act as barriers; because
Natural Gas which is the main raw material of the industry, and the prices
and supply of it is completely depend upon the Government. Government
does not easily give permission for manufacturing plant due to shortage of
Natural gas and harmful environmental effects, this also act as a barrier.
 Brand reputation of existing companies is also one of the barriers because
customers do not easily get ready to switch.
 Brand loyalty of customers
26
3.1.4 Threat of Substitutes
The threat of substitutes entails a consideration of such things as switching
costs, buyer inclination to substitute and the price-performance trade-off of
substitutes. Many organizations do realize that substitutes are there but they must
develop such a product that satisfies their customer. Some threats are such that:
 Brand loyalty of customers,
 Close customer relationships,
 Switching costs for customers,
 The relative price for performance of substitutes,
 Current trends
3.1.5 Degree of Competitive Rivalry

This force describes the intensity of competition between existing players
(companies) in an industry. High competitive pressure results in pressure on
prices, margins, and hence, on profitability for every single company in the
industry.
 Fixed Costs are too high, which is not easily possible to tolerate. It reduces
the competition.
 Fertilizer industry is at maturity stage so; competition on the basis of
growth is low.
 Prices are fixed for every season so no competition on the basis of pricing
behavior.
 Competition is only on the basis of Quality.
27
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4. External Environment
4.1 PEST Analysis
Fauji Foundation is taken from the company logo "Increasing our outreach
through sustainable growth".
PEST analysis stands for" Political, Economic, Social, and Technological
analysis" and describes a framework of macro-environmental factors used in the
environmental scanning component of strategic management. So, we have applied
the PEST Analysis into the respective divisions:
1. Political / Legal Factor
2. Economic Factor
3. Social Factor
4. Technological Factor
29
4.1.1
Political/Legal Factor
Political factors include government regulations and legal issues and define
both formal and informal rules under which the firms operate.
 Political trends are always in favor of this industry.
30
 To fulfill local demand of fertilizers at affordable prices, the Government is
providing subsidy on production and import of fertilizers.
 Investors will be allowed to relocate second hand plant, equipment and
machinery, with the same concession/exemption as applicable to new
plants.
 The Government is providing concessionary feed stock gas to the fertilizer
plants for production of urea.
 Tax relaxation has also been offered by the Government.
 Export benefit to suppliers of capital goods for new/modernization projects
of fertilizer.
 Gas price has been fixed for 8 years for new investments.
4.1.2 Economic Factor

Economic factors affect the purchasing power of potential customers and the
firm’s cost of capital. Economic factors can not be excluded for operating any
business including fertilizers.
 One of the main sectors of economy is Agricultural as it contributes 22% to
the GDP and without Fertilizer industry this sector would not able to work.
Due to that Government always gives support to the fertilizer industry.
 Tax relaxation has been offered in order to attract new entrants.
 Export benefit to suppliers of capital goods for new/modernization projects
of fertilizer. To reduce the dependence on imported fertilizers by enhancing
the local production capacity.
 The Government is providing subsidy on production and import of
fertilizers. A massive subsidy of Rs.27 billion in the supply of urea and
DAP in 2009.
 Ban on export of fertilizer is also imposed so that economic stability would
be gain.
4.1.3 Social Factor
31
Health consciousness among the people of Pakistan has been increasing
day by day. The citizens of Pakistan are getting aware of their duties in order to
maintain the healthy environment. Government is taking several steps in order to
educate, how important it is for the people to live in the healthy environment.
Although the adverse effects of this industry is very high because of the
improper handling of the waste. Due to this, many diseases like asthma, kidney
diseases, hepatitis etc. are caused. Still, the usage of the fertilizers cannot be
stopped because it gives farmers so much ease in terms of saving time and
actually, using it.
The government discourages the operation of the industries with in the city
by charging these factories with environmental charges. In spite of this
discouragement, there are many factories that are running inside the city,
discharging poisonous gases and chemicals. By the passage of time, the people as
well along with the government are discouraging such activities and demand for
clean environment.
Urea manufacturing site has got ISO 9001:2000 & ISO 14001:2004,
OHSAS 18001:1999, ISO 14000 certifications.
4.1.4 Technological Factor

To meet the demand of fertilizers in the country through indigenous
production, self-reliance in design engineering and execution of fertilizer projects
is very crucial. This requires a strong indigenous technological base in planning,
development of process know-how, detailed engineering and expertise in project
management and execution of projects.
32
The fertilizer plant operators have now fully absorbed and assimilated the
latest technological developments, incorporating environmental friendly process
technologies, and are in a position to operate and maintain the plants at their
optimum levels and on international standards in terms of capacity utilization,
specific energy consumption & pollution standards. The average performance of
gas-based plants in the country today is amongst the best in the world.
The fertilizer industry is also carrying out de-bottlenecking and energy
saving scheme in their existing plants and to enhance the capacity and reduce the
specific energy consumption per ton of product. Companies are also planning to
convert to Liquefied Natural Gas (LNG).
33
5. Internal Environment
5.1 SWOT Analysis
SWOT analysis is a tool for auditing an organization and its environment.
It is the stage of planning and helps marketers to focus on key issues. SWOT
stands for Strengths, Weaknesses, Opportunities and Threats. Strengths and
weaknesses are internal factors. Opportunities and Threats are external factors.
34
The SWOT analysis provides information that is helpful in matching the
firm's resources and capabilities to the competitive environment in which it
operates. As such, it is instrumental in strategy formulation and selection. It
involves specifying the objective of the business venture or project and identifying
the internal and external factors that are favorable and unfavorable to achieve that
objective.
5.1.1 Strengths
A firm's strengths are its resources and capabilities that can be used as a
basis for developing a competitive advantage. Some are:
 The persons operating in this sector are financially strong and they can start
production of new product line. Adding some new unit can enhance the
production capacity of the plants.
35
 It provides the good quality products to its customers to get the better
advantages and maximizes their profits.
 Demand is heavy because, being an agriculture country and due to
increasing awareness about the balanced use of fertilizer, demand for the
fertilizer will increase.
 Industry has well distribution centers.
 High quality and skilled professionals are there helping the industry to
achieve their target.
 Fertilizer industry peruses an innovative education oriented advertising
policy utilizing electronic/ print media and road side advertisement.
 All companies in the industry have developed a well planned network field
warehouses to ensure that fertilizers are available to the farmers
uninterrupted.
 FFBL has new technological devices to seeking and using the natural
resources in the fertilizer industry.
5.1.2 Weaknesses
The absence of certain strengths may be viewed as a weakness. Some
weaknesses are:
 Due to the existence of black market and heavy demand, farmers have to
pay above then the stated price.
 Demand is more and capacity of plants to produce fertilizers is less.
36
 Fertilizer sector is backward in technology and also lack in resources.
 Low advertising campaigns as growers and farmers are not educated and
lives in villages, so they don’t exactly know the balanced use of fertilizer.
 There is wastage of raw material.
 Delay in capacity expansion.
 Large investment needed for business expansion.
 Disputes between Middle level and Lower management.
 Dependence on supply and price of international market raw material and
natural gas.
5.1.3 Opportunities
The external environmental analysis may reveal certain new opportunities
for profit and growth. Some of them are:
 If the quality is good customer will buy your product. By improving the
quality of products, industry can attract more customers and can retain
customers by satisfying their needs.
 There is no quota restriction by WTO since 2005, so there are more chances
of export.
 Availability of gas from Iran can increase the production of plants and
industry can fulfill the demands.
 Government is giving support to fertilizer sector. It means that Government
has decided to increase fertilizer industry funding.
 As demand is high comparing to supply, fertilizer sector has an opportunity

to expand the capacity to fulfill the local demand.
 As Pakistan is an agricultural country and farmers are getting awareness
about the balanced use of fertilizer, demand of fertilizer has increased.
37
 Government programs and excess demand of fertilizers in Pakistan aware
the farmer in Pakistan. So it is a golden opportunity for firms to provide
better services to potential customers.
5.1.4 Threats
Changes in the external environmental also may present threats to the firm.
Potential unfavorable conditions for an FFBL face such threats:
 As natural gas is the main raw material, load shedding of natural gas is big
threat.
 Imported fertilizer is available at cheap prices than local fertilizer.
 Unstable political condition in the country is also a big threat to fertilizer
industry.
 Prices of fuel and gas have increased enormously.
 Scarce water resources.
 Global prices of fertilizer products are also increasing which is causing
increase in fertilizer prices in the country.
 Bio fertilizer is the main threat to the industry because it is cheap and also
environment friendly.
 Government policies are not consistent regarding fertilizer industry.
 Competition may pose a threat because the company will have to maintain
its leadership in an expanding market.
38
6. Boston Consulting Group Matrix
6.1 BCG Matrix
39
For more effective planning and operations, a multi-business or multi-
product organization should be divided according to its major markets o products.
Each such entity is called a strategic business unit (SBU).
Using this matrix, an organization classified each of such SBU according to
the factor like
i. Market Share
ii. Industry Growth Rate
Representation
The BCG matrix is shown below:
Under the light of BCG matrix, I can examine that Fauji Fertilizer Bin
Qasim Limited is existing in the category of Question Mark because of low market
share and medium business growth rate as compared to others. In order to be the
40
market leader, Fauji Fertilizer Bin Qasim Limited has to improve its market
position.
6.2 Strategies under BCG Matrix
This is the exact time for Fauji Fertilizer Bin Qasim Limited to grow more
rapidly with the showing of its internal strength to the market to make the market
favorable. Following are the main strategies that will be helpful for Fauji Fertilizer
Bin Qasim Limited to get a better market position.
6.2.1 Differentiation Strategy
Fauji Fertilizer Bin Qasim Limited has to provide good quality products
and more values to its consumers, so that it will be beneficial to become the
market leader.
6.2.2 Cost Leadership Strategy
Fauji Fertilizer Bin Qasim Limited has to consider its cost to improve its
profitability ratio.
6.2.3 Focused Strategy
Focus strategy refers to the focus on the customer, focus on the target
market, identify them and serve them better.
41
7. Summarized Financial Statements
7.1 Income Statement
42
FAUJI FERTILIZER BIN QASIM LIMITED
Summarized Profit & Loss Account
As At December 31, 2009.
(Rupees '000)
2005 2006 2007 2008 2009
SALES
15,277,23 15,777,64 13,167,13
Gross sales 2 0 5
27,410,756 37,270,515
Less:
ale tax 884,662 921,803 716,918 339,847 0
Trade discount 116,181 125,724 190,443 230,017 518,878
Commission to holding company 21,625 22,825 16,886 20,080 26,717
1,022,468 1,070,352 924,247 589,944 545,595
14,254,76 14,707,28 12,242,88
NET SALES 4 8 8
26,820,812 36,724,920
LESS: COST OF SALES

Raw materials consumed 6,621,531 7,098,429 6,526,801 34,409,318 15,518,409
Packing materials consumed 270,870 304,025 256,652 492,509 470,472
Fuel and power 982,669 1,230,819 1,100,224 1,713,011 1,990,504
Chemicals and supplies consumed 63,836 72,643 83,729 135,274 158,370
Salaries, wages and benefits 332,650 332,360 434,734 616,825 1,074,527
Rent, rates and taxes 20,481 21,577 22,575 23,606 28,359
Insurance 44,338 47,909 45,252 46,710 69,671
Travel and conveyance 28,423 30,969 33,839 42,062 55,145
Repairs and maintenance 206,917 257,294 605,995 482,904 979,294
Communication and other expenses 37,570 46,895 30,323 57,061 35,483
Provision for doubtful advances 45 0 0 0 0
Depreciation 925,152 986,363 1,051,381 1,186,433 1,212,073
Provision for inventory obsolescence 4,297 0 29,686 113,545 56,263
Opening stock - work in process 4,482 1,504 4,801 13,472 3,602
Closing stock - work in process -1,504 -4,801 -13,472 -3,602 -5,140
Subsidy on DAP fertilizer from Pak Govt. 0 -1,322,110 -2,797,017 -15,522,573 0
Cost of goods manufactured 9,541,757 9,103,876 7,415,503 23,806,555 21,647,032
Opening stock - own manufactured fertilizers 39,403 398,724 99,322 252,267 5,583,460
Closing stock - own manufactured fertilizers -398,724 -99,322 -252,267 -5,583,460 -170,926
Cost of sale - own manufactured fertilizer 9,182,436 9,403,278 7,262,558 18,475,362 27,059,566
Opening stock - purchased fertilizers 4,751 3,215 139,885 1,246 0
Purchase of fertilizers 508,264 756,436 19,113 118,144 0
Closing stock - purchased fertilizers -3,215 -139,885 -1,246 0 0
Cost of sales - purchased fertilizers 509,800 619,766 157,752 119,390 0
10,023,04
TOTAL COST OF SALES 9,692,236
4
7,420,310 18,594,752 27,059,566
GROSS PROFIT 4,562,528 4,684,244 4,822,578 8,226,060 9,665,354

2005 2006 2007 2008 2009
LESS: OPERATING EXPENSES

Selling and distribution expenses
43
Product transportation 1,044,439 1,169,597 829,047 1,440,265 1,680,782
Expenses charged by holding company
Salaries, wages and benefits 128,540 156,085 149,319 213,145 353,109
Rent, rates, and taxes 19,886 20,462 19,438 25,716 33,410
Technical services 1,243 1,733 1,515 2,280 3,616
Insurance expenses 0 0 0 0 14688
Sale promotion and advertising 11,482 8,916 8,581 9,715 17,260
Communication and other expenses 11,134 15,106 12,808 19,010 36,495
Warehousing expenses 12,275 14,033 15,022 23,019 38,070
Depreciation 4,189 5,293 4,948 7,223 9,096
Total expenses 213,259 250,804 239,582 336,599 555,341
Total selling and distribution expenses 1,257,698 1,420,401 1,068,629 1,776,864 2,236,123
Administrative expenses
Salaries, wages and benefits 51,952 70,195 88,232 137,482 262,580
Utilities 1,024 1,435 1,658 2,123 3,397
Printing and stationery 1,617 2,308 2,596 2,207 8,575
Repairs and maintenance 1,836 1,122 2,870 3,754 6,019
Communication, advertisement and other 9,232 8,941 8,652 11,435 16,928
Rent, rates and taxes 2,085 2,755 2,594 2,828 5,807
Listing fee 208 212 215 221 328
Donation to President relief fund 18,215 500 600 1,363 33,915
Legal and professional 3,612 2,432 2,483 2,622 8,582
Depreciation 14,286 3,775 4,607 3,639 4,686
Miscellaneous 3,378 3,871 4,719 6,218 20,090
Total administrative expenses 114,470 103,643 131,369 207,383 401,204
TOTAL OPERATING EXPENSES 1,372,168 1,524,044 1,199,998 1,984,247 2,637,327
OPERATING PROFIT 3,190,360 3,160,200 3,622,580 6,241,813 7,028,027
LESS: OTHER OPERATING COSTS

Finance cost
Mark-up on long term financing
Banking companies & financial institution 149,438 159,912 131,465 114,439 96,708
PKIC, an associated undertaking 18,402 19,692 16,189 14,092 0
167,840 179,604 147,654 128,531 96,708
Finance charge on leased plant, equipment 1,051 461 206 29 0
Mark-up on long term murabaha 15,570 16,661 13,697 11,921 8,971
Mark-up on short term borrowings 73,845 204,817 429,735 1,434,171 1,212,803
Interest on WPPF 100 180 246 283 454
Bank charges 1,103 1,391 2,554 3,204 4,669
Exchange loss 308 9,256 36,421 1,213,832 136,187
Total finance cost 259,817 412,370 630,513 2,791,971 1,459,792
2005 2006 2007 2008 2009
Other operating expenses

Workers' Profit Participation Fund 169,206 164,973 177,786 218,437 312,302
44
Worker's Welfare Fund 0 77,561 77,998 88,097 125,430
Property, plant and equipment written off 0 0 0 257,332 4,200
Loss on sale of property, plant & equipment 0 0 87,293 0 0
Auditor's remuneration
Fees - annual audit 400 400 440 440 550
Fees - half yearly review 100 100 100 100 100
Other certification & services 0 0 146 60 60
Out of pocket expenses 40 40 50 50 50
540 540 736 650 760
Total other operating expenses 169,746 243,074 343,813 564,516 442,692
TOTAL OTHER OPERATING COSTS 429,563 655,444 974,326 3,356,487 1,902,484
NET PROFIT AFTER INTEREST 2,760,797 2,504,756 2,648,254 2,885,326 5,125,543
PLUS: OTHER INCOMES

Share of profit of associate & joint venture 0 0 0 133,221 -314908
Compensation from GOP 700,000 700,000 600,000 600,000 0
Others
Income from financial assets
Profit on bank balances and term deposits 425,333 518,198 519,152 591,844 583,976
Surplus of investment at fair value 0 2,387 88,907 0 0
Dividend received on investment in MMF 0 0 0 127,356 156,267
Gain on sale of investment 0 0 5,691 12,686 219,425
425,333 520,585 613,750 731,886 959,668
Income on payments made on behalf of FF 105 0 0 0 0
Income from asset other the financial asset
Scrap sales and miscellaneous receipts 25,834 28,533 37,925 50,710 36,636
Gain on sale of property & equipment 2,851 3,040 0 3,732 1,364
28,685 31,573 37,925 54,442 38,000
Total others 454,123 552,158 651,675 786,328 997,668
TOTAL OTHER INCOMES 1,154,123 1,252,158 1,251,675 1,519,549 682,760
PROFIT BEFORE TAXATION 3,914,920 3,756,914 3,899,929 4,404,875 5,808,303
Less: Taxation 1,465,811 1,312,056 1,359,896 1,505,254 2,023,938
PROFIT AFTER TAXATION 2,449,109 2,444,858 2,540,033 2,899,621 3,784,365
7.2 Balance Sheet

Summarized Balance Sheet
45
(Rupees '000)
2005 2006 2007 2008 2009
EQUITY AND LIABILITIES
SHARE CAPITAL AND RESERVES

Share capital 9,341,100 9,341,100 9,341,100 9,341,100 9,341,100
Capital reserves 228,350 228,350 228,350 228,350 228,350
Statutory reserves 0 0 0 0 6,380
Translation reserves 0 0 0 572,399 698,005
Accumulated profit / (loss) -1,841,919 -1,031,754 -1,060,523 344,522 386,066
10,486,37
TOTAL SHARE CAPITAL AND RESERVES 7,727,531 8,537,696 8,508,927
1
10,659,901
NON-CURRENT LIABILITIES
Long-term financing
From banks and financial institutions
Habib Bank Limited 713,875 584,080 454,284 324,488 194,694
Standard Chartered Bank 408,210 333,990 259,770 185,550 111,329
Muslim Commercial Bank Limited 703,727 575,777 447,827 319,876 191,926
Askari Commercial Bank Limited 157,143 128,571 100,000 71,429 42,857
Saudi Pak Agricultural & Investment Company 58,808 48,116 37,423 26,731 16,039
2,041,763 1,670,534 1,299,304 928,074 556,845
From associated undertaking
Pak Kuwait Investment Company Limited 251,429 205,714 160,000 114,286 68,571
2,293,192 1,876,248 1,459,304 1,042,360 625,416
Less: Current portion under current liabilities 416,944 416,944 416,944 416,944 416,944
Total long-term financing 1,876,248 1,459,304 1,042,360 625,416 208,472
Liabilities against asset subject to lease
Gross lease payments payable in future 6,553 3,338 0 0 0
Less: Finance charge 259 28 0 0 0
Total liabilities against asset subject to lease 6,294 3,310 0 0 0
Long term murabaha
Faysal Bank Limited (FBL) 212,730 174,052 135,373 96,696 58,017
Total long term murabaha 174,051 135,373 96,694 58,017 19,338
Deferred tax liability
Compensated leave absences 0 0 0 116,510 143,808
Deferred tax 1,322,283 2634339 3994235 4,080,283 3,909,006
Total deferred tax liability 1,322,283 2,634,339 3,994,235 4,196,793 4,052,814
2005 2006 2007 2008 2009
Long term loan

Government of Pakistan (GOP) loan 5,148,455 4,860,646 4,552,690 4,223,180 3,870,599
Deferred Government Assistance 2,629,954 2,269,562 1,929,317 1,610,626 1,315,006
7,778,409 7,130,208 6,482,007 5,833,806 5,185,605
46
Total long term loan 7,130,208 6,482,007 5,833,806 5,185,605 4,537,404
10,509,08 10,714,33 10,967,09 10,065,83

TOTAL NON-CURRENT LIABILITIES 4 3 5 1
8,818,028
CURRENT LIABILITIES AND PROVISIONS

Trade and other payable
Creditors 1,615,935 1,497,540 1,048,909 4,748,957 2,949,346
Accrued liabilities 330,542 397,603 495,602 707,751 1,381,721
Advances from customers 605,000 472,353 351,393 364,990 837,375
Workers' Profit Participation Fund 9,206 14,973 17,786 18,437 52,302
Payable to gratuity fund 0 0 0 8,417 14,473
Worker's welfare fund 0 77,561 155,560 243,657 280,989
Unclaimed dividend 321,950 183,327 295,461 39,466 386,635
Tax deducted at source 2,667 2,002 1,958 5,713 3,275
Other payables 20,695 29,544 97,577 127,281 809,723
Total trade and other payable 2,905,995 2,674,903 2,464,246 6,264,669 6,715,839
Mark-up accrued
On long term financing
From banks and financial institutions 45,240 38,036 30,781 27,695 19,765
From PKIC, an associated undertaking 5,571 4,669 3,791 3,410 0
50,811 42,705 34,572 31,105 19,765
On long term murabaha 4,714 3,830 3,207 2,886 1,834
On short term borrowings 38,823 58,417 86,108 559,595 88,725
Total mark-up accrued 94,348 104,952 123,887 593,586 110,324
18,257,08
Short term running finance 2,236,649 4,531,836 5,875,341
2
7,730,450
Current portion of:
Long term financing 416,944 416,944 416,944 416,944 416,944
Liabilities against assets subject to lease 4,015 2,586 2,651 0 0
Long term murabaha 38,679 38,679 38,679 38,679 38,679
Long term loan 648,201 648,201 648,201 648,201 648,201
Sales tax payable 0 11,226 0 0 0
Provision for income tax - net 0 0 0 308 1,086,816
Total of current portion 1,107,839 1,117,636 1,106,475 1,104,132 2,190,640
26,219,46
TOTAL CURRENT LIABILITIES 6,344,831 8,429,327 9,569,949
9
16,747,253
24,581,44 27,681,35 29,045,97 46,771,67

TOTAL EQUITY AND LIABILITIES 6 6 1 1
36,225,182
2005 2006 2007 2008 2009

ASSETS
NON-CURRENT ASSETS
47
Property, plant and equipment
Owned assets
Leasehold land 158,733 154,205 149,566 144,927 144,155
Free hold land 120,000 120,000 120,000 120,000 120,000
Buildings on leasehold land 1,202,185 1,160,692 1,120,936 1,080,963 1,112,498
12,120,83 12,036,55 13,470,38 14,182,53
Plant and machinery 5 1 5 2
13,236,931
Catalyst 39,288 38,990 59,118 40,741 113,858
Furniture and fittings 1,952 1,660 3,869 4,192 3,826
Vehicles 17,844 33,294 40,786 47,027 97,517
Office and other equipment 5,981 6,598 1,164 9,351 24,299
Computer and ancillary equipment 4,180 3,816 6,477 9,387 17,284
Library books 369 241 270 176 1029
Capital work in progress 884,602 1,371,566 1,485,694 207,808 705,502
14,555,96 14,927,61 16,458,26 15,847,10
15,576,899
9 3 5 4
Assets subject to finance lease
Vehicles 7,134 2,726 0 0 0
14,563,10 14,930,33 16,458,26 15,847,10
Total property, plant and equipment 3 9 5 4
15,576,899
Long term investments
Pakistan Maroc Phosphore S.A, Morocco
Cost of investment 734,275 1,411,150 1,411,150 1,411,150 2,105,894
Share of profit / loss 0 0 0 122,345 -336,015
Dividend 0 0 0 0 -99,496
Gain on translation of net assets 0 0 0 572,399 125,606
Balance 734,275 1,411,150 1,411,150 2,105,894 1,795,989
Investment in associate
Fauji Cement Company Limited
Cost of investment 0 0 0 300,000 310,876
Share of post acquisition profits 0 0 0 10,876 21,107
Balance 0 0 0 310,876 331,983
Investment – available for sale
Arabian Sea Country Club Limited
300,000 ordinary shares of Rs. 10 each 3,000 3,000 3,000 3,000 3,000
Less: Impairment in value of investment 3,000 3,000 3,000 3,000 3,000
0 0 0 0 0
Total long term investments 734,275 1,411,150 1,411,150 2,416,770 2,127,972
Long term deposits
Security deposit 15,208 15,228 15,228 15,228 76,546
Lease key money 2,966 2,045 1,623 0 0
18,174 17,273 16,851 15,228 76,546
Less: Current portion of long term deposits 779 0 1623 0 0
Total long term deposits 17,395 17,273 15,228 15,228 76,546
15,314,77 16,358,76 17,884,64 18,279,10

TOTAL NON-CURRENT ASSETS 3 2 3 2
17,781,417
2005 2006 2007 2008 2009
48
CURRENT ASSETS
Short term investments
Loans and receivables
Term deposits with bank & financial institution 0 0 2,150,000 0 4,400,000
Investments at fair value through profit or loss
Fixed income / Money market funds 0 500,000 1,655,755 0 251,376
Surplus on re measurement 0 2,387 88,907 0 7,560
0 502,387 1,744,662 0 258,936
Total short term investments 0 502,387 3,894,662 0 4,658,936
Bank balances
Deposit accounts 6,608,287 7,047,562 3,499,683 6,755,864 7,977,897
Current accounts 323,328 188,187 300,777 1,185,477 1,669,919
Cash in hand 0 0 109 183 215
Total bank balances 6,931,615 7,235,749 3,800,569 7,941,524 9,648,031
Trade debts
Considered good 115,059 230,874 243,269 283,612 476,728
Due from FF, unsecured, considered good 22 398 482 1,842 0
Total trade debts 115,081 231,272 243,751 285,454 476,728
Other receivables
Due from holding company - considered good 267,744 375,022 67,540 413,529 161,203
Other receivables
Considered good (net) 67,244 969,891 750,752 57,984 69,594
Considered doubtful 53,482 53,482 53,482 53,482 53,482
120,726 1,023,373 804,234 111,466 123,076
Less: Provision for doubtful receivables 53,482 53,482 53,482 53,482 53,482
67,244 969,891 750,752 57,984 69,594
Insurance claims 1,278 1,954 0 0 0
Total other receivables 336,266 1,346,867 818,292 471,513 230,797
Stores and spares
Stores 34,514 31,258 22,943 47,342 70,769
Spares 496,027 656,379 1,149,427 1,276,757 1,848,846
Items in transit 50,838 113,974 128,183 241,700 129,674
581,379 801,611 1,300,553 1,565,799 2,049,289
Less: Provision for obsolescence 4,297 4,297 33,983 143,232 199,495
Total stores and spares 577,082 797,314 1,266,570 1,422,567 1,849,794
Stock in trade
Packing materials 9,632 13,936 31,152 62,848 17,072
Raw materials 341,653 206,424 289,809 26,829 1,033,875
Raw material in transit 268,229 336,167 0 0 0
Work in process 1,504 4,801 13,472 3,602 5,140
Finished goods 401,939 239,207 253,513 5,583,460 170,926
Total stock in trade 1,022,957 800,535 587,946 5,676,739 1,227,013
Income and sales tax refundable 157,005 251,034 365,026 119,530 119,487
Interest accrued 85,545 91,218 96,526 65,669 116,819
12,440,06
Due from GOP on account of DAP subsidy 0 0 0
0
0
2005 2006 2007 2008 2009
49
Advances
Advances to:
Executives, unsecured considered good 378 795 2,982 1,479 3,546
Other employees, considered good 3,318 4,935 3,747 8,104 13,813
Advances to suppliers and contractors
Considered good 34,120 55,430 72,790 55,054 93,994
Considered doubtful 45 45 45 45 45
34,165 55,475 72,835 55,099 94,039
Less:Provision for doubtful advances 45 45 45 45 45
34,120 55,430 72,790 55,054 93,994
Total advances 37,816 61,160 79,519 64,637 111,353
Trade deposits & short term prepayments
Current portion of long term deposits 779 0 1,623 0 0
Security deposits 622 1,387 4,582 1,969 1,047
Prepayments 1,905 3,671 2,262 2,907 3,760
Total trade deposits and prepayments 3,306 5,058 8,467 4,876 4,807
11,322,59 11,161,32 28,492,56

TOTAL CURRENT ASSETS 9,266,673
4 8 9
18,443,765
24,581,44 27,681,35 29,045,97 46,771,67

TOTAL ASSETS 6 6 1 1
36,225,182
50
51
8. Common Size/Component Percentage Analysis
8.1 Introduction
Component percentage indicates the relative size of each item included in
the total known as component percentage analysis. It is also known as vertical or
static analysis, which refers to the review of financial information for only one
accounting period.
Financial statement item that is used as a base value. Vertical analysis

discloses the internal structure of the firm. It compared with the prior years to
determine whether the company's financial condition is improving or deteriorating
over time. All other accounts on the financial statement are compared to it.
 In the balance sheet, for example, total assets equal 100%. Each
asset is stated as a percentage of total assets.
 Similarly, total liabilities and stockholders' equity are assigned 100%

with a given liability or equity account stated as a percentage of the total
liabilities and stockholders' equity.
 For the income statement, 100% is assigned to net sales with all
revenue and expense accounts related to it.
Component percentage analyses of FAUJI FERTILIZER BIN

QASIM LIMITED are given on next pages.
52
Vertical Analysis of Summarized Profit & Loss Account
2005 2006 2007 2008 2009

SALES
Gross sales - - - - -
Less:
Sale tax - - - - -
Trade discount - - - - -
Commission to holding company - - - - -
- - - - -
NET SALES 100.00% 100.00% 100.00% 100.00% 100.00%
LESS: COST OF SALES
Raw materials consumed 46.45% 48.26% 53.31% 128.29% 42.26%
Packing materials consumed 1.90% 2.07% 2.10% 1.84% 1.28%
Fuel and power 6.89% 8.37% 8.99% 6.39% 5.42%
Chemicals and supplies consumed 0.45% 0.49% 0.68% 0.50% 0.43%
Salaries, wages and benefits 2.33% 2.26% 3.55% 2.30% 2.93%
Rent, rates and taxes 0.14% 0.15% 0.18% 0.09% 0.08%
Insurance 0.31% 0.33% 0.37% 0.17% 0.19%
Travel and conveyance 0.20% 0.21% 0.28% 0.16% 0.15%
Repairs and maintenance 1.45% 1.75% 4.95% 1.80% 2.67%
Communication and other expenses 0.26% 0.32% 0.25% 0.21% 0.10%
Provision for doubtful advances 0.00% 0.00% 0.00% 0.00% 0.00%
Depreciation 6.49% 6.71% 8.59% 4.42% 3.30%
Provision for inventory obsolescence 0.03% 0.00% 0.24% 0.42% 0.15%
Opening stock - work in process 0.03% 0.01% 0.04% 0.05% 0.01%
Closing stock - work in process -0.01% -0.03% -0.11% -0.01% -0.01%
Subsidy on DAP fertilizer from Pak Govt. 0.00% -8.99% -22.85% -57.88% 0.00%
Cost of goods manufactured 66.94% 61.90% 60.57% 88.76% 58.94%
Opening stock - own manufactured fertilizers 0.28% 2.71% 0.81% 0.94% 15.20%
Closing stock - own manufactured fertilizers -2.80% -0.68% -2.06% -20.82% -0.47%
Cost of sale - own manufactured fertilizer 64.42% 63.94% 59.32% 68.88% 73.68%
Opening stock - purchased fertilizers 0.03% 0.02% 1.14% 0.00% 0.00%
Purchase of fertilizers 3.57% 5.14% 0.16% 0.44% 0.00%
Closing stock - purchased fertilizers -0.02% -0.95% -0.01% 0.00% 0.00%
Cost of sales - purchased fertilizers 3.58% 4.21% 1.29% 0.45% 0.00%
TOTAL COST OF SALES 67.99% 68.15% 60.61% 69.33% 73.68%
GROSS PROFIT 32.01% 31.85% 39.39% 30.67% 26.32%
53
2005 2006 2007 2008 2009

Product transportation 7.33% 7.95% 6.77% 5.37% 4.58%
Rent, rates, and taxes 0.14% 0.14% 0.16% 0.10% 0.09%
Technical services 0.01% 0.01% 0.01% 0.01% 0.01%
Insurance expenses 0.00% 0.00% 0.00% 0.00% 0.04%
Sale promotion and advertising 0.08% 0.06% 0.07% 0.04% 0.05%
Warehousing expenses 0.09% 0.10% 0.12% 0.09% 0.10%
Depreciation 0.03% 0.04% 0.04% 0.03% 0.02%
Total expenses 1.50% 1.71% 1.96% 1.25% 1.51%
Total selling and distribution expenses 8.82% 9.66% 8.73% 6.62% 6.09%
Utilities 0.01% 0.01% 0.01% 0.01% 0.01%
Printing and stationery 0.01% 0.02% 0.02% 0.01% 0.02%
Communication, advertisement and other 0.06% 0.06% 0.07% 0.04% 0.05%
Listing fee 0.00% 0.00% 0.00% 0.00% 0.00%
Donation to President relief fund 0.13% 0.00% 0.00% 0.01% 0.09%
Legal and professional 0.03% 0.02% 0.02% 0.01% 0.02%
Depreciation 0.10% 0.03% 0.04% 0.01% 0.01%
Miscellaneous 0.02% 0.03% 0.04% 0.02% 0.05%
Total administrative expenses 0.80% 0.70% 1.07% 0.77% 1.09%
TOTAL OPERATING EXPENSES 9.63% 10.36% 9.80% 7.40% 7.18%
OPERATING PROFIT 22.38% 21.49% 29.59% 23.27% 19.14%

Finance cost
Banking companies & financial institution 1.05% 1.09% 1.07% 0.43% 0.26%
PKIC, an associated undertaking 0.13% 0.13% 0.13% 0.05% 0.00%
1.18% 1.22% 1.21% 0.48% 0.26%
Finance charge on leased plant, equipment 0.01% 0.00% 0.00% 0.00% 0.00%
Mark-up on long term murabaha 0.11% 0.11% 0.11% 0.04% 0.02%
Mark-up on short term borrowings 0.52% 1.39% 3.51% 5.35% 3.30%
Interest on WPPF 0.00% 0.00% 0.00% 0.00% 0.00%
Bank charges 0.01% 0.01% 0.02% 0.01% 0.01%
Exchange loss 0.00% 0.06% 0.30% 4.53% 0.37%
Total finance cost 1.82% 2.80% 5.15% 10.41% 3.97%
54
2005 2006 2007 2008 2009

Workers' Profit Participation Fund 1.19% 1.12% 1.45% 0.81% 0.85%
Worker's Welfare Fund 0.00% 0.53% 0.64% 0.33% 0.34%
Property, plant and equipment written off 0.00% 0.00% 0.00% 0.96% 0.01%
Loss on sale of property, plant & equipment 0.00% 0.00% 0.71% 0.00% 0.00%
Fees - annual audit 0.00% 0.00% 0.00% 0.00% 0.00%
Fees - half yearly review 0.00% 0.00% 0.00% 0.00% 0.00%
Other certification & services 0.00% 0.00% 0.00% 0.00% 0.00%
Out of pocket expenses 0.00% 0.00% 0.00% 0.00% 0.00%
0.00% 0.00% 0.01% 0.00% 0.00%
Total other operating expenses 1.19% 1.65% 2.81% 2.10% 1.21%
TOTAL OTHER OPERATING COSTS 3.01% 4.46% 7.96% 12.51% 5.18%
NET PROFIT AFTER INTEREST 19.37% 17.03% 21.63% 10.76% 13.96%
PLUS: OTHER INCOMES

Share of profit of associate & joint venture 0.00% 0.00% 0.00% 0.50% -0.86%
Compensation from GOP 4.91% 4.76% 4.90% 2.24% 0.00%
Others
Profit on bank balances and term deposits 2.98% 3.52% 4.24% 2.21% 1.59%
Surplus of investment at fair value 0.00% 0.02% 0.73% 0.00% 0.00%
Dividend received on investment in MMF 0.00% 0.00% 0.00% 0.47% 0.43%
Gain on sale of investment 0.00% 0.00% 0.05% 0.05% 0.60%
2.98% 3.54% 5.01% 2.73% 2.61%
Income on payments made on behalf of FF 0.00% 0.00% 0.00% 0.00% 0.00%
Scrap sales and miscellaneous receipts 0.18% 0.19% 0.31% 0.19% 0.10%
Gain on sale of property, plant & equipment 0.02% 0.02% 0.00% 0.01% 0.00%
0.20% 0.21% 0.31% 0.20% 0.10%
Total others 3.19% 3.75% 5.32% 2.93% 2.72%
TOTAL OTHER INCOMES 8.10% 8.51% 10.22% 5.67% 1.86%
PROFIT BEFORE TAXATION 27.46% 25.54% 31.85% 16.42% 15.82%
Less: Taxation 10.28% 8.92% 11.11% 5.61% 5.51%
PROFIT AFTER TAXATION 17.18% 16.62% 20.75% 10.81% 10.30%
8.2.1 CGS, GP and Net Profit
55
The Cost of Sales involves the identification of the expenses that are
related to the manufacturing process. It is determined by adding beginning
inventory of material and net purchases with the deduction of ending inventory
from both. Gross Profit is determined by deduction of Cost of good sold from net
sales. Net Profit is amount of money earned after all expenses, including
overhead, employee salaries, manufacturing costs, and advertising costs, have
been deducted from the total revenue. Amounts are given below:
Amounts:
2005 2006 2007 2008 2009
Cost of Sales 67.99% 68.15% 60.61% 69.33% 73.68%

Gross Profit 32.01% 31.85% 39.39% 30.67% 26.32%
Net Profit 17.18% 16.62% 20.75% 10.81% 10.30%
CGS, GP, NET PROFIT
80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2005 2006 2007 2008 2009
COST OF SALES GROSS PROFIT NET PROFIT
Source: FFBL Annual Report
Interpretation:
56
Cost of goods sold contribution has been decreasing over the year which is
a good sign for the company as it is able to control its cost and it is good for the
future sales growth the profits. But in 2007-2009 cost of goods sold contribution
has been increasing over the year which is not a good sign for the company.
The company also improved year after year in the gross profit section as
well which better tells the company how much they improved over the past few
years and the big reason for that in not only better sales but also a decline in cost
of sales percentage.
The company maintained its distribution cost over all the past years which
were around 8 to 9 percent. As the company improved in increasing sales and
decreasing their cost of sales and maintain their distribution cost they also made a
healthier operating profit over the last few years.
So because all these reason the company improved in maintain their before
tax and after tax profit to a much better position.
8.3 Balance Sheet
57
Vertical Analysis of Summarized Balance Sheet
2005 2006 2007 2008 2009


Share capital 38.00% 33.75% 32.16% 19.97% 25.79%
Capital reserves 0.93% 0.82% 0.79% 0.49% 0.63%
Statutory reserves 0.00% 0.00% 0.00% 0.00% 0.02%
Translation reserves 0.00% 0.00% 0.00% 1.22% 1.93%
Accumulated profit / (loss) -7.49% -3.73% -3.65% 0.74% 1.07%
TOTAL SHARE CAPITAL AND RESERVES 31.44% 30.84% 29.29% 22.42% 29.43%
Long-term financing
Habib Bank Limited 2.90% 2.11% 1.56% 0.69% 0.54%
Standard Chartered Bank 1.66% 1.21% 0.89% 0.40% 0.31%
Muslim Commercial Bank Limited 2.86% 2.08% 1.54% 0.68% 0.53%
Askari Commercial Bank Limited 0.64% 0.46% 0.34% 0.15% 0.12%
Saudi Pak Agricultural Investment Company 0.24% 0.17% 0.13% 0.06% 0.04%
8.31% 6.03% 4.47% 1.98% 1.54%
Pak Kuwait Investment Company Limited 1.02% 0.74% 0.55% 0.24% 0.19%
9.33% 6.78% 5.02% 2.23% 1.73%
Less: Current portion under current liabilities 1.70% 1.51% 1.44% 0.89% 1.15%
Total long-term financing 7.63% 5.27% 3.59% 1.34% 0.58%
Gross lease payments payable in future 0.03% 0.01% 0.00% 0.00% 0.00%
Less: Finance charge 0.00% 0.00% 0.00% 0.00% 0.00%
Total liabilities against asset subject to lease 0.03% 0.01% 0.00% 0.00% 0.00%
Long term murabaha
Faysal Bank Limited (FBL) 0.87% 0.63% 0.47% 0.21% 0.16%
Total long term murabaha 0.71% 0.49% 0.33% 0.12% 0.05%
Compensated leave absences 0.00% 0.00% 0.00% 0.25% 0.40%
Deferred tax 5.38% 9.52% 13.75% 8.72% 10.79%
Total deferred tax liability 5.38% 9.52% 13.75% 8.97% 11.19%
2005 2006 2007 2008 2009
Long term loan
58
Government of Pakistan (GOP) loan 20.94% 17.56% 15.67% 9.03% 10.68%
Deferred Government Assistance 10.70% 8.20% 6.64% 3.44% 3.63%
31.64% 25.76% 22.32% 12.47% 14.31%
Total long term loan 29.01% 23.42% 20.08% 11.09% 12.53%
TOTAL NON-CURRENT LIABILITIES 42.75% 38.71% 37.76% 21.52% 24.34%

Creditors 6.57% 5.41% 3.61% 10.15% 8.14%
Accrued liabilities 1.34% 1.44% 1.71% 1.51% 3.81%
Advances from customers 2.46% 1.71% 1.21% 0.78% 2.31%
Payable to gratuity fund 0.00% 0.00% 0.00% 0.02% 0.04%
Worker's welfare fund 0.00% 0.28% 0.54% 0.52% 0.78%
Unclaimed dividend 1.31% 0.66% 1.02% 0.08% 1.07%
Tax deducted at source 0.01% 0.01% 0.01% 0.01% 0.01%
Other payables 0.08% 0.11% 0.34% 0.27% 2.24%
Total trade and other payable 11.82% 9.66% 8.48% 13.39% 18.54%
Mark-up accrued
From banks and financial institutions 0.18% 0.14% 0.11% 0.06% 0.05%
From PKIC, an associated undertaking 0.02% 0.02% 0.01% 0.01% 0.00%
0.21% 0.15% 0.12% 0.07% 0.05%
On long term murabaha 0.02% 0.01% 0.01% 0.01% 0.01%
On short term borrowings 0.16% 0.21% 0.30% 1.20% 0.24%
Total mark-up accrued 0.38% 0.38% 0.43% 1.27% 0.30%
Short term running finance 9.10% 16.37% 20.23% 39.03% 21.34%
Current portion of:
Long term financing 1.70% 1.51% 1.44% 0.89% 1.15%
Liabilities against assets subject to lease 0.02% 0.01% 0.01% 0.00% 0.00%
Long term murabaha 0.16% 0.14% 0.13% 0.08% 0.11%
Long term loan 2.64% 2.34% 2.23% 1.39% 1.79%
Sales tax payable 0.00% 0.04% 0.00% 0.00% 0.00%
Provision for income tax – net 0.00% 0.00% 0.00% 0.00% 3.00%
Total of current portion 4.51% 4.04% 3.81% 2.36% 6.05%
TOTAL CURRENT LIABILITIES 25.81% 30.45% 32.95% 56.06% 46.23%
TOTAL EQUITY AND LIABILITIES 100.00% 100.00% 100.00% 100.00% 100.00%
2005 2006 2007 2008 2009

ASSETS
59
NON-CURRENT ASSETS
Owned assets
Leasehold land 0.65% 0.56% 0.51% 0.31% 0.40%
Free hold land 0.49% 0.43% 0.41% 0.26% 0.33%
Buildings on leasehold land 4.89% 4.19% 3.86% 2.31% 3.07%
Plant and machinery 49.31% 43.48% 46.38% 30.32% 36.54%
Catalyst 0.16% 0.14% 0.20% 0.09% 0.31%
Furniture and fittings 0.01% 0.01% 0.01% 0.01% 0.01%
Vehicles 0.07% 0.12% 0.14% 0.10% 0.27%
Office and other equipment 0.02% 0.02% 0.00% 0.02% 0.07%
Computer and ancillary equipment 0.02% 0.01% 0.02% 0.02% 0.05%
Library books 0.00% 0.00% 0.00% 0.00% 0.00%
Capital work in progress 3.60% 4.95% 5.11% 0.44% 1.95%
59.22% 53.93% 56.66% 33.88% 43.00%
Vehicles 0.03% 0.01% 0.00% 0.00% 0.00%
Total property, plant and equipment 59.24% 53.94% 56.66% 33.88% 43.00%
Cost of investment 2.99% 5.10% 4.86% 3.02% 5.81%
Share of profit / loss 0.00% 0.00% 0.00% 0.26% -0.93%
Dividend 0.00% 0.00% 0.00% 0.00% -0.27%
Gain on translation of net assets 0.00% 0.00% 0.00% 1.22% 0.35%
Balance 2.99% 5.10% 4.86% 4.50% 4.96%
Share of post acquisition profits 0.00% 0.00% 0.00% 0.02% 0.06%
Balance 0.00% 0.00% 0.00% 0.66% 0.92%
Investment - available for sale
300,000 ordinary shares of Rs. 10 each 0.01% 0.01% 0.01% 0.01% 0.01%
Less: Impairment in value of investment 0.01% 0.01% 0.01% 0.01% 0.01%
0.00% 0.00% 0.00% 0.00% 0.00%
Total long term investments 2.99% 5.10% 4.86% 5.17% 5.87%
Long term deposits
Security deposit 0.06% 0.06% 0.05% 0.03% 0.21%
Lease key money 0.01% 0.01% 0.01% 0.00% 0.00%
0.07% 0.06% 0.06% 0.03% 0.21%
Less: Current portion of long term deposits 0.00% 0.00% 0.01% 0.00% 0.00%
Total long term deposits 0.07% 0.06% 0.05% 0.03% 0.21%
TOTAL NON-CURRENT ASSETS 62.30% 59.10% 61.57% 39.08% 49.09%
2005 2006 2007 2008 2009
CURRENT ASSETS
60
Term deposits with bank & financial institution 0.00% 0.00% 7.40% 0.00% 12.15%
Fixed income / Money market funds 0.00% 1.81% 5.70% 0.00% 0.69%
Surplus on re measurement 0.00% 0.01% 0.31% 0.00% 0.02%
0.00% 1.81% 6.01% 0.00% 0.71%
Total short term investments 0.00% 1.81% 13.41% 0.00% 12.86%
Bank balances
Deposit accounts 26.88% 25.46% 12.05% 14.44% 22.02%
Current accounts 1.32% 0.68% 1.04% 2.53% 4.61%
Cash in hand 0.00% 0.00% 0.00% 0.00% 0.00%
Total bank balances 28.20% 26.14% 13.08% 16.98% 26.63%
Trade debts
Considered good 0.47% 0.83% 0.84% 0.61% 1.32%
Due from FF, unsecured, considered good 0.00% 0.00% 0.00% 0.00% 0.00%
Total trade debts 0.47% 0.84% 0.84% 0.61% 1.32%
Other receivables
Due from holding company - considered good 1.09% 1.35% 0.23% 0.88% 0.45%
Other receivables
Considered good (net) 0.27% 3.50% 2.58% 0.12% 0.19%
Considered doubtful 0.22% 0.19% 0.18% 0.11% 0.15%
0.49% 3.70% 2.77% 0.24% 0.34%
Less: Provision for doubtful receivables 0.22% 0.19% 0.18% 0.11% 0.15%
0.27% 3.50% 2.58% 0.12% 0.19%
Insurance claims 0.01% 0.01% 0.00% 0.00% 0.00%
Total other receivables 1.37% 4.87% 2.82% 1.01% 0.64%
Stores and spares
Stores 0.14% 0.11% 0.08% 0.10% 0.20%
Spares 2.02% 2.37% 3.96% 2.73% 5.10%
Items in transit 0.21% 0.41% 0.44% 0.52% 0.36%
2.37% 2.90% 4.48% 3.35% 5.66%
Less: Provision for obsolescence 0.02% 0.02% 0.12% 0.31% 0.55%
Total stores and spares 2.35% 2.88% 4.36% 3.04% 5.11%
Stock in trade
Packing materials 0.04% 0.05% 0.11% 0.13% 0.05%
Raw materials 1.39% 0.75% 1.00% 0.06% 2.85%
Raw material in transit 1.09% 1.21% 0.00% 0.00% 0.00%
Work in process 0.01% 0.02% 0.05% 0.01% 0.01%
Finished goods 1.64% 0.86% 0.87% 11.94% 0.47%
Total stock in trade 4.16% 2.89% 2.02% 12.14% 3.39%
Income and sales tax refundable 0.64% 0.91% 1.26% 0.26% 0.33%
Interest accrued 0.35% 0.33% 0.33% 0.14% 0.32%
Due from GOP on account of DAP subsidy 0.00% 0.00% 0.00% 26.60% 0.00%
2005 2006 2007 2008 2009
Advances
Advances to:
Executives, unsecured considered good 0.00% 0.00% 0.01% 0.00% 0.01%
61
Other employees, considered good 0.01% 0.02% 0.01% 0.02% 0.04%
Considered good 0.14% 0.20% 0.25% 0.12% 0.26%
0.14% 0.20% 0.25% 0.12% 0.26%
Less: Provision for doubtful advances 0.00% 0.00% 0.00% 0.00% 0.00%
0.14% 0.20% 0.25% 0.12% 0.26%
Total advances 0.15% 0.22% 0.27% 0.14% 0.31%
Current portion of long term deposits 0.00% 0.00% 0.01% 0.00% 0.00%
Security deposits 0.00% 0.01% 0.02% 0.00% 0.00%
Prepayments 0.01% 0.01% 0.01% 0.01% 0.01%
Total trade deposits and prepayments 0.01% 0.02% 0.03% 0.01% 0.01%
TOTAL CURRENT ASSETS 37.70% 40.90% 38.43% 60.92% 50.91%
TOTAL ASSETS 100.00% 100.00% 100.00% 100.00% 100.00%
8.3.1 Total Assets
62
All the valuables possessed by the Fauji Fertilizer Bin Qasim Limited are
called its assets. It includes all Current Assets, Non-Current Assets, and Fixed
Assets. Amounts are given below:
Amounts:
2005 2006 2007 2008 2009
Total Non-Current Assets 62.30% 59.10% 61.57% 39.08% 49.09%

Total Current Assets 37.70% 40.90% 38.43% 60.92% 50.91%
TOTAL ASSETS
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2005 2006 2007 2008 2009
NON-CURRENT ASSETS CURRENT ASSETS
Interpretation:
63
Non-Current Assets has decreased year by year and dropped to 25% in
2008 as compared to 2007 which tells that the company was not in good position.
So, these are increased in fiscal year 2009 which shows the relative good position
of the company.
Fixed assets of the company has deteriorated year by year and dropped to
34% in 2008 as compared to other years which tells that the company was not
interested in buying plants and equipment. The Fixed assets section increased in
huge amount in 2009 which tells us that the company really invested in the buying
of the fixed assets for much better capacity and storage so they can improve and
increase their production.
The current assets section as it is clear that the stores, spares and loose tools
and stock in trade were almost just enough as much they needed. It seems that the
company is utilizing their inventory as much they needed. The current assets
section was in the greater proportion as compared to rest of assets that how well
the company not in the long term but also in short term is keeping it better in the
market and improved their position over the last few years.
8.3.2 Total Equity and Liabilities
64
The claim of outsiders against the assets of the firm is called liability. It
includes current and non current liabilities for the particular year, and the claim of
the owner against the assets of the firm are called shareholder equity. Amounts are
given below:
Amounts:
2005 2006 2007 2008 2009
Total Equity 31.44% 30.84% 29.29% 22.42% 29.43%

Total Non-Current Liabilities 42.75% 38.71% 37.76% 21.52% 24.34%
Total Current Liabilities 25.81% 30.45% 32.95% 56.06% 46.23%
TOTAL EQUITY AND LIABILITIES
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2005 2006 2007 2008 2009
TOTAL EQUITY TOTAL NON-CURRENT LIABILITIES

TOTAL CURRENT LIABILITIES
Interpretation:
65
As the number of shares issued in 2001 was 3,341,100 shares and they have
increased it to 9,341,100 shares in 2008. The reason for increasing shares is to
raise funds for the company. The number of shares issued till 2005-2009 are same.
The company after 2008 raised some share capital to raise fund as their value was
Going Up, while 2005-2008 it shows the declining. As the share holder equity
section is increasing year by year but in terms of percentage it is going down and it
are about 30% of the assets.
There is no redeemable capital which tells us that the company position is

getting good and strong that they were not in the need of urgent funds by issuing
some temporary shares.
Non-Current Liabilities shows the negative trend. The reason is that Long
term financing is also falling down which means that the company has increased
its capital to overcome its business. In the year 2009, it becomes 0.58% which is
the best in comparison of the previous years.
The Current Liabilities shows the positive trend. The Current Liabilities are
around 25 to 30% which means that the company is paying off its liabilities within
one year.
8.4 Conclusion
66
The company mainly manufactures and market fertilizers. The analysis of
Fauji Fertilizer Bin Qasim Limited has shown a modest growth over the past few
years showing healthy increases in the profit of the company.
According to the Component Percentage Analysis,
The company’s numbers of share are going to increase from 2004 to 2009.
The reason for increasing shares is to raise funds for the company. The Current
Liabilities shows the positive trend and Non-Current Liabilities shows the negative
trend, which shows that the company’s financial position is healthy. Company has
the good quantity of assets, which leads the company upward. But there is
problem in Fixed Assets, which shows the negative trend. This is due to that
company is not interested in buying the new assets.
Cost of goods sold contribution has been decreasing over the year which is
a good sign for the company as it is able to control its cost. Selling and
administrative expenses contribution has remained which is a positive sign as the
firm is able to control its expenses. An important development in 2008 is the
amount spent on interest charges which has increased by around 5% due to high
debt. The company’s profit is good and in the remaining years it show the good
result if the company control their cost of sales.
67
9. Trend Percentage Analysis
9.1 Introduction
The process of dividing each expense item of a given year by the same
expense item in the base year is known as Trend Percentage Analysis. This allows
for the exploration of changes in the relative importance of expense items over
time and the behavior of expense items as sales change.
Comparing analytical data for a current period with similar computation for
prior years afford some basis for judging whether the condition of the business is
improving or worsening. This comparison of data over time is sometimes called
68
horizontal or trend analysis. The changes in financial statement items from a base
year to following years are expressed as trend percentages to show the extent and
direction of change.
 First, a base year is selected and each item in financial statement for
the base year is given a weight of 100%.
 Second step is the express each item in the financial statement for
following years as a percentage of its base year amount.
Trend percentage analyses of FAUJI FERTILIZER BIN QASIM

LIMITED are given on next pages.

