Fauji Fertilizer

Topics: Financial statements, Urea, Financial ratio Pages: 36 (8394 words) Published: April 7, 2013
Part 1

(Word Count: - 867 )

1. Project Objectives And Overall Research Approach:
The objectives of this project are to evaluate the operational performance of the Fauji Fertilizer Company Limited over the three years. This includes both financial and non-financial performance.

1. Reasons for choosing the topic:
The reason why I have chosen the topic is that as I am a student of ACