FAUJI FERTILIZER

COMPANY LIMITED

Presenters:
• Palwasha Achakzai
• Faiqa Qamar
• Asiya jamil
 FAUJI FERTILIZER COMPANY

• Public company

• Fertilizers and urea

• Parent company- Fauji foundation

• Subsidiaries

• Askari Bank

• FFC energy limited

• Fauji cement

• Fauji Akbar Portia Marine Terminal Limited

• Fauji Oil Terminal And Distribution Company Limited

 COMPANY SPECIFIC RISKS

Macroeconomic SLIDE
Operational 9
increasing government which may adversely impact
borrowings, declining foreign the value of the organization
exchange reserves, weak caused by internal factors.
political situation. Workforce turnover or supply
chain disruptions

Commercial Financial
Reduction in an entity’s Credit risk
market share, product price Market risk:
regulation or other regulatory Liquidity Risk
amendments posing threat to
the organizations i.e.
profitability

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160 70
INDUSTRY
ANALYSIS
140 60

120
50 • Largest sector of the economy in
100
terms of labor employment
40
80 • Average rate of 2.1% over the last
30
five years
60

20
• 19% to its GDP
40
• Overall GDP contracted by 0.4%
10
20 • Growth of 2.7%

0 0 • Three companies holding 82%

1/5/20YY 1/6/20YY 1/7/20YY 1/8/20YY 1/9/20YY

Volume Close
share in the urea market
 Fertilizer Industry
Fatima Fertilizer
Imports 6%
15%

Other
3%

INDUSTRY
ANALYSIS
Fauji Fertilizer
43%

Engro Fertilizer
33%

Fatima Fertilizer Fauji Fertilizer Engro Fertilizer Other Imports

 Porter Five Forces Model

SLIDE 9
Buyers Bargaining power
Threat of Substitute
Low
Low • Low power
• Low threat of substitutes • Prices mainly decided by large
• Crucial nutrients player

LOW

Threat of new Entrant Supplier Bargaining Power

Low High
• High Capital cost of plant • Government supplies natural gas
development • LNG based on imported price available as substitute
• Limited supply of major • No control over gas supply or international pricing
raw material
• Shortage of Natural Gas
• Strong dealer network
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 BALANCE SHEET ANALYSIS

• Equity - increased its profitability and retention by 20% in 2020.

• Non-current liabilities - long term borrowing remained at Rs. 10.63

billion that is Rs 5.27 billion lower than year 2015.

• Current liabilities - short term borrowing and current portion of

long term borrowings have increased by 28% to fund working capital
requirements

• Non-current assets - PPE, intangible assets and long term

investments have increased Rs 8.13 billion. Major portion of long-
term investments goes to fauji fresh and freeze limited (Rs 1.5
billion) and fauji fertilizer bin qasim limited (Rs 2.5 billion
 INCOME STATEMENT ANALYSIS

• Turnover - reduced in 2020 due to decrease in selling prices of urea

• Gross profit - improved 2018 onwards due to improvement in fertilizers
prices.
• Distribution cost - has been improving with an average rate of 4% despite cost
control measures and lower fuel prices
• Finance cost - The year 2020 had lesser borrowing needs that is why finance
cost was lower than 2019. However, FFC had high borrowings in 2015 and
2016. Moving forward, the requirements improved in 2018 and 2019, and the
finance cost increased.
 CASH FLOW STATEMENT ANALYSIS

• Operating activities - significant increase is shown in cash flows from

operating activities due to higher increase in working capital changes. In 2020,
cash from operating activities was record highest at Rs 39.54 billion.
• Investing activities - mixed trend in the last 4 years. Cash in this section
comes from fixed capital expenditure and equity investment in subsidiaries.
Inflows in this section depend upon dividend distribution by
subsidiaries/associates. An average increase in cash flows from investing
activities in the last six years has been Rs 4.51 billion.
 CASH FLOW STATEMENT ANALYSIS

• Financing activities - The cash out flow for financing activities has stayed
close to the average of Rs 10.19 billion. The reason of this consistency has
been the dividend payments to shareholders and repayment of long term
financing.
 RATIO ANALYSIS

• Profitability ratios
• Gross profit margin remained high at 32.34% irrespective of the rising
inflation because of efficient cost controls of FFC.
• FFC improved its net profit margin, showed 21.32% in 2020 because of
recognition of gains on GIDC liability, and cost control measures.
• Liquidity ratios
• The current ratio of FFC as 1.37 times, which was the highest in the last six
years. This was because of increased short-term investments of the
company.
• FFC has improved its “cash to current liabilities ratio” to 0.71.
 RATIO ANALYSIS

• Turnover ratios
• Trade debts of the company have remained high in 2019 and 2020 that is why its
debtor turnover is at 29 days, which is relatively higher.
• The company has gotten rid of most of its fertilizer stock that has improved its
inventory turnover days to 20 days as compared to last six years average of 27 days
• GIDC payables long term portion is classified as non-current liability, this has reduced
creditor turnover days to 250 days from 258 days
• The fixed asset turnover has reduced to 4.28 times because revenues have reduced due
to price reduction despite the fact that the company offloaded fertilizer stock during
the year 2020.
 RATIO ANALYSIS

• Investment / market ratios

• EPS has increased by 22% in 2020 to Rs 16.36 on account of overstated profitability due to temporary
gains realized.
• The trading range of FFC’s stock on PSX was Rs. 82.71 to Rs. 114.54 during 2020 and the stock closed at
Rs 108.5 that was Rs 7.03 higher than 2019
• The price to earnings ratio was averaged at 8.55 times as an average for the last six years.
• Capital structure ratios
• financial leverage ratio remained similar to 2019 that was 0.95 times
• debt to equity ratio increased to 20.8 compared to 15.85 in 2019
• interest coverage ratio has also increased due to lower finance cost in the past years, which was because
of lower interest cost.
 Sensitivity Analysis
SLIDE 9
Currency Price risk

variable rate instrument

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 Buy

VALUATION DDM

RRR
 SLIDE 11

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