Horizontal Analysis of Summarized Profit & Loss Account
2005 2006 2007 2008 2009

SALES
Gross sales 100.00% 103.28% 86.19% 179.42% 243.96%
Less:
Sale tax 100.00% 104.20% 81.04% 38.42% 0.00%
Trade discount 100.00% 108.21% 163.92% 197.98% 446.61%
Commission to holding company 100.00% 105.55% 78.09% 92.86% 123.55%
100.00% 104.68% 90.39% 57.70% 53.36%
NET SALES 100.00% 103.17% 85.89% 188.15% 257.63%
LESS: COST OF SALES
69
Raw materials consumed 100.00% 107.20% 98.57% 519.66% 234.36%
Packing materials consumed 100.00% 112.24% 94.75% 181.82% 173.69%
Fuel and power 100.00% 125.25% 111.96% 174.32% 202.56%
Insurance 100.00% 108.05% 102.06% 105.35% 157.14%
Provision for doubtful advances 100.00% 0.00% 0.00% 0.00% 0.00%
Depreciation 100.00% 106.62% 113.64% 128.24% 131.01%
Provision for inventory obsolescence 100.00% 0.00% 690.85% 2642.42% 1309.36%
Opening stock - work in process 100.00% 33.56% 107.12% 300.58% 80.37%
Closing stock - work in process 100.00% 319.22% 895.74% 239.49% 341.76%
Subsidy on DAP fertilizer from Pak Govt. 0.00% 100.00% 211.56% 1174.08% 0.00%
Cost of goods manufactured 100.00% 95.41% 77.72% 249.50% 226.87%
Opening stock - own manufactured fertilizers 100.00% 1011.91% 252.07% 640.22% 14170.14%
Closing stock - own manufactured fertilizers 100.00% 24.91% 63.27% 1400.33% 42.87%
Cost of sale - own manufactured fertilizer 100.00% 102.41% 79.09% 201.20% 294.69%
Opening stock - purchased fertilizers 100.00% 67.67% 2944.33% 26.23% 0.00%
Purchase of fertilizers 100.00% 148.83% 3.76% 23.24% 0.00%
Closing stock - purchased fertilizers 100.00% 4351.01% 38.76% 0.00% 0.00%
Cost of sales - purchased fertilizers 100.00% 121.57% 30.94% 23.42% 0.00%
TOTAL COST OF SALES 100.00% 103.41% 76.56% 191.85% 279.19%
GROSS PROFIT 100.00% 102.67% 105.70% 180.30% 211.84%
2005 2006 2007 2008 2009

Product transportation 100.00% 111.98% 79.38% 137.90% 160.93%
Rent, rates, and taxes 100.00% 102.90% 97.75% 129.32% 168.01%
Technical services 100.00% 139.42% 121.88% 183.43% 290.91%
Insurance expenses 0.00% 0.00% 0.00% 0.00% 100.00%
Sale promotion and advertising 100.00% 77.65% 74.73% 84.61% 150.32%
Depreciation 100.00% 126.35% 118.12% 172.43% 217.14%
Total expenses 100.00% 117.61% 112.34% 157.84% 260.41%
Total selling and distribution expenses 100.00% 112.94% 84.97% 141.28% 177.79%
70
Utilities 100.00% 140.14% 161.91% 207.32% 331.74%
Printing and stationery 100.00% 142.73% 160.54% 136.49% 530.30%
Communication, advertisement and other 100.00% 96.85% 93.72% 123.86% 183.36%
Listing fee 100.00% 101.92% 103.37% 106.25% 157.69%
Donation to President relief fund 100.00% 2.74% 3.29% 7.48% 186.19%
Legal and professional 100.00% 67.33% 68.74% 72.59% 237.60%
Depreciation 100.00% 26.42% 32.25% 25.47% 32.80%
Miscellaneous 100.00% 114.59% 139.70% 184.07% 594.73%
Total administrative expenses 100.00% 90.54% 114.76% 181.17% 350.49%
TOTAL OPERATING EXPENSES 100.00% 111.07% 87.45% 144.61% 192.20%
OPERATING PROFIT 100.00% 99.05% 113.55% 195.65% 220.29%

Finance cost
Banking companies & financial institution 100.00% 107.01% 87.97% 76.58% 64.71%
PKIC, an associated undertaking 100.00% 107.01% 87.97% 76.58% 0.00%
100.00% 107.01% 87.97% 76.58% 57.62%
Finance charge on leased plant, equipment 100.00% 43.86% 19.60% 2.76% 0.00%
Mark-up on long term murabaha 100.00% 107.01% 87.97% 76.56% 57.62%
Mark-up on short term borrowings 100.00% 277.36% 581.94% 1942.14% 1642.36%
Interest on WPPF 100.00% 180.00% 246.00% 283.00% 454.00%
Bank charges 100.00% 126.11% 231.55% 290.48% 423.30%
11825.00 394101.30
Exchange loss 100.00% 3005.19%
% %
44216.56%
Total finance cost 100.00% 158.72% 242.68% 1074.59% 561.85%
2005 2006 2007 2008 2009

Worker's Welfare Fund 0.00% 100.00% 100.56% 113.58% 161.72%
Property, plant and equipment written off 0.00% 0.00% 0.00% 100.00% 1.63%
Loss on sale of property, plant & equipment 0.00% 0.00% 100.00% 0.00% 0.00%
Other certification & services 0.00% 0.00% 100.00% 41.10% 41.10%
100.00% 100.00% 136.30% 120.37% 140.74%
Total other operating expenses 100.00% 143.20% 202.55% 332.57% 260.80%
TOTAL OTHER OPERATING COSTS 100.00% 152.58% 226.82% 781.37% 442.89%
NET PROFIT AFTER INTEREST 100.00% 90.73% 95.92% 104.51% 185.65%
PLUS: OTHER INCOMES
71
Share of profit of associate & joint venture 0.00% 0.00% 0.00% 100.00% -236.38%
Compensation from GOP 100.00% 100.00% 85.71% 85.71% 0.00%
Others
Profit on bank balances and term deposits 100.00% 121.83% 122.06% 139.15% 137.30%
Surplus of investment at fair value 0.00% 100.00% 3724.63% 0.00% 0.00%
Dividend received on investment in MMF 0.00% 0.00% 0.00% 100.00% 122.70%
Gain on sale of investment 0.00% 0.00% 100.00% 222.91% 3855.65%
100.00% 122.39% 144.30% 172.07% 225.63%
Income on payments made on behalf of FF 100.00% 0.00% 0.00% 0.00% 0.00%
Scrap sales and miscellaneous receipts 100.00% 110.45% 146.80% 196.29% 141.81%
Gain on sale of property & equipment 100.00% 106.63% 0.00% 130.90% 47.84%
100.00% 110.07% 132.21% 189.79% 132.47%
Total others 100.00% 121.59% 143.50% 173.15% 219.69%
TOTAL OTHER INCOMES 100.00% 108.49% 108.45% 131.66% 59.16%
PROFIT BEFORE TAXATION 100.00% 95.96% 99.62% 112.52% 148.36%
Less: Taxation 100.00% 89.51% 92.77% 102.69% 138.08%
PROFIT AFTER TAXATION 100.00% 99.83% 103.71% 118.39% 154.52%
9.2.1 Net Sales

This is the amount of net revenues earned from sales of goods during the
particular period. It is determined by deducting sales tax from own manufactured
and purchased products or services rendered of that period. Amounts are given
NET SALES
below:
Amounts:
2005 2006 2007 2008 2009
Net Sales 100.00% 103.17% 85.89% 188.15% 257.63%
72

300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2005 2006 2007 2008 2009
NET SALES
Interpretation:
Net Sales are showing positive optimistic trend. It’s increasing year by year
but shows the decline in fiscal year 2007 and then reaches to the 257.63% in fiscal
year 2009 as compared to the fiscal year 2005. Further explanations are given as
under:
FY2005: Company's sales in 2005 are 24% higher than the year 2004. This is
mainly due to increase in volumes and higher prices of both Granular Urea and
DAP, coupled with un-interrupted availability of Phos acid from Morocco
throughout the year. The Company achieved the highest Ammonia, Urea and DAP
production during the year with a significant increase over 2004.
FY2006: During the year, sales net of DAP subsidy increased by 3% that is given
to farmers by the GOP through fertilizer company that is deducted from the cost of
73
production. It decrease the net sales price, thereby the sale of the company were
reduced by the amount of subsidy. But the Company achieved the highest
Ammonia and Urea production during the year.
FY2007: DAP sales has been decreased by 16%. During the year the Company
achieved ever-highest daily Ammonia production in September 2007. But the
required level is not achieved till the end of year. So, Ammonium, Sona DAP and
Granular Urea production was lower than last year 2006.
FY2008: The Company achieved the ever-highest Ammonia, Urea and DAP
production during the year with a significant increase over 2004. Ammonia, Urea
and DAP production during the year was better than the last year 2007 by 35%,
37% and 32%, respectively. For the better production, FFBL imported the Urea.
FY2009: With the DAP achieving the record yearly production, the overall
performance of all the plants remained satisfactory. Ammonium and Urea
production were lower as compared to the year 2008. No sale tax has been paid
during this year.
9.2.2 Cost of Sales

The Cost of Sales involves the identification of the expenses that are
related to the manufacturing process. It is determined by adding beginning
inventory of material and net purchases with the deduction of ending inventory
COST OF SALES
from both. Amounts are given below:
Amounts:
2005 2006 2007 2008 2009
Cost of Sales 100.00% 103.41% 76.56% 191.85% 279.19%
Graphical Representation:
74

300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2005 2006 2007 2008 2009
COST OF SALES
Interpretation:
Cost of sales are showing positive optimistic trend. It’s increasing year by
year but shows the decline in 2007 and then reaches to the 279.19% in fiscal year
2009 as compared to the fiscal year 2005. Further explanations are given as under:
FY2005: Cost of sales, net of DAP subsidy has been increased over the last year.
Cost of sales has been increased due to increase in purchase prices of raw material
consumed in process, and increase in fuel gases prices.
FY2006: Cost of sales, net of DAP subsidy has been increased by 3% over the
last year. However, the cost of sales has been increased 16% due to mainly on
account of increase in phosphoric acid and fuel gases also increased by 25%.
75
FY2007: Cost of sales has been decreased by 26% as the company is able to
control its cost. It is attributable to the continuity of DAP subsidy. Lesser
production during the year has resulted in lower raw material consumption.
last year. Cost of good sold grow much because of increase in raw material
consumed in business process and in manufacturing cost -through offset by prices
driven by change in demand and demand of food grains.
last year. Cost of sales has been increased because company did not purchase any
fertilizer. It consumed all the fertilizer and shows the good production. No subsidy
on DAP fertilizer from the compensation of GOP is paid out. So cost of sales has
been increased during this year.
9.2.3 Gross Profit

Gross Profit is determined by deduction of Cost of good sold from net
sales. It helps to determine the net profit by deducting the operating expenses and
addingGROSS PROFIT
the operative income. Amounts are given below:
Amounts:
2005 2006 2007 2008 2009
Gross Profit 100.00% 102.67% 105.70% 180.30% 211.84%
76

250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2005 2006 2007 2008 2009
GROSS PROFIT
Interpretation:
Gross Profits are showing positive trend. It’s increasing year by year and
reaches to the 211.84% in 2009 as compared to the 2005. Gross Profits are higher
due to higher unit selling price of Urea, Ammonium and DAP. This was mainly
attributed to shifting of plant turnaround to the year 2006 and overall increased
plant load. Further explanations are given as under:
FY2005: Gross profit for the year is 32% of the sales, higher by 40% compared to
2004. This is mainly due to higher production, better plant efficiency and
improved selling price of Urea and DAP.
77
FY2006: Gross Profit (32% of sales) remained the same as that of last year.
Consistent gross profit margin as of the last year are mainly due to better plant
efficiency, 5% increase in sale volume and improved selling price of Urea.
FY2007: Company’s cost of sales has been decreased 26%. By decreasing the
cost of sale, gross profit has been increased by 3% showing the better plant
efficiency.
FY2008: Company’s gross profit has been increased by 74% during this year.
Because of increase in raw material consumed in business process and in
manufacturing cost -through offset by prices driven by change in demand and
demand of food grains.
FY2009: Company’s gross profit has been increased by 32% during this year. But
the gross profit margin is decreased by 5% due to mainly completion of gas feed
subsidy during the year 2008.
9.2.4 Net Profit

Net Profit is amount of money earned after all expenses, including
overhead, employee salaries, manufacturing costs, and advertising costs, have
been deducted from the total revenue. Amounts are given below:
Amounts:
2005 2006 2007 2008 2009
Net Profit 100.00% 99.83% 103.71% 118.39% 154.52%
78
NET PROFIT
160.00%
140.00%
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
2005 2006 2007 2008 2009
NET PROFIT
Interpretation:
Cost of sales are showing positive optimistic trend. It’s increasing year by
year but shows the decline in 2007 and then reaches to the 279.19% in fiscal year
2009 as compared to the fiscal year 2005. Further explanations are given as under:
FY2005: The net profit for the year shows an improvement of 34% over 2004.
Other incomes like as compensation of GOP and that of bank deposits improved
the profit rates and better liquidity position of the business as compared to the last
year.
FY2006: Net profit for the year is marginally the same as compared to the last
year. Other incomes like as compensation of GOP and that of bank deposits
79
improved the profit rates and better liquidity position of the business as compared
to the last year.
FY2007: Net profit shows the improvement means it is higher as compared to the
last year. Other incomes like as compensation of GOP has been decreased, but the
other income resources of FFBL has been increased that results the improved
profits and better liquidity position of the company.
FY2008: Net profit has been increased by 14% during this year. Company’s
finance cost is higher that shows the greater utilization of borrowed funds. But the
company’s other income resources are higher as it gets the share of profit on joint
venture has gained. That shows the improvement in net profit.
FY2009: Net profit has been increased by 37% during this year. Total finance
cost has been decreased that shows the reduced utilization of borrowed funds.
Other income resources are high made on the account of bank deposits and mutual
funds with the loss on share of joint venture. But the net profit after interest has
been increased during this year as compared to last year. Overall in 2009, it shows
the improved profits and better liquidity position of company.
9.3 Balance Sheet

Horizontal Analysis of Summarized Balance Sheet
2005 2006 2007 2008 2009


Share capital 100.00% 100.00% 100.00% 100.00% 100.00%
Statutory reserves 0.00% 0.00% 0.00% 0.00% 100.00%
Translation reserves 0.00% 0.00% 0.00% 100.00% 121.94%
80
Accumulated profit / (loss) 100.00% 56.02% 57.58% -18.70% -20.96%
TOTAL SHARE CAPITAL AND RESERVES 100.00% 110.48% 110.11% 135.70% 137.95%
Long-term financing
Habib Bank Limited 100.00% 81.82% 63.64% 45.45% 27.27%
Standard Chartered Bank 100.00% 81.82% 63.64% 45.45% 27.27%
Muslim Commercial Bank Limited 100.00% 81.82% 63.64% 45.45% 27.27%
Askari Commercial Bank Limited 100.00% 81.82% 63.64% 45.45% 27.27%
Saudi Pak Agricultural Investment Company 100.00% 81.82% 63.64% 45.45% 27.27%
100.00% 81.82% 63.64% 45.45% 27.27%
Pak Kuwait Investment Company Limited 100.00% 81.82% 63.64% 45.45% 27.27%
100.00% 81.82% 63.64% 45.45% 27.27%
Total long-term financing 100.00% 77.78% 55.56% 33.33% 11.11%
Gross lease payments payable in future 100.00% 50.94% 0.00% 0.00% 0.00%
Less: Finance charge 100.00% 10.81% 0.00% 0.00% 0.00%
Total liabilities against asset subject to lease 100.00% 52.59% 0.00% 0.00% 0.00%
Long term murabaha
Faysal Bank Limited (FBL) 100.00% 81.82% 63.64% 45.45% 27.27%
Total long term murabaha 100.00% 77.78% 55.55% 33.33% 11.11%
Compensated leave absences 0.00% 0.00% 0.00% 100.00% 123.43%
Deferred tax 100.00% 199.23% 302.07% 308.58% 295.63%
Total deferred tax liability 100.00% 199.23% 302.07% 317.39% 306.50%
2005 2006 2007 2008 2009
Long term loan

Government of Pakistan (GOP) loan 100.00% 94.41% 88.43% 82.03% 75.18%
Deferred Government Assistance 100.00% 86.30% 73.36% 61.24% 50.00%
100.00% 91.67% 83.33% 75.00% 66.67%
Total long term loan 100.00% 90.91% 81.82% 72.73% 63.64%
TOTAL NON-CURRENT LIABILITIES 100.00% 101.95% 104.36% 95.78% 83.91%

Creditors 100.00% 92.67% 64.91% 293.88% 182.52%
Advances from customers 100.00% 78.07% 58.08% 60.33% 138.41%
Payable to gratuity fund 0.00% 0.00% 0.00% 100.00% 171.95%
81
Worker's welfare fund 0.00% 100.00% 200.56% 314.15% 362.28%
Unclaimed dividend 100.00% 56.94% 91.77% 12.26% 120.09%
Tax deducted at source 100.00% 75.07% 73.42% 214.21% 122.80%
Other payables 100.00% 142.76% 471.50% 615.03% 3912.65%
Total trade and other payable 100.00% 92.05% 84.80% 215.58% 231.10%
Mark-up accrued
From banks and financial institutions 100.00% 84.08% 68.04% 61.22% 43.69%
From PKIC, an associated undertaking 100.00% 83.81% 68.05% 61.21% 0.00%
100.00% 84.05% 68.04% 61.22% 38.90%
On long term murabaha 100.00% 81.25% 68.03% 61.22% 38.91%
1441.40
On short term borrowings 100.00% 150.47% 221.80%
%
228.54%
Total mark-up accrued 100.00% 111.24% 131.31% 629.15% 116.93%
Short term running finance 100.00% 202.62% 262.68% 816.27% 345.63%
Current portion of:
Liabilities against assets subject to lease 100.00% 64.41% 66.03% 0.00% 0.00%
Long term loan 100.00% 100.00% 100.00% 100.00% 100.00%
Sales tax payable 0.00% 100.00% 0.00% 0.00% 0.00%
Provision for income tax - net 0.00% 0.00% 0.00% 100.00% 352862.34%
Total of current portion 100.00% 100.88% 99.88% 99.67% 197.74%
TOTAL CURRENT LIABILITIES 100.00% 132.85% 150.83% 413.24% 263.95%
TOTAL EQUITY AND LIABILITIES 100.00% 112.61% 118.16% 190.27% 147.37%
2005 2006 2007 2008 2009
ASSETS
NON-CURRENT ASSETS
Owned assets
Leasehold land 100.00% 97.15% 94.22% 91.30% 90.82%
Free hold land 100.00% 100.00% 100.00% 100.00% 100.00%
Buildings on leasehold land 100.00% 96.55% 93.24% 89.92% 92.54%
Plant and machinery 100.00% 99.30% 111.13% 117.01% 109.21%
Catalyst 100.00% 99.24% 150.47% 103.70% 289.80%
Furniture and fittings 100.00% 85.04% 198.21% 214.75% 196.00%
Vehicles 100.00% 186.58% 228.57% 263.55% 546.50%
Office and other equipment 100.00% 110.32% 19.46% 156.35% 406.27%
Computer and ancillary equipment 100.00% 91.29% 154.95% 224.57% 413.49%
Library books 100.00% 65.31% 73.17% 47.70% 278.86%
Capital work in progress 100.00% 155.05% 167.95% 23.49% 79.75%
82
100.00% 102.55% 113.07% 108.87% 107.01%
Vehicles 100.00% 38.21% 0.00% 0.00% 0.00%
Total property, plant and equipment 100.00% 102.52% 113.01% 108.82% 106.96%
Share of profit / loss 0.00% 0.00% 0.00% 100.00% -274.65%
Dividend 0.00% 0.00% 0.00% 0.00% 100.00%
Gain on translation of net assets 0.00% 0.00% 0.00% 100.00% 21.94%
Balance 100.00% 192.18% 192.18% 286.80% 244.59%
Share of post acquisition profits 0.00% 0.00% 0.00% 100.00% 194.07%
Balance 0.00% 0.00% 0.00% 100.00% 106.79%
300,000 ordinary shares of Rs 10 each 100.00% 100.00% 100.00% 100.00% 100.00%
0.00% 0.00% 0.00% 0.00% 0.00%
Total long term investments 100.00% 192.18% 192.18% 329.14% 289.81%
Long term deposits
Lease key money 100.00% 68.95% 54.72% 0.00% 0.00%
100.00% 95.04% 92.72% 83.79% 421.18%
Less: Current portion of long term deposits 100.00% 0.00% 208.34% 0.00% 0.00%
Total long term deposits 100.00% 99.30% 87.54% 87.54% 440.05%
TOTAL NON-CURRENT ASSETS 100.00% 106.82% 116.78% 119.36% 116.11%
2005 2006 2007 2008 2009
CURRENT ASSETS
Term deposits with bank & financial institution 0.00% 0.00% 100.00% 0.00% 204.65%
Fixed income / Money market funds 0.00% 100.00% 331.15% 0.00% 50.28%
Surplus on re measurement 0.00% 100.00% 3724.63% 0.00% 316.72%
0.00% 100.00% 347.27% 0.00% 51.54%
Total short term investments 0.00% 100.00% 775.23% 0.00% 927.36%
Bank balances
Deposit accounts 100.00% 106.65% 52.96% 102.23% 120.73%
Current accounts 100.00% 58.20% 93.03% 366.65% 516.48%
Cash in hand 0.00% 0.00% 100.00% 167.89% 197.25%
Total bank balances 100.00% 104.39% 54.83% 114.57% 139.19%
Trade debts
Considered good 100.00% 200.66% 211.43% 246.49% 414.33%
83
1809.09 8372.73
Due from FF, unsecured, considered good 100.00%
%
2190.91%
%
0.00%
Other receivables
Due from holding company - considered good 100.00% 140.07% 25.23% 154.45% 60.21%
Other receivables
1442.35
Considered good (net) 100.00%
%
1116.46% 86.23% 103.49%
100.00% 847.68% 666.16% 92.33% 101.95%
1442.35
100.00% 1116.46% 86.23% 103.49%
%
Insurance claims 100.00% 152.90% 0.00% 0.00% 0.00%
Total other receivables 100.00% 400.54% 243.35% 140.22% 68.64%
Stores and spares
Stores 100.00% 90.57% 66.47% 137.17% 205.04%
Spares 100.00% 132.33% 231.73% 257.40% 372.73%
Items in transit 100.00% 224.19% 252.14% 475.43% 255.07%
100.00% 137.88% 223.70% 269.33% 352.49%
3333.30
Less: Provision for obsolescence 100.00% 100.00% 790.85%
%
4642.66%
Stock in trade
Packing materials 100.00% 144.68% 323.42% 652.49% 177.24%
Raw materials 100.00% 60.42% 84.83% 7.85% 302.61%
Raw material in transit 100.00% 125.33% 0.00% 0.00% 0.00%
Work in process 100.00% 319.22% 895.74% 239.49% 341.76%
1389.13
Finished goods 100.00% 59.51% 63.07%
%
42.53%
Total stock in trade 100.00% 78.26% 57.48% 554.93% 119.95%
Income and sales tax refundable 100.00% 159.89% 232.49% 76.13% 76.10%
Interest accrued 100.00% 106.63% 112.84% 76.77% 136.56%
Due from GOP on account of DAP subsidy 0.00% 0.00% 0.00% 100.00% 0.00%
2005 2006 2007 2008 2009
Advances
Advances to:
Executives, unsecured considered good 100.00% 210.32% 788.89% 391.27% 938.10%
Other employees, considered good 100.00% 148.73% 112.93% 244.24% 416.31%
Considered good 100.00% 162.46% 213.34% 161.35% 275.48%
100.00% 162.37% 213.19% 161.27% 275.25%
100.00% 162.46% 213.34% 161.35% 275.48%
Total advances 100.00% 161.73% 210.28% 170.93% 294.46%
Current portion of long term deposits 100.00% 0.00% 208.34% 0.00% 0.00%
Security deposits 100.00% 222.99% 736.66% 316.56% 168.33%
84
Prepayments 100.00% 192.70% 118.74% 152.60% 197.38%
Total trade deposits and prepayments 100.00% 152.99% 256.11% 147.49% 145.40%
TOTAL CURRENT ASSETS 100.00% 122.19% 120.45% 307.47% 199.03%
TOTAL ASSETS 100.00% 112.61% 118.16% 190.27% 147.37%
9.3.1 Total Assets

All the valuables possessed by the Fauji Fertilizer Bin Qasim Limited are
called its assets. It includes all Current Assets, Non-Current Assets, and Fixed
Assets. Amounts are given below:
Amounts:
2005 2006 2007 2008 2009
Total Non Current Assets 100.00% 106.82% 116.78% 119.36% 116.11%

Total Current Assets 100.00% 122.19% 120.45% 307.47% 199.03%
85
Total Assets 100.00% 112.61% 118.16% 190.27% 147.37%
TOTAL ASSETS
450.00%
400.00%
350.00%
300.00%
250.00%
200.00%
150.00%
100.00%
50.00%
0.00%
2005 2006 2007 2008 2009
NON-CURRENT ASSETS CURRENT ASSETS
Interpretation:
From 2005 to 2008, it shows the positive trend. But in 2009, it is going to
decrease. From 2005 to 2009, the percentage increase in the fixed assets was high
which tells how much the company has invested to buy more fixed assets to
increase their production and sales. But in 2009, company did not purchase the
new machines. That’s why in 2009, company’s total assets has been decreased as
compared to the last 4 years.
86
The company also invested a lot in the long term investments from year
2005 which was also by a greater proportion which tells how much the company is
trying to make money from greater long term projects. But in 2009, company’s
long term investments has been decreased that shows that the company is not
interested to make money from greater long term projects. Company’s long term
deposits have been also decreased in 2009.
The company’s stock-in trade and trade debts has been increased smoothly
but it arises in 2008 at a huge percentage and then in 2009 it declined by a huge
percentage. This tells how better the company is managing their inventory and
their decline in the account receivables section.
So, overall total assets rose over the last 4 years but it rose much more in
2008 by around 74% which tells that from year 2005 the company’s position was
getting very strong in Pakistan.
9.3.2 Total Liabilities

The claim of outsiders against the assets of the firm is called liability. It
includes current and non current liabilities for the particular year. Amounts are
given below:
Amounts:
2005 2006 2007 2008 2009
87
Total Non-Current Liabilities 100.00% 101.95% 104.36% 95.78% 83.91%
Total Current Liabilities 100.00% 132.85% 150.83% 413.24% 263.95%
Total Liabilities 100.00% 112.61% 118.16% 190.27% 147.37%
TOTAL LIABILITIES
600.00%
500.00%
400.00%
300.00%
200.00%
100.00%
0.00%
2005 2006 2007 2008 2009
NON-CURRENT LIABILITIES CURRENT LIABILITIES
Interpretation:
From 2005 to 2008, it shows the positive trend. But in 2009, it is going to
decrease. The company’s non-current liabilities increased in year 2005 to 2007 but
in 2008 and 2009 it has deteriorated. Deferred taxation also increased by a huge
amount in percentage over the last two to three years.
The trade and other payable section have fallen down in 2006 and 2007 but
it has increased almost doubled in 2008 and from here, it shows the little increase
88
in year 2009. The company also increased the short term borrowing amount by a
much greater percentage from year 2005 to 2008 which tells the company really
increased most of their liabilities in this particular section. But in 2009, it shows
the dramatically change in short term borrowings, it declined double in 2009. So
the current liabilities have been increased smoothly from 2005 to 2006 and it
doubled in 2007 and then it declined double in 2009.
So, overall total liabilities rose over the last 4 years but it rose much more
in 2008 by around 94% which tells that from year 2004 the company’s position
was getting very strong in Pakistan.
9.4 Conclusion
According to the Trend Percentage Analysis,
89
FFBL’s financial positions started getting stronger and stronger from year
2005 as they improved in almost all kinds of sections in which they can earn profit
by increasing their sales and make more money by buying assets, short term
investments and long term investment and huge amount of loans. The FFBL’s net
profit after taxation also rose too much in greater proportion over all the last five
years but raised much in year 2009 as compare to the last few years due to the
increased in demand and supply.
Since the company bought fixed assets that definitely have improved their
production capacity and this was definitely due to much bigger demand and
supply. So the company really improved in much greater proportion in increasing
their sales from year 2005 and continued their progress until now. The company
also invested a lot in the long term investments from year 2005 which was also by
a greater proportion which tells how much the company is trying to make money
from greater long term projects. The company’s non-current liabilities increased in
year 2006 and 2007 but in 2008 it has deteriorated. Deferred taxation also
increased by a huge amount in percentage over the last two to three years.
So over the three years we see how much the FFBL has improved in
perspective of all kinds of non-current and especially current assets and how better
they are managing it.
90
10. Dollar and Percentage Changes
10.1 Introduction
The dollar amount of any change is the difference between the amounts for
a comparison year and for a base year. The percentage change is computed by
dividing the amount of the change between years by the amount for the base year.
(currentyea r − lastyear )
Percentage Changes = * 100
lastyear
91
To calculate the percentage change between two periods:
1. Select the base year.
2. For each line item, divide the amount in each non base year by the
amount in the base year and multiply by 100.
The base year trend percentage is always 100.0%. A trend percentage of

less than 100.0% means the balance has decreased below the base year level in
that particular year. A trend percentage greater than 100.0% means the balance in
that year has increased over the base year. A negative trend percentage represents
a negative number. If the base year is zero or negative, the trend percentage
calculated will not be meaningful.
Percentage change analyses of FAUJI FERTILIZER BIN QASIM

LIMITED are given on next pages.

Percentage Change of Summarized Income Statement
2005 2006 2007 2008 2009
SALES
Gross sales 100.00% 3.28% -16.55% 108.18% 35.97%
Less:
Sale tax 100.00% 4.20% -22.23% -52.60% -
92
Trade discount 100.00% 8.21% 51.48% 20.78% 125.58%
Commission to holding company 100.00% 5.55% -26.02% 18.92% 33.05%
100.00% 4.68% -13.65% -36.17% -7.52%
NET SALES 100.00% 3.17% -16.76% 119.07% 36.93%
LESS: COST OF SALES
Raw materials consumed 100.00% 7.20% -8.05% 427.20% -54.90%
Packing materials consumed 100.00% 12.24% -15.58% 91.90% -4.47%
Fuel and power 100.00% 25.25% -10.61% 55.70% 16.20%
Salaries, wages and benefits 100.00% -0.09% 30.80% 41.89% 74.20%
Insurance 100.00% 8.05% -5.55% 3.22% 49.16%
Repairs and maintenance 100.00% 24.35% 135.53% -20.31% 102.79%
Communication and other expenses 100.00% 24.82% -35.34% 88.18% -37.82%
Provision for doubtful advances 100.00% - - - -
Depreciation 100.00% 6.62% 6.59% 12.85% 2.16%
Provision for inventory obsolescence 100.00% - 100.00% 282.49% -50.45%
Opening stock - work in process 100.00% -66.44% 219.22% 180.61% -73.26%
Closing stock - work in process 100.00% 219.22% 180.61% -73.26% 42.70%
Subsidy on DAP fertilizer from Pak Govt. - 100.00% 111.56% 454.97% -
Cost of goods manufactured 100.00% -4.59% -18.55% 221.04% -9.07%
Opening stock - own manufactured fertilizers 100.00% 911.91% -75.09% 153.99% 2113.31%
Closing stock - own manufactured fertilizers 100.00% -75.09% 153.99% 2113.31% -96.94%
Cost of sale - own manufactured fertilizer 100.00% 2.41% -22.77% 154.39% 46.46%
Opening stock - purchased fertilizers 100.00% -32.33% 4251.01% -99.11% -
Purchase of fertilizers 100.00% 48.83% -97.47% 518.13% -
4251.01
Closing stock - purchased fertilizers 100.00%
%
-99.11% - -
Cost of sales - purchased fertilizers 100.00% 21.57% -74.55% -24.32% -
TOTAL COST OF SALES 100.00% 3.41% -25.97% 150.59% 45.52%
GROSS PROFIT 100.00% 2.67% 2.95% 70.57% 17.50%
2005 2006 2007 2008 2009

Product transportation 100.00% 11.98% -29.12% 73.73% 16.70%
Salaries, wages and benefits 100.00% 21.43% -4.33% 42.74% 65.67%
Rent, rates, and taxes 100.00% 2.90% -5.00% 32.30% 29.92%
Technical services 100.00% 39.42% -12.58% 50.50% 58.60%
Insurance expenses - - - - 100.00%
Travel and conveyance 100.00% 19.04% -4.20% 30.55% 35.92%
Sale promotion and advertising 100.00% -22.35% -3.76% 13.22% 77.66%
Communication and other expenses 100.00% 35.67% -15.21% 48.42% 91.98%
Depreciation 100.00% 26.35% -6.52% 45.98% 25.93%
93
Total expenses 100.00% 17.61% -4.47% 40.49% 64.99%
Total selling and distribution expenses 100.00% 12.94% -24.77% 66.28% 25.85%
Travel and conveyance 100.00% -13.21% 99.16% 175.80% -9.54%
Utilities 100.00% 40.14% 15.54% 28.05% 60.01%
Printing and stationery 100.00% 42.73% 12.48% -14.98% 288.54%
Repairs and maintenance 100.00% -38.89% 155.79% 30.80% 60.34%
Communication, advertisement and other 100.00% -3.15% -3.23% 32.17% 48.04%
Rent, rates and taxes 100.00% 32.13% -5.84% 9.02% 105.34%
Listing fee 100.00% 1.92% 1.42% 2.79% 48.42%
Donation to President relief fund 100.00% -97.26% 20.00% 127.17% 2388.26%
Legal and professional 100.00% -32.67% 2.10% 5.60% 227.31%
Depreciation 100.00% -73.58% 22.04% -21.01% 28.77%
Miscellaneous 100.00% 14.59% 21.91% 31.77% 223.09%
Total administrative expenses 100.00% -9.46% 26.75% 57.86% 93.46%
TOTAL OPERATING EXPENSES 100.00% 11.07% -21.26% 65.35% 32.91%
OPERATING PROFIT 100.00% -0.95% 14.63% 72.30% 12.60%

Finance cost
Banking companies & financial institution 100.00% 7.01% -17.79% -12.95% -15.49%
PKIC, an associated undertaking 100.00% 7.01% -17.79% -12.95% -
100.00% 7.01% -17.79% -12.95% -24.76%
Finance charge on leased plant, equipment 100.00% -56.14% -55.31% -85.92% -
Mark-up on long term murabaha 100.00% 7.01% -17.79% -12.97% -24.75%
Mark-up on short term borrowings 100.00% 177.36% 109.81% 233.73% -15.44%
Interest on WPPF 100.00% 80.00% 36.67% 15.04% 60.42%
Bank charges 100.00% 26.11% 83.61% 25.45% 45.72%
2905.19
Exchange loss 100.00%
%
293.49% 3232.78% -88.78%
Total finance cost 100.00% 58.72% 52.90% 342.81% -47.71%
2005 2006 2007 2008 2009

Workers' Profit Participation Fund 100.00% -2.50% 7.77% 22.87% 42.97%
Worker's Welfare Fund - 100.00% 0.56% 12.95% 42.38%
Property, plant and equipment written off - - - 100.00% -98.37%
Loss on sale of property, plant & equipment - - 100.00% - -
Other certification & services - - 100.00% -58.90% 0.00%
100.00% 0.00% 36.30% -11.68% 16.92%
Total other operating expenses 100.00% 43.20% 41.44% 64.19% -21.58%
94
TOTAL OTHER OPERATING COSTS 100.00% 52.58% 48.65% 244.49% -43.32%
NET PROFIT AFTER INTEREST 100.00% -9.27% 5.73% 8.95% 77.64%
PLUS: OTHER INCOMES

Share of profit of associate & joint venture - - - 100.00% -336.38%
Compensation from GOP 100.00% 0.00% -14.29% 0.00% -
Others
Profit on bank balances and term deposits 100.00% 21.83% 0.18% 14.00% -1.33%
Surplus of investment at fair value - 100.00% 3624.63% - -
Dividend received on investment in MMF - - - 100.00% 22.70%
Gain on sale of investment - - 100.00% 122.91% 1629.66%
100.00% 22.39% 17.90% 19.25% 31.12%
Income on payments made on behalf of FF 100.00% - - - -
Scrap sales and miscellaneous receipts 100.00% 10.45% 32.92% 33.71% -27.75%
Gain on sale of property & equipment 100.00% 6.63% - 100.00% -63.45%
100.00% 10.07% 20.12% 43.55% -30.20%
Total others 100.00% 21.59% 18.02% 20.66% 26.88%
TOTAL OTHER INCOMES 100.00% 8.49% -0.04% 21.40% -55.07%
PROFIT BEFORE TAXATION 100.00% -4.04% 3.81% 12.95% 31.86%
Less: Taxation 100.00% -10.49% 3.65% 10.69% 34.46%
PROFIT AFTER TAXATION 100.00% -0.17% 3.89% 14.16% 30.51%
10.3 Balance Sheet

Percentage Change of Summarized Balance Sheet
2005 2006 2007 2008 2009


Share capital 100.00% 0.00% 0.00% 0.00% 0.00%
95
Statutory reserves - - - - 100.00%
Translation reserves - - - 100.00% 21.94%
Accumulated profit / (loss) 100.00% -43.98% 2.79% -132.49% 12.06%
TOTAL SHARE CAPITAL AND RESERVES 100.00% 10.48% -0.34% 23.24% 1.65%
Long-term financing
Habib Bank Limited 100.00% -18.18% -22.22% -28.57% -40.00%
Standard Chartered Bank 100.00% -18.18% -22.22% -28.57% -40.00%
Muslim Commercial Bank Limited 100.00% -18.18% -22.22% -28.57% -40.00%
Askari Commercial Bank Limited 100.00% -18.18% -22.22% -28.57% -40.00%
Saudi Pak Agricultural Investment Company 100.00% -18.18% -22.22% -28.57% -40.00%
100.00% -18.18% -22.22% -28.57% -40.00%
Pak Kuwait Investment Company Limited 100.00% -18.18% -22.22% -28.57% -40.00%
100.00% -18.18% -22.22% -28.57% -40.00%
Total long-term financing 100.00% -22.22% -28.57% -40.00% -66.67%
Gross lease payments payable in future 100.00% -49.06% - - -
Less: Finance charge 100.00% -89.19% - - -
Total liabilities against asset subject to lease 100.00% -47.41% - - -
Long term murabaha
Faysal Bank Limited (FBL) 100.00% -18.18% -22.22% -28.57% -40.00%
Total long term murabaha 100.00% -22.22% -28.57% -40.00% -66.67%
Compensated leave absences - - - 100.00% 23.43%
Deferred tax 100.00% 99.23% 51.62% 2.15% -4.20%
Total deferred tax liability 100.00% 99.23% 51.62% 5.07% -3.43%
2005 2006 2007 2008 2009
Long term loan

Government of Pakistan (GOP) loan 100.00% -5.59% -6.34% -7.24% -8.35%
Deferred Government Assistance 100.00% -13.70% -14.99% -16.52% -18.35%
100.00% -8.33% -9.09% -10.00% -11.11%
Less:Current portion under current liabilities 100.00% 0.00% 0.00% 0.00% 0.00%
Total long term loan 100.00% -9.09% -10.00% -11.11% -12.50%
TOTAL NON-CURRENT LIABILITIES 100.00% 1.95% 2.36% -8.22% -12.40%

Creditors 100.00% -7.33% -29.96% 352.75% -37.89%
Advances from customers 100.00% -21.93% -25.61% 3.87% 129.42%
96
Payable to gratuity fund - - - 100.00% 71.95%
Worker's welfare fund - 100.00% 100.56% 56.63% 15.32%
Unclaimed dividend 100.00% -43.06% 61.17% -86.64% 879.67%
Tax deducted at source 100.00% -24.93% -2.20% 191.78% -42.67%
Other payables 100.00% 42.76% 230.28% 30.44% 536.17%
Total trade and other payable 100.00% -7.95% -7.88% 154.22% 7.20%
Mark-up accrued
From banks and financial institutions 100.00% -15.92% -19.07% -10.03% -28.63%
From PKIC, an associated undertaking 100.00% -16.19% -18.80% -10.05% -100.00%
100.00% -15.95% -19.04% -10.03% -36.46%
On long term murabaha 100.00% -18.75% -16.27% -10.01% -36.45%
On short term borrowings 100.00% 50.47% 47.40% 549.88% -84.14%
Total mark-up accrued 100.00% 11.24% 18.04% 379.14% -81.41%
Short term running finance 100.00% 102.62% 29.65% 210.74% -57.66%
Current portion of:
Liabilities against assets subject to lease 100.00% -35.59% 2.51% - -
Long term loan 100.00% 0.00% 0.00% 0.00% 0.00%
Sales tax payable - 100.00% - - -
Provision for income tax - net - - - 100.00% 352762.34%
Total of current portion 100.00% 0.88% -1.00% -0.21% 98.40%
TOTAL CURRENT LIABILITIES 100.00% 32.85% 13.53% 173.98% -36.13%
TOTAL EQUITY AND LIABILITIES 100.00% 12.61% 4.93% 61.03% -22.55%
2005 2006 2007 2008 2009
ASSETS
NON-CURRENT ASSETS
Owned assets
Leasehold land 100.00% -2.85% -3.01% -3.10% -0.53%
Free hold land 100.00% 0.00% 0.00% 0.00% 0.00%
Buildings on leasehold land 100.00% -3.45% -3.43% -3.57% 2.92%
Plant and machinery 100.00% -0.70% 11.91% 5.29% -6.67%
Catalyst 100.00% -0.76% 51.62% -31.09% 179.47%
Furniture and fittings 100.00% -14.96% 133.07% 8.35% -8.73%
Vehicles 100.00% 86.58% 22.50% 15.30% 107.36%
Office and other equipment 100.00% 10.32% -82.36% 703.35% 159.85%
Computer and ancillary equipment 100.00% -8.71% 69.73% 44.93% 84.13%
Library books 100.00% -34.69% 12.03% -34.81% 484.66%
97
Capital work in progress 100.00% 55.05% 8.32% -86.01% 239.50%
100.00% 2.55% 10.25% -3.71% -1.71%
Vehicles 100.00% -61.79% - - -
Total property, plant and equipment 100.00% 2.52% 10.23% -3.71% -1.71%
Share of profit / loss - - - 100.00% -374.65%
Dividend - - - - 100.00%
Gain on translation of net assets - - - 100.00% -78.06%
Balance 100.00% 92.18% 0.00% 49.23% -14.72%
Cost of investment - - - 100.00% 3.63%
Share of post acquisition profits - - - 100.00% 94.07%
Balance - - - 100.00% 6.79%
300,000 ordinary shares of Rs 10 each 100.00% 0.00% 0.00% 0.00% 0.00%
0.00% 0.00% 0.00% 0.00% 0.00%
Total long term investments 100.00% 92.18% 0.00% 71.26% -11.95%
Long term deposits
Lease key money 100.00% -31.05% -20.64% - -
100.00% -4.96% -2.44% -9.63% 402.67%
Less: Current portion of long term deposits 100.00% - 100.00% - -
Total long term deposits 100.00% -0.70% -11.84% 0.00% 402.67%
TOTAL NON-CURRENT ASSETS 100.00% 6.82% 9.33% 2.21% -2.72%
2005 2006 2007 2008 2009
CURRENT ASSETS
Term deposits with bank & financial institution - - 100.00% - 100.00%
Fixed income / Money market funds - 100.00% 231.15% - 100.00%
3624.63
Surplus on re measurement - 100.00%
%
- 100.00%
- 100.00% 247.27% - 100.00%
Total short term investments - 100.00% 675.23% - 100.00%
Bank balances
Deposit accounts 100.00% 6.65% -50.34% 93.04% 18.09%
Current accounts 100.00% -41.80% 59.83% 294.14% 40.86%
Cash in hand - - 100.00% 67.89% 17.49%
Total bank balances 100.00% 4.39% -47.48% 108.96% 21.49%
Trade debts
98
Considered good 100.00% 100.66% 5.37% 16.58% 68.09%
1709.09
Due from FF, unsecured, considered good 100.00%
%
21.11% 282.16% -
Other receivables
Due from holding company - considered good 100.00% 40.07% -81.99% 512.27% -61.02%
Other receivables
1342.35
Considered good (net) 100.00%
%
-22.59% -92.28% 20.02%
100.00% 747.68% -21.41% -86.14% 10.42%
1342.35
100.00% -22.59% -92.28% 20.02%
%
Insurance claims 100.00% 52.90% - - -
Total other receivables 100.00% 300.54% -39.24% -42.38% -51.05%
Stores and spares
Stores 100.00% -9.43% -26.60% 106.35% 49.48%
Spares 100.00% 32.33% 75.12% 11.08% 44.81%
Items in transit 100.00% 124.19% 12.47% 88.56% -46.35%
100.00% 37.88% 62.24% 20.39% 30.88%
Less: Provision for obsolescence 100.00% 0.00% 690.85% 321.48% 39.28%
Stock in trade
Packing materials 100.00% 44.68% 123.54% 101.75% -72.84%
Raw materials 100.00% -39.58% 40.40% -90.74% 3753.57%
Raw material in transit 100.00% 25.33% - - -
Work in process 100.00% 219.22% 180.61% -73.26% 42.70%
2102.44
Finished goods 100.00% -40.49% 5.98%
%
-96.94%
Total stock in trade 100.00% -21.74% -26.56% 865.52% -78.39%
Income and sales tax refundable 100.00% 59.89% 45.41% -67.25% -0.04%
Interest accrued 100.00% 6.63% 5.82% -31.97% 77.89%
Due from GOP on account of DAP subsidy - - - 100.00% -
2005 2006 2007 2008 2009
Advances
Advances to:
Executives, unsecured considered good 100.00% 110.32% 275.09% -50.40% 139.76%
Other employees, considered good 100.00% 48.73% -24.07% 116.28% 70.45%
Considered good 100.00% 62.46% 31.32% -24.37% 70.73%
100.00% 62.37% 31.29% -24.35% 70.67%
100.00% 62.46% 31.32% -24.37% 70.73%
Total advances 100.00% 61.73% 30.02% -18.72% 72.27%
Current portion of long term deposits 100.00% - 100.00% - -
99
Security deposits 100.00% 122.99% 230.35% -57.03% -46.83%
Prepayments 100.00% 92.70% -38.38% 28.51% 29.34%
Total trade deposits and prepayments 100.00% 52.99% 67.40% -42.41% -1.42%
TOTAL CURRENT ASSETS 100.00% 22.19% -1.42% 155.28% -35.27%
TOTAL ASSETS 100.00% 12.61% 4.93% 61.03% -22.55%
10.4 Conclusion
According to the Dollar Percentage Analysis,

The firm’s position is quiet visible which we can measure from its sales
which is rising year after year especially from year 2005. The increase in sales the
cost of sales also rise but the company did really well in reducing their cost of
100
sales in the year 2007 which tells that the company is really making efforts in
order to increase the gross profit for the longer term. The company’s did well in
reducing most of their expense and increased sales to get the improved profits and
better liquidity position of the company. The company improved the profits in
year 2009.
The company’s position was getting better and better year after year
because shareholder’s equity section did rise all the years. Overall total liabilities
rose over the last 4 years but it rose much more in 2008 by around 94% which tells
that from year 2004 the company’s position was getting very strong in Pakistan.
The fixed asset portion of the company also rose from year to year and later on it
increased at a slow proportion in percentage. So overall the company’s total assets
rose over the last four years but they raised much in the year 2008 which tells that
in year 2008 the firm’s position was getting very strong in Pakistan. But in 2009
there comes a dramatically change that declines the total assets as compared to
2008.
101
11. Ratio Analysis
Ratio analysis involves the method of calculating and interpreting financial
ratios to analyze and monitor the firm’s performance. The basic inputs to ratio
analysis are the firm’s income statement and balance sheet.
Ratio Analysis enables the business owner/manager to spot trends in a
business and to compare its performance and condition with the average
performance of similar businesses in the same industry. The analysis is used to
provide indicators of past performance in terms of critical success factors of a
102
business. This assistance in decision-making reduces reliance on guesswork and
intuition and establishes a basis for sound judgment.
Financial ratio analysis groups the ratios into categories which tell us about
different facets of a company's finances and operations.
11.1 Analysis of Short Term Financial Position
A firm’s ability to satisfy its short term obligations as they become due is
known as liquidity of the firm. Liquidity refers to the solvency of the firm’s
overall financial position------ the ease with which it can pay its bills.
Trade creditors; creditor for expenses; commercial banks; short term
lenders are concerned with the short term financial position or liquidity of the unit.
Management is also interested in knowing how efficiently working capital is being
utilized by the business. Shareholders and long term creditors are also interested in
studying the prospectus of dividend and interest payment.
Liquidity ratios usually consist of:

1. Net Working Capital
2. Current Ratio or Working Capital Ratio
3. Acid test Ratio or Quick Ratio or Liquid Ratio
4. Absolute Liquid Ratio or Cash Position Ratio
11.1.1 Net Working Capital

The difference between the current assets and current liabilities of is known
as net working capital. It may be positive or negative. Greater the net working
capital lowers the risk of technically insolvency.
Formula:
Net Working Capital = currentass ets − currentlia bilities
Calculation:
103
2005 2006 2007 2008 2009
Current Assets 9,266,673 11,322,594 11,161,328 28,492,569 18,443,765

Current Liabilities 6,344,831 8,429,327 9,569,949 26,219,469 16,747,253
Net Working Capital 2,921,842 2,893,267 1,591,379 2,273,100 1,696,512
NET WORKING CAPITAL
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000
500,000
0
2005 2006 2007 2008 2009
NET WORKING CAPITAL
Interpretation:
Net working capital showed the negative trend from 2005 to 2007 and then
afterwards increases the net working capital in 2008 and in 2009 it again
decreased. The current assets of the company registered a nominal decrease during
2008 as compared to 2007. The major portion of the current assets is attributed to
subsidy due from GOP on account of DAP 44% of total current assets. Moreover,
the stock in trade has been slowly increased as the finished goods in the 2008 have
been increased.
104
Current liabilities showed a high increase during 2008 as compared to
2007. The major portion of the current liabilities is attributed to the short term
financing depicting an increase in 2008, by availing running finance facilities from
different banks and financial institutions to meet the working capital requirements
of company. The company has made a huge investment for expansion of fertilizer
producing plants. Moreover, the company availed short-term loans from various
banks to fulfill the requirements concerning purchase of raw material.
11.1.2 Current Ratio
Current ratio indicates the liquidity of current assets or the ability of the
business to meet its maturing current liabilities. Current ratio is also known as
Working capital ratio.
Formula
currentass ets
Current Ratio =
currentlia bilities
Calculation:
2005 2006 2007 2008 2009
Current Assets 9,266,673 11,322,594 11,161,328 28,492,569 18,443,765

Current Ratio 1.46 1.34 1.17 1.09 1.10
CURRENT RATIO
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2005 2006 2007 2008 2009
CURRENT RATIO
105

Interpretation:
The business concern maintains current ratio of 1.10 times, which is equal
to 1:1 indicating the concerns capability to meet its short-term obligations. The
current ratio of FFBL has shown a decrease year by year as it was 1.46 times in
2005 and in 2009, it has become 1.10. This is due to increase in assets as it
liabilities has also increased but there is a high change in assets as compare to
liabilities. It also means that the FFBL will be able to pay off its current liabilities
in full even if current assets realizable value is 1 of its book value.
11.1.3 Acid Test Ratio
It establishes a relationship between liquid assets and current liabilities.
Liquid assets include all the assets minus inventory and prepaid expenses. Liquid
ratio is also known as quick ratio or acid test ratio.
Formula
liquidasse ts
Liquid Ratio =
currentlia bilities
Calculation:
2005 2006 2007 2008 2009
Quick Assets 7,663,328 9,719,687 9,298,345 21,388,387 15,362,151

Quick Ratio 1.21 1.15 0.97 0.82 0.92
106
ACID TEST RATIO
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2005 2006 2007 2008 2009
ACID TEST RATIO
Interpretation:
The quick ratio has shown an effective decrease in 2005 as it was 1.21
times. From 2005 to 2008 it decreased due to the high stock in trade, this may be
because of inflation. Then afterwards in 2009, there is an increase in quick ratio
that shows the favorable position of FFBL.
11.1.4 Absolute Liquid Ratio

Absolute Liquid Ratio relates cash, bank and marketable securities to the
current liabilities. It means absolute liquid assets worth one half of the value of
current liabilities are sufficient for satisfactory liquid position of a business.
Formula
absoluteli quidassets
Absolute Liquid Ratio =
currentlia bilities
Calculation:
107
2005 2006 2007 2008 2009
Absolute Liquid Assets 7,211,981 8,141,548 8,236,302 20,631,420 14,654,626

Absolute Liquid Ratio 1.14 0.97 0.86 0.79 0.88
ABSOLUTE LIQUID RATIO
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2005 2006 2007 2008 2009
Interpretation:
The absolute liquid ratio has shown an effective decrease in 2005 as it was
1.14 times. From 2005 to 2008 it decreased due to increase in trade debts. Then
afterwards in 2009, there is an increase in quick ratio. But in spite of these this
ratio shows the favorable position of FFBL, when compared to the rule of thumb
standard which is 0.50 times.
11.1.5 Conclusion
108
Liquidity of company has declined, illustrating that the firm may
experience problems in financing its short term obligations. However overall
liquidity position of the Fauji Fertilizer Bin Qasim Limited is “GOOD” because its
Current growth is greater than the growth of Current Liability, which shows that
company is not risky and may not be insolvent in short term.
LIQUIDITY RATIOS
1.60 3500000.00
1.40 3000000.00
1.20 2500000.00
1.00
2000000.00
0.80
1500000.00
0.60
0.40 1000000.00
0.20 500000.00
0.00 0.00
2005 2006 2007 2008 2009
CURRENT RATIO LIQUID RATIO ABSOLUTE LIQUID RATIO NWC
11.2 Analysis of Efficiency

Activity or efficiency or turnover ratios are concerned with measuring the
efficiency in assets management. Efficiency implies effective utilization of
available resources. The term turnover refers to the rotation or utilization of a
resource or an asset in the process of business activity. Therefore the activity ratios
are used to find out the effective utilization of assets by relating the same to sales
109
or cost of goods sold. Activity ratios are therefore used to assess how active
various assets are in the business. Efficiency ratios usually consist of:
1. Inventory Efficiency
2. Debtor Efficiency
3. Creditor Efficiency
4. Assets Efficiency
5. Cycle Efficiency
11.2.1 Inventory Efficiency
It consists of inventory turnover ratio and average age of inventory.
1. Inventory Turnover Ratio
Measure the activity, 0r liquidity of the firm’s inventory is called Stock
Turnover Ratio.
Formula
cos tofgoodsso ld
Stock Turnover Ratio = averageinv entory
Calculation:
2005 2006 2007 2008 2009
Cost of Goods Sold 9,692,236 10,023,044 7,420,310 18,594,752 27,059,566

Average Inventory 1186345 1598944 1726182.5 4476911 5088056.5
Stock Turnover Ratio 8.2 6.3 4.3 4.2 5.3
2. Average Age of Inventory

It shows how many days were taken to disposal off average inventory. It is
known as Average Age of Inventory (AAI).
Formula
365
Average Age of Inventory =
stockturno verrate
Calculation:
110
2005 2006 2007 2008 2009
Stock Turnover Ratio 8.2 6.3 4.3 4.2 5.3

AAI 44.7 58.2 84.9 87.9 68.6
INVENTORY EFFICIENCY
9.0 100.0
8.0 90.0
7.0 80.0
6.0 70.0
60.0
5.0
50.0
4.0
40.0
3.0 30.0
2.0 20.0
1.0 10.0
0.0 0.0
2005 2006 2007 2008 2009
STOCK TURNOVER AAI
Interpretation:
The level of inventory turnover was decreasing from the year 2005 till 2008
and afterwards it increased in 2009. The higher the inventory level, the more time
it takes to come to an end. Inventory turnover days were increasing from the year
2005 till 2008. But it created the problems because they have increased their
inventory level so it took more time to wipe out. And in 2009 it was decreased 20
days that there inventory finishes in 20 days.
111
11.2.2 Debtor Efficiency
It consists of debtor turnover ratio and average collection period.
1. Debtor Turnover Ratio
Measure the activity, or liquidity of the firm’s credit sales is called Debtor
Turnover Ratio.
Formula
netcredits ales
Debtor Turnover Ratio = averagetra dedebtor
Calculation:
2005 2006 2007 2008 2009
Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920

Average Trade Debtor 602424.5 1014743 1320091 909505 732246
Debtor Turnover Ratio 23.7 14.5 9.3 29.5 50.2
2. Average Collection Period

It shows how many days were taken to collect trade debt by the company. It
is known as Average Collection Period (ACP).
Formula
365
Average Collection Period =
debtorturn overratio
DEBTOR EFFICIENCY
Calculation:
2005 2006 2007 2008 2009
Debtor Turnover Ratio 23.7 14.5 9.3 29.5 50.2

ACP 15.4 25.2 39.4 12.4 7.3
112

60.0 45.0
40.0
50.0
35.0
40.0 30.0
25.0
30.0
20.0
20.0 15.0
10.0
10.0
5.0
0.0 0.0
2005 2006 2007 2008 2009
DEBTOR TURNOVER ACP
Interpretation:
Receivable turnover has improved year by year as it was 24 times in 2005
and in 2008 it became 30 times, this is due to higher sales revenue. FFBL do
speedy and effective collection of trade debts. In 2009 turnover is increased that
indicates the sufficient collection of debts. Average collection period of trade
debts also improved year by year as it was 15 days in 2005 and in 2009 it became
7 days. This shows that FFBL collects its bills in 7 days. FFBL also improved its
position to collect its bills as soon.
11.2.3 Creditor Efficiency
It consists of creditor turnover ratio and average payment period.
1. Creditor Turnover Ratio
Measure the activity, or liquidity of the firm’s credit purchase is called
Creditor Turnover Ratio. It indicates the speed with which the payments are made
to the trade creditor.
Formula
113
netcreditp urchase
Creditor Turnover Ratio = averagetra decreditor
Calculation:
2005 2006 2007 2008 2009
Net Credit Purchase 9,692,236 10,023,044 7,420,310 18,594,752 27,059,566

Average Trade Credit 2534672 2790449 2569574.5 4364457.5 6490254
Creditor Turnover Ratio 3.8 3.6 2.9 4.3 4.2
2. Average Payment Period

It shows how many days were taken to pay trade credit by the company, it
is known as Average Payment Period (APP).
Formula
365
Average Payment Period =
creditortu rnoverrati o
Calculation:
2005 2006 2007 2008 2009
Creditor Turnover Ratio 3.8 3.6 2.9 4.3 4.2

APP 91.3 91.3 121.7 91.3 91.3
CREDITOR EFFICIENCY
4.5 140.0
4.0
120.0
3.5
100.0
3.0
2.5 80.0
2.0 60.0
1.5
40.0
1.0
20.0
0.5
0.0 0.0
2005 2006 2007 2008 2009
CREDITOR TURNOVER APP

114

Interpretation:
Creditor turnover has not shown a significant change as it was same in all
years from 2005 to 2009. Not many changes in average payable days as it was 91
days in 2005 and it was remained in its range till 2009. This shows that the
company was in good position. In 2007, creditor turnover was low and average
payment period is high as compared to previous years. This shows that the
company is not in good position in 2007.
11.2.4 Cycle Efficiency

It consists of operating cycle and cash conversion cycle.
1. Operating Cycle
The time from the beginning of the production process to the collection of
cash from the sale of finished good is called operating cycle.
Formula
Operating Cycle = AAI + ACP
115
Calculation:
2005 2006 2007 2008 2009
AAI 44.7 58.2 84.9 87.9 68.6

ACP 15.4 25.2 39.4 12.4 7.3
Operating Cycle 60.1 83.4 124.3 100.3 75.9
2. Cash Conversion Cycle

The time from the beginning of the production process to the collection of
cash from the sale of finished goods and payment made to its suppliers is called
cash conversion cycle (CCC).
Formula
Cash Conversion Cycle = AAI + ACP − APP
Calculation:
2005 2006 2007 2008 2009
AAI 44.7 58.2 84.9 87.9 68.6

ACP 15.4 25.2 39.4 12.4 7.3
APP 91.3 91.3 121.7 91.3 91.3
Cash Conversion Cycle -31.1 -7.8 2.6 9.0 -15.3
CYCLE EFFICIENCY
140.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
2005 2006 2007 2008 2009
-20.0
-40.0
OPERATING CYCLE CCC
116

Interpretation:
Operating cycle was increased from 2005 to 2007 and then it dramatically
change in 2009. Cash conversion cycle was increasing from 2005 to 2008 and then
it decreased in 2009. It decreased because the credit purchase of FFBL was
decreasing. So the greater growth in APP than the growth of ACP and AAI may
lead to the decrease of cash conversion cycle. This presents a good picture about
company credit management.
11.2.5 Assets Efficiency

It consists of total asset turnover ratio and fixed asset turnover ratio.
1. Total Asset Turnover Ratio
The total assets turnover indicates that generate company turnover. Here all
assets are compared with its turnover. Normally it calculates by dividing sales
from its total assets.
Formula
117
sales
Total Assets Turnover Ratio =
totalasset s
Calculation:
2005 2006 2007 2008 2009
Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920

Total Assets 24,581,446 27,681,356 29,045,971 46,771,671 36,225,182
Total Assets Turnover 0.6 0.5 0.4 0.6 1.0
2. Fixed Asset Turnover Ratio

The fixed assets turnover indicates that generate company turnover. Here
fixed assets are compared with its turnover. Normally it calculates by dividing
sales from its total fixed assets.
Formula
sales
Fixed Assets Turnover Ratio = fixedasset s
Calculation:
2005 2006 2007 2008 2009
Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920

Fixed Assets 14,563,103 14,930,339 16,458,265 15,847,104 15,576,899
Fixed Asset Turnover 1.0 1.0 0.7 1.7 2.4
ASSETS EFFICIENCY
2.5 1.2
1.0
2.0
0.8
1.5
0.6
1.0
0.4
0.5
0.2
0.0 0.0
2005 2006 2007 2008 2009
FIXED ASSET TURNOVER TOTAL ASSET TURNOVER

118

Interpretation:
The total asset turnover has been decreased from 2005 to 2007 due to
combination of an increase in total assets and in sales a slight change occurs.
Afterwards from 2008 to 2009 total asset turnover has been increased due to
combination of an increase in sales and decrease in total assets.
The fixed asset turnover has been decreased from 2005 to 2007 due to
combination of an increase in fixed assets and in sales a slight change occurs.
Afterwards from 2008 to 2009 fixed asset turnover has been increased due to
combination of an increase in sales and decrease in fixed assets.
However, FFBL has in good position.
11.2.6 Working Capital Turnover Ratio

It creates a relationship between cost of sales and net working capital. As
working capital has direct and close relationship with cost of sales, therefore the
ratio provide useful idea of how effectively and actively working capital is being
used.
Formula
cos tofsales
Working Capital Turnover Ratio = averagenet workingcap ital
119
Calculation:
2005 2006 2007 2008 2009
Cost of Goods Sold 9,692,236 10,023,044 7,420,310 18,594,752 27,059,566

Average NWC 2652055.5 2907554.5 2242323 1932239.5 1984806
Working Capital Turnover 3.7 3.4 3.3 9.6 13.6
WORKING CAPITAL TURNOVER RATIO
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2005 2006 2007 2008 2009
WORKING CAPITAL TURNOVER
Interpretation:
The working capital turnover shows the slight changes in 2005 to 2007 and
afterwards it shows the positive trend from 2008 to 2009. From 2005 to 2007 net
working capital has been decreased. In 2008 net working capital is higher as
compared to previous year and then it decreased. But in spite of it, working capital
turnover ratio increased due to increase in sales.
11.2.7 Conclusion
120
Consequently the turnover ratios are in “GOOD” position. This shows that
the FFBL has an efficient working capital cycle. The cash is not tied up for long
period and collected as soon as possible. Hence firm will not face liquidity
problem.
EFFICIENCY RATIOS
100.0 140.0
90.0
120.0
80.0
70.0 100.0
60.0 80.0
50.0
40.0 60.0
30.0 40.0
20.0
20.0
10.0
0.0 0.0
2005 2006 2007 2008 2009
AAI ACP APP WCT
11.3 Analysis of Long Term Risk

Thus long-term financial soundness (or solvency) of any business is
examined by calculating ratios popularly, known as leverage of capital structure
ratios. These ratios help us the interpreting repays long-term debt as per
installments stipulated in the contract.
The long-term financial soundness of any business can be judged by its
long-term creditors by testing its ability to pay interest charges regularly and its
ability to repay the principal as per schedule. It usually consists of:
121
1. Proprietory Ratio
2. Capital Gearing Ratio
3. Solvency Ratio
11.3.1 Proprietory Ratio

Proprietary ratio establishes relationship between proprietor’s funds to total
resources of the unit. Where proprietor’s funds refer to equity share capital and
Reserves, surpluses and Total resources refer to total assets. It is also known as
Equity Ratio or Net worth to total assets or shareholders equity to total equity.
Formula
proprietor ' sfund
Proprietory Ratio =
totalasset s
Calculation:
2005 2006 2007 2008 2009
Proprietor’s Fund 7,727,531 8,537,696 8,508,927 10,486,371 10,659,901

Total Assets 24,581,446 27,681,356 29,045,971 46,771,671 36,225,182
Proprietory Ratio 0.31 0.31 0.29 0.22 0.29
PROPRIETORY RATIO
0.35
0.30
0.25
0.20
0.15
0.10
0.05
0.00
2005 2006 2007 2008 2009
PROPRIETORY RATIO
122

Interpretation:
Proprietory ratio shows the negative trend from 2005 to 2008 and
afterwards it increased. As this ratio is 0.31 times in 2005 and 2006 that indicates
69% of funds have been supplied by the outside creditors. In 2007 and 2009 this
ratio was 0.29 times that indicates that 71% of funds have been supplied by the
outside creditors. In 2008 this ratio was 0.29 times that indicates that 78% of funds
have been supplied by the outside creditors.
11.3.2 Capital Gearing Ratio
It is the ratio between the capitals plus reserves i.e. equity and fixed cost
bearing securities. Fixed cost bearing securities include debentures, long-term
mortgage long etc.
Formula
equity
Capital Gearing Ratio = fixed int erestbeari ngdebts
Calculation:
2005 2006 2007 2008 2009
Equity 7,727,531 8,537,696 8,508,927 10,486,371 10,659,901

Fixed Interest Debts 10,509,084 10,714,333 10,967,095 10,065,831 8,818,028
Capital Gearing Ratio 0.74 0.80 0.78 1.04 1.21
123
CAPITAL GEARING RATIO
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
2005 2006 2007 2008 2009
CAPITAL GEARING RATIO
Interpretation:
It shows the positive trend throughout the last five years. This ratio is
favorable for the company because it involves the high degree of risk as well as
the potential returns. And earnings are higher that indicates that FFBL can fulfill
its interest obligations.
11.3.3 Solvency Ratio
Solvency is the term which is used to describe the financial position of any
business which is capable to meet outside obligations in full out of its own assets.
So this ratio establishes relationship between total liabilities and total assets.
Formula
totalliabi lities
Solvency Ratio =
totalasset s
Calculation:
2005 2006 2007 2008 2009
Total Liabilities 16,853,915 19,143,660 20,537,044 36,285,300 25,565,281
124
Total Assets 24,581,446 27,681,356 29,045,971 46,771,671 36,225,182
Solvency Ratio 0.69 0.69 0.71 0.78 0.71
SOLVENCY RATIO
0.78
0.76
0.74
0.72
0.70
0.68
0.66
0.64
2005 2006 2007 2008 2009
SOLVENCY RATIO
Interpretation:
Solvency ratio shows the positive trend from 2005 to 2008 and afterwards it
shows the decrease. Positive trend is not beneficial for the company because it
increase the degree of risk as well as potential returns. In 2008 it indicates that
there are 22% total assets through which the financial obligations are met. In 2009
it indicates that there are 29% total assets through which financial obligations are
met. In 2009 FFBL has in good position as compared to 2008.
11.3.4 Conclusion
Capital gearing ratio is favorable for the company because it involves the high
degree of risk as well as the potential returns. Proprietory ratio shows the negative
125
trend. In 2009 this ratio was 0.29 times that indicates that 71% of funds have been
supplied by the outside creditors. Solvency ratio shows the positive trend that
indicates the FFBL has not in good position. Overall, Solvency ratio analysis
seems to be “GOOD”.
SOLVENCY RATIO ANALYSIS
1.40 0.80
1.20 0.78
0.76
1.00
0.74
0.80
0.72
0.60
0.70
0.40
0.68
0.20 0.66
0.00 0.64
2005 2006 2007 2008 2009
PROPRIETORY RATIO CAPITAL GEARING RATIO SOLVENCY RATIO
11.4 Analysis of Profitability

The main objective of a business concern is to earn profit. In general terms,
efficiency in business is measured by profitability. A low profitability may arise
due to the lack of control over expanses.
Banker’s financial institutions and other creditors look at the profitability
ratios as an indicator whether or not the firm earns substantially more than it pays
interest for the use of borrowed funds and whether the ultimate repayment of their
debt appears reasonably certain. Owners are also interested to know the return
which they can get on their investments. A profitability ratio usually consists of:
1. Percentage change ratio
126
2. Gross profit ratio
3. Net profit ratio
4. Operating profit ratio
5. Expenses ratio
6. Operating ratio
11.4.1 Percentage Change Ratio
The percentage change is the difference between the amount for a
comparison year and for a base year. The two most important percentage changes
are:
 Net sales
 Net income
1. Net Sales
The percentage change of net sales is the difference between the amount for
a comparison year and for a base year.
Formula
amountofch ange
Net Income Percentage Change = ×100
amountinea rlieryear
Calculation:
2005 2006 2007 2008 2009

NET SALES
NET SALES 100% 3% -17% 119% 37%
37%
100%
119% 3%
-17%
2005 2006 2007 2008 2009

NET SALES 127

2. Net Income
The percentage change of net income is the difference between the amount
for a comparison year and for a base year.
Formula
amountofch ange
Net Income Percentage Change = ×100
amountinea rlieryear
Calculation:
2005 2006 2007 2008 2009
NET INCOME 100% 0% 4% 14% 31%
NET INCOME
31%
14%
4%
0% 100%
2005 2006 2007 2008 2009
NET INCOME
128
Interpretation:
The percentage change in net sales and percentage change in net income
shows a positive trend these changes occur due to the fluctuation in amounts.
11.4.2 Gross Profit Ratio
Gross profit ratio is the ratio of gross profit to net sales i.e. sales less sales
returns. The ratio thus reflects the margin of profit that a concern is able to earn on
its trading and manufacturing activity. It is the most commonly calculated ratio. It
is employed for inter-firm and inter-firm comparison of trading results.
Formula
grossprofi t
Gross Profit Ratio = ×100
netsales
Calculation:
2005 2006 2007 2008 2009
Gross Profit 4,562,528 4,684,244 4,822,578 8,226,060 9,665,354

Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920
Gross Profit Ratio 32% 32% 39% 31% 26%
GROSS PROFIT RATIO
40%
35%
30%
25%
20%
15%
10%
5%
0%
2005 2006 2007 2008 2009
GROSS PROFIT
129
Interpretation:
Gross profit ratio showed the positive trend from 2005 till 2007 and
afterwards it declined. The increase in cost incurred during 2007 is mainly due to
the increase in consumption of raw material. This improvement is mainly due to
the increase in the production capacity of the plants for which the raw material
was excessively used to utilize production facility and to meet the market demand.
Due to this, gross profit margin of the company 2008 decreased. However, due to
higher sales, the gross profit increased in 2009. So, in 2009 gross profit ratio is
decreased.
11.4.3 Net Profit Ratio

Net profit ratio expresses the relationship between net profit after taxes and
sales. This ratio is the measure of the overall profitability. Net profit is arrived at
after taking into account both the operating and non-operating items of incomes
and expenses. The ratio indicates what portion of the net sales is left for the
owners after all expenses have been met.
Formula
netprofit
Net Profit Ratio = ×100
netsales
Calculation:
2005 2006 2007 2008 2009
130
Net Profit 2,449,109 2,444,858 2,540,033 2,899,621 3,784,365
Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920
Net Profit Ratio 17% 17% 21% 11% 10%
NET PROFIT RATIO
25%
20%
15%
10%
5%
0%
2005 2006 2007 2008 2009
NET PROFIT
Interpretation:
Sales for the year 2009 as compared to the year 2008, depicts a growth by
211% due to sale of higher units in the market. Moreover, these sales do not
include subsidies which are provided by the government. However, as the prices
of DAP in the international market have been declined so it is expected that the
prices in the local market will also decline.
In this situation, the government will not provide any subsidy as the prices
will be within the affordability of farmers. The decrease in prices will enhance the
demand in the market and to give further boost to the sales of fertilizer’s
manufacturers and influence the yield by the farmers. The profit margin of the
company fluctuates in a range of 10-20%.
131
Profitability of the company is dependent on its net income. The higher the
income the better the profitability or there is an inverse relation of sales i.e. the
lower the sales the higher the profit margin.
11.4.4 Operating Profit Ratio
Operating net profit ratio is calculated by dividing the operating net profit
by sales. This ratio helps in determining the ability of the management in running
the business.
Formula
operatingp rofit
Operating Profit Ratio = ×100
netsales
Calculation:
2005 2006 2007 2008 2009
Operating Profit 3,190,360 3,160,200 3,622,580 6,241,813 7,028,027

Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920
Operating Profit Ratio 22% 21% 30% 23% 19%
OPERATING PROFIT RATIO
30%
25%
20%
15%
10%
5%
0%
2005 2006 2007 2008 2009
OPERATING PROFIT
132
Interpretation:
The Operating profit ratio shows an increasing trend from 2005 to 2007.
And from 2007 it shows the negative trend because the operating expenses were
increased. It is expected that it will increase more in next future because of
expansion plan and increasing demand of fertilizers in all over the world.
11.4.5 Expenses Ratio

Expense ratios are calculated to ascertain the relationship that exists
between operating expenses and volume of assets. It indicates the portion of sales
which is consumed by various operating expenses.
It consists of selling and distribution expenses and administration expenses.
1. Selling and Distribution Expenses
It is calculated by dividing the selling and distribution expenses to net sales.
Formula
selling exp enses
Expense Ratio = ×100
netsales
133
Calculation:
2005 2006 2007 2008 2009
Selling Expenses 1,257,698 1,420,401 1,068,629 1,776,864 2,236,123

Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920
Expense Ratio 9% 10% 9% 7% 6%
2. Administration Expenses
It is calculated by dividing the administration expenses to net sales.
Formula
ad min exp ense
Expense Ratio = ×100
netsales
Calculation:
2005 2006 2007 2008 2009
Admin Expenses 114,470 103,643 131,369 207,383 401,204

Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920
Expense Ratio 1% 1% 1% 1% 1%
EXPENSES RATIO
12%
10%
8%
6%
4%
2%
0%
2005 2006 2007 2008 2009
ADMIN EXPENSES SELLING EXPENSES
134
Interpretation:
Expense ratio consists of the administrative expenses and selling and
distribution expenses. This indicates the portion of sales which is consumed by
various operating expenses. Admin expenses throughout all the years are equal
that indicates that the FFBL spent less money on it. It saved the money and does
the other expenses like as more spent on the selling and distribution expenses.
Selling and distribution expenses throughout the years showed the negative trend.
It indicates that lower this ratio results the lower operating ratio. It is expected that
it will be decrease in near future because of better facilities provided by the
Government.
11.4.6 Operating Ratio

The ratio is determined by comparing the cost of the goods and other
operating expenses with net sales.
Formula
operating cos t
Operating Ratio = ×100
netsales
Calculation:
2005 2006 2007 2008 2009
Operating Cost 11,064,404 11,547,088 8,620,308 20,578,999 29,696,893

Net Sales 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920
Operating Ratio 78% 79% 70% 77% 81%
135
OPERATING RATIO
82%
80%
78%
76%
74%
72%
70%
68%
66%
64%
2005 2006 2007 2008 2009
OPERATING RATIO
Interpretation:
Operating ratio throughout all the years showed the positive trend. This
operating ratio is higher that showed that FFCL is not in good position because
there was small margin of profit available for the purpose of payment of dividend
and creation of reserves. But in 2007 dramatically change occurred that declined
the operating ratio. This showed that the company is in good position in 2007
because there is greater profitability and management efficiency of the concern.
11.4.7 Conclusion
Overall the analysis of profitability of FFBL showed the “GOOD” position.
Gross profit ratio throughout the years showed good position. This improvement is
due to the increase in the production capacity of the plants for which the raw
136
material was excessively used to utilize production facility and to meet the market
demand. Net profit ratio throughout all the years showed the positive and negative
trend. The higher the income the better the profitability or there is an inverse
relation of sales i.e. the lower the sales the higher the profit margin.
Operating profit ratio throughout all the years showed the negative trend. It
is expected that operating profit ratio will increase more in next future because of
expansion plan and increasing demand of fertilizers in all over the world.
Operating ratio throughout all the years showed the positive trend. As lower this
ratio, better is the position because there is greater profitability and management
efficiency of the concern.
11.5 Analysis of Return

Basic purpose of this test is to assist decision maker in efficiently allocating
and using economic resources. In deciding where to invest their money, equity
investor wants to know how efficiently companies utilize resources. The most
common method of evaluating with which financial resources are employed to
compute the rate of return earned on the resources. It includes:
1. Return on assets
2. Return on investment
3. Return on equity
11.5.1 Return on Assets
137
Return on assets is used to evaluate whether management has earned a
reasonable return with the assets under the control. Return on assets measure the
efficiency with which the management has utilized the assets under its control,
regardless of whether these assets were financed with debt or equity capital.
Return on assets is an indicator of how profitable a company is before leverage,
and is compared with companies in the same industry.
Formula
netprofit
Return on Assets = ×100
totalavera geassets
Calculation:
2005 2006 2007 2008 2009
Net Profit 2,449,109 2,444,858 2,540,033 2,899,621 3,784,365

Average Total Assets 23274195 26131401 28363663.5 37908821 41498426.5
ROA 8% 7% 7% 6% 9%
RETURN ON ASSETS
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
2005 2006 2007 2008 2009
RETURN ON ASSETS
138
Interpretation:
Return on assets shows the negative trend from 2005 to 2008. This decrease
occurs due to the increase in total assets specially fixed assets while net income
after subtracting the compensation from GOP is also low as compared to the
average total assets. This is mainly due to the poor equipment and obsolete
technological equipment used in process. In 2009 it showed the positive trend that
indicates that the FFBL improved its position in the industry.
11.5.2 Return on Investment
Return on investment (ROI) indicates the percentage of return on the total
capital employed in the business. It is also called overall profitability ratio.
Formula
EBIT
Return on investment = ×100
capitalemp loyed
Calculation:
2005 2006 2007 2008 2009

RETURN ON INVESTMENT
EBIT 3,190,360 3,160,200 3,622,580 6,241,813 7,028,027
Capital Employed 18,236,615 19,252,029 19,476,022 20,552,202 19,477,929
ROI 17% 16% 19% 30% 36%
40%
Graphical35%representation
30%
25%
20%
15%
10%
5%
0%
2005 2006 2007 2008 2009
RETURN ON INVESTMENT
139

Interpretation:
Return on investment showed the positive trend throughout all the years. It
improved its position that indicates that the FFBL is in good position. It increased
due to the lower interest rate. The whole situation concludes that ROI is increasing
year by year due to the higher returns than the total capital employed in business.
11.5.3 Return on Equity

The Return on Equity ratio looks only at return earned by management on
the shareholder investment. ROE measures a firm's efficiency at generating profits
from every unit of shareholders' equity. The company’s ROE shows how well a
company uses investment funds to generate earnings growth.
Formula
NPAIT
Return on Equity = ×100
equity
Calculation:
2005 2006 2007 2008 2009
140
Net Profit 2,449,109 2,444,858 2,540,033 2,899,621 3,784,365
Equity 7,727,531 8,537,696 8,508,927 10,486,371 10,659,901
ROE 32% 29% 30% 28% 36%
RETURN ON EQUITY
40%
35%
30%
25%
20%
15%
10%
5%
0%
2005 2006 2007 2008 2009
RETURN ON EQUITY
Interpretation:
Return on equity showed the positive and negative trend throughout all the
years. The company’s ROE shows how well a company uses investment funds to
generate earnings growth. ROE decreased in 2006 and 2008. In 2009, it showed
the growth in ROE due to increase in the net income and equity as compared to the
last year.
11.5.4 Conclusion
Return on investment indicates the percentage of return on the total capital
employed in the business. Return on assets is used to evaluate whether
management has earned a reasonable return with the assets under the control. The
Return on Equity ratio looks only at return earned by management on the
141
shareholder investment. Overall the FFBL showed the “GOOD” position because
its ROI is in good position that gives the higher return.
ANALYSIS OF RETURN
40% 10%
35% 9%
8%
30%
7%
25% 6%
20% 5%
15% 4%
3%
10%
2%
5% 1%
0% 0%
2005 2006 2007 2008 2009
ROI ROE ROA
142
12. Cross Sectional Analysis
12.1 Introduction
Cross sectional analysis is used to compare the company’s financial
performance to the industry’s average performance. It means the analysis of
financial ratios of company with the same ratios of the different companies in the
same industry. An analyst does this in order to find the company with its healthiest
financial status. This is helpful in making informed investment decisions.
Cross sectional analysis is done by using the some basic ratios of the
industry in which the firm under analysis belongs to (and specifically, the average
of all the firms of the industry) as benchmarks or the basis for our company’s
overall performance evaluation. The benchmark usually chosen is the average ratio
value for all the firms in an industry for the time period.
In cross sectional analysis, ratios are used and compared between several
firms of the same industry in order to draw conclusions about an entity's
profitability and financial performance.
Criteria:
Comparison of different fertilizer firm as Fauji Fertilizer Bin Qasim
Limited, Engro Chemical Pakistan Limited, and Fauji Fertilizer Company Limited
143
financial ratios at the same point in time from 2005 to 2009, involves comparing
the firm’s ratios to those of other firms in its industry or to industry averages.
Actual calculations are as under…..

Cross sectional analysis of sales, cost of goods sold, and net profit is as:
Amounts:
2005 2006 2007 2008 2009

Sales
FFCL 39,757,510 44,680,986 40,688,779 57,433,698 72,914,811
FFBL 14,254,764 14,707,288 12,242,888 26,820,812 36,724,920 GOOD
ECPL 18,756,820 20,240,035 34,120,611 40,973,047 58,152,368
CGS
FFCL 26,074,950 30,265,238 25,731,835 36,829,444 47,574,610
FFBL 9,692,236 10,023,044 7,420,310 18,594,752 27,059,566 GOOD
ECPL 14,072,832 15,097,181 26,138,366 30,111,348 44,658,196
Net Profit
FFCL 6,395,259 6,250,971 6,594,095 8,769,347 10,598,506
SALES FFBL 2,449,109 2,444,858 2,540,033 2,899,621 3,784,365 BETTER
ECPL 2,283,783 2,138,842 2,833,788 4,206,690 3,718,802
80,000,000
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL

144

COST OF GOODS SOLD
50,000,000
45,000,000
40,000,000
35,000,000
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL

NET PROFIT
12,000,000
10,000,000
8,000,000
6,000,000
4,000,000
2,000,000
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL
145

Interpretation:
Cross sectional analysis shows that FFBL has a good position in market on
the basis of its income statement as compare to the other market players. It stands
3rd on the basis of sales and cost of goods sold and 2nd on the basis of profits.
12.3 Balance Sheet
Cross sectional analysis of current assets, current liabilities, and equity is
as:
Amounts:
2005 2006 2007 2008 2009

Current
Assets
FFCL 20,463,506 20,461,126 21,593,297 37,770,114 33,108,426
FFBL 9,266,673 11,322,594 11,161,328 28,492,569 18,443,765 BETTER
ECPL 5,261,432 8,710,860 24,279,441 20,661,003 19,923,726
Current
Liabilities
FFCL 18,707,783 18,687,259 20,666,876 37,610,128 34,389,137
FFBL 6,344,831 8,429,327 9,569,949 26,219,469 16,747,253 BETTER
ECPL 2,907,331 6,397,441 9,604,833 12,279,929 15,970,218
CURRENT ASSETS
Equity
FFCL 15,411,567 16,741,909 16,486,640 18,410,468 19,336,001
FFBL 7,727,531 8,537,696 8,508,927 10,486,371 10,659,901 GOOD
ECPL 7,540,790 9,796,171 18,006,690 23,547,731 29,344,395
40,000,000
35,000,000
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL

146

CURRENT LIABILITIES
40,000,000
35,000,000
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL

EQUITY
30,000,000
25,000,000
20,000,000
15,000,000
10,000,000
5,000,000
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL
147

Interpretation:
the basis of its balance sheet as compare to the other market players. It stands 2nd
on the basis of current assets and current liabilities and 3rd on the basis of equity.
12.4 Short Term Financial Position Analysis
Cross sectional analysis of short term financial position focuses on Current
ratio and quick ratio.
Amounts:
2005 2006 2007 2008 2009

Current Ratio
FFCL 1.09 1.09 1.04 1 0.96
FFBL 1.46 1.34 1.17 1.09 1.1 BETTER
ECPL 1.81 1.36 2.53 1.68 1.24
Quick Ratio
FFCL 0.86 0.84 0.81 0.72 0.78
FFBL 1.21 1.15 0.97 0.82 0.92 BETTER
ECPL 0.84 0.82 1.93 0.92 0.83
Absolute Liquid
Ratio
CURRENT RATIO
FFCL 0.77 0.64 0.59 0.33 0.73
FFBL 1.14 0.97 0.86 0.79 0.88 GOOD
ECPL 0.52 0.42 1.36 0.55 0.54
3
2.5
1.5
0.5
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL

148

QUICK RATIO
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL

1.4
1.2
0.8
0.6
0.4
0.2
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL
149
Interpretation:
the basis of its liquidity as compare to other market players. It stands 2 nd on the
basis of current ratio and quick ratio and 3rd on the basis of absolute liquid ratio.
12.5 Profitability Analysis
Cross sectional analysis of profitability position focuses on gross profit
margin, net profit margin and operating profit margin.
Amounts:
2005 2006 2007 2008 2009

Gross Profit
Ratio
FFCL 34% 32% 37% 36% 35%
FFBL 32% 32% 39% 31% 26% BETTER
ECPL 25% 25% 23% 27% 23%
Net Profit Ratio
FFCL 16% 14% 16% 15% 15%
FFBL 17% 17% 21% 11% 10% BETTER
ECPL 12% 11% 8% 10% 6%
Operating
Profit Ratio
GROSS PROFIT
FFCLRATIO
25% 23% 28% 28% 27%
FFBL 22% 21% 30% 23% 19% BETTER
ECPL 18% 14% 13% 16% 13%
40%
35%
30%
25%
20%
15%
10%
5%
0%
2005 2006 2007 2008 2009
FFCL FFBL ECPL

150

NET PROFIT RATIO
25%
20%
15%
10%
5%
0%
2005 2006 2007 2008 2009
FFCL FFBL ECPL

OPERATING PROFIT RATIO
30%
25%
20%
15%
10%
5%
0%
2005 2006 2007 2008 2009
FFCL FFBL ECPL
151
Interpretation:
the basis of its profitability as compared to other market players. It stands 2nd on
the basis of gross profit ratio, net profit ratio and operating profit ratio.
12.6 Return Analysis
Cross sectional analysis of profitability focuses on gross profit margin, net
profit margin and operating profit margin.
Amounts:
2005 2006 2007 2008 2009

ROI
FFCL 34% 33% 35% 44% 55%
FFBL 17% 16% 19% 30% 36% BETTER
ECPL 29% 21% 11% 9% 6%
ROE
FFCL 41% 37% 40% 48% 55%
FFBL 32% 29% 30% 28% 36% BETTER
ECPL 30% 22% 16% 16% 13%
ROA
FFCL 22% 21% 22% 25% 27%
FFBL 8% 7% 7% 6% 9% GOOD
RETURN
ECPLON INVESTMENT
24% 16% 13% 10% 7%
60%
50%
40%
30%
20%
10%
0%
2005 2006 2007 2008 2009
FFCL FFBL ECPL

152

RETURN ON EQUITY
60%
50%
40%
30%
20%
10%
0%
2005 2006 2007 2008 2009
FFCL FFBL ECPL

RETURN ON ASSETS
30%
25%
20%
15%
10%
5%
0%
2005 2006 2007 2008 2009
FFCL FFBL ECPL
153
Interpretation:
the basis of its returns as compared to other market players. It stands 2 nd on the
basis of ROI and ROE and 3rd on the basis of ROA.
12.7 Efficiency Analysis
Cross sectional analysis of efficiency focuses on inventory turnover, debtor
turnover and creditor turnover.
Amounts:
2005 2006 2007 2008 2009

Inventory
Turnover
FFCL 7 7 5 5 6
FFBL 8 6 4 4 5 GOOD
ECPL 8 5 7 5 7
Debtor
Turnover
FFCL 19 17 10 6 9
FFBL 24 15 9 30 50 GOOD
ECPL 23 12 9 6 13
Creditor
Turnover
INVENTORY TURNOVER
FFCL 3 4 4 4 4
FFBL 4 4 3 4 4 GOOD
ECPL 9 6 5 4 6
8
Graphical
7
Representation
6
5
4
3
2
1
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL

154

DEBTOR TURNOVER
50
45
40
35
30
25
20
15
10
5
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL

CREDITOR TURNOVER
9
8
7
6
5
4
3
2
1
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL
Source: FFBL Annual Report 155

Interpretation:
the basis of its efficiency as compared to other market players. It stands 3rd on the
basis of inventory turnover, debtor turnover and creditor turnover.
12.8 Long Term Financial Position Analysis
Cross sectional analysis of long term financial position focuses on solvency
ratio.
Amounts:
2005 2006 2007 2008 2009

Solvency
Ratio
FFCL 0.68 0.66 0.69 0.75 0.72
FFBL 0.69 0.69 0.71 0.78 0.71 BETTER
ECPL 0.48 0.51 0.63 0.71 0.78
SOLVENCY RATIO
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2005 2006 2007 2008 2009
FFCL FFBL ECPL

156
Interpretation:
the basis of its long term financial position as compared to other market players. It
stands 2nd on the basis of solvency ratio.
12.9 Conclusion
According to the Cross Sectional Analysis,

the basis of its returns as compare to the other market players. All the profits are
increasing as per industry. But due to poor sales, low volume profits are also
obtained. FFBL’s performance is also improving and gross profits is increased that
capture industry average coupled with better relative increase in selling, general
expenses. Returns are increasing. Return on Assets is decreased that may create
problem in management. But company has sufficient finance to fulfill the
liabilities hence firm will not face liquidity problems.
157
158
13. Conclusion
Overall the fertilizer industry showed the proper but sustainable growth
with good profitability. The strength of this sector can be derived from the
agriculture sector that is the most important contributor to Pakistan’s GDP. The
government supports in agriculture and fertilizer industry are vital variables in the
social development of the country. Therefore, the fertilizer industry offers the safe
and good opportunities to the banks.
The company mainly manufactures and market fertilizers. FFBL offered the
good shareholder returns and demand is also rising so that the manufacturers
expand its capacity to accommodate in the industry with its other market players.
That’s why; we can say that the FFBL has sound fundamentals and significant
potential for the future. FFBL opened the more opportunities for the investors
related the capacity for the export of fertilizer.
The government keep the input costs low for some time to come because it
know that the local manufactures are determined to pass on all such increases to
consumers. So, this preserves the industry’s growth and expansion and move
towards the satisfied condition, the entry barriers for new firms arise.
FFBL’s can lend to its short term debts to its lenders because its short term
capacity is good. The company can pay its bills soon and its collects its receivable
in good time period. So, it can open the great and sound opportunities for the
lenders.
We can say that the company achieved its goals and showed the customer
satisfaction. It maintains its growth and shows the healthy increase in the profits in
the five years.
159
160
14. Future Projections
The Company is actively looking out for further diversification
opportunities by either going for own projects or participating with other investors
in opportunities like privatization, Liquefied Natural Gas (LNG) Terminal,
Independent Power Projects, Cement Sector etc. If the company would be able to
continue its current stability and investments in profitable projects then the
company would be able to increase its market share as well as profitability.
The company is also investing in Fauji Cement Company Limited (FCCL).
Fauji Cement Company Limited (FCCL), an Associated Company of FFBL, is in
the process of expanding its existing operating capacity from 1.17 MTPA to 3.51
MTPA (200% expansion). The Fauji Cement Brand carries a premium in the
market and is perceived as a better quality product. This is why FCCL has been
operating at a higher capacity than the industry over the last 5 years.
Pakistan is having more than enough availability of both DAP and ‘lately
imported’ Urea during the first quarter 2009. At current price levels, there does not
seem any need of DAP subsidy. Timely disbursement of promised wheat support
price to the farmers must be ensured, in order to improve their cash cycle.
The FFBL continue to take proactive measure to mitigate potential risks and cope
with challenges to company’s profitability arising from the current economic
climate.
However, despite challenges mentioned earlier, the company expects to
have highest production and sales during 2009 and accordingly, good results by
the end of Year 2009.
161
162
15. Recommendations
On the basis of SOWT analysis and other firm analysis these
recommendation are generated.
 Fauji Fertilizer Bin Qasim Ltd. is one of the top Fertilizer production plants
of Pakistan enjoying satisfactory reputation throughout the country.
 Fauji Fertilizer Bin Qasim Limited is a subsidiary of Fauji Fertilizer
Company Limited (existing client) and the only fertilizer complex in
Pakistan producing DAP fertilizer and granular urea making significant
contribution towards agricultural growth of the country.
 Investment in Pak-Marco Phosphore (PMP) by FFBL ensures uninterrupted
supply of phosphoric acid at a cheaper price, which is a major raw material
for manufacturing DAP.
 Generally with Pakistan being a net importer for DAP (70% demand met
through imports), producers used to have a cost edge over importers owing
to fixed cost throughout the year. Being a sole producer of DAP in
Pakistan, FFBL avails scores of benefits as compared to other suppliers.
 FFBL enjoys an assured demand for its domestically manufactured product
as well as imports. Strong identity and recognition of brand “Sona” give an
edge to FFBL over its competitors.
 Additionally, the augmented demand gives propensity to fertilizer plants to
capture more and more market share and to get leading position in the
industry.
163
 The level of training is lower and also lack of knowledge is available.
That’s why FFBL must focus on hiring the new persons and provide the
need and new technology to the employees.
164
16. Annexure
All data and information are gathered from the annual reports of Fauji
Fertilizer Bin Qasim Limited…………
 www.ffbl.com.pk
 http://www.google.com.pk
 http://www.kse.com.pk/
 http://www.sbp.org.pk/
 http://www.brecorder.com/
 http://www.investopedia.com
165

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“Fauji Fertilizer Bin Qasim Limited”

Financial Analysis Report

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

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

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

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

guideline to accomplish this task. Her spiritual personality and kindness

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

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

Source: Economic Survey of Pakistan

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

Source: Economic Survey of Pakistan 3

Source: State Bank of Pakistan

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

Local manufactures Import

Source: Economic Survey of Pakistan

Sector Fertilizer Industry

Sector Life Cycle Expansion stage

Fertilizer industry is fast growing industry, being aided by

• Dawood Hercules Company Ltd,

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

Inflation rate, Interest rate, Environmental problems,

1.4.2 Market Situation

Source: NFDC, IGI Research

Source: NFDC, IGI Research

Source: Company Reports and NFDC

Source: NFDC, IGI Research

1.4.3 Future Outlook and Growth

Date of Formation 17th November, 1993

• Granular Urea (Sona Urea)

• Lahore Stock Exchange

Registered Office 73-Harley Street, Rawalpindi, Pakistan

Plot # EZ/1/P-1, Eastern Zone,

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

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

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

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

KPMG Taseer Hadi & Co Chartered

Orr Dignam & Co

Manufacturing Plants Production (Metric Ton / Day)

Urea Granular 1670 1920

DAP 1350 2230 (After Revamp)

Ammonia 1270 1570 (After Revamp)

2.2.3 Core Values

2. Di Ammonium Phosphate (Sona DAP)

Certification Description Audit Company

ISO 14001 - 2004 Environmental Management System

3.1.3 Potential Entrants

3.1.5 Degree of Competitive Rivalry

4.1.2 Economic Factor

4.1.4 Technological Factor

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

LESS: COST OF SALES

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

LESS: OPERATING EXPENSES

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

LESS: OTHER OPERATING COSTS

2005 2006 2007 2008 2009

Other operating expenses

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

PLUS: OTHER INCOMES

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

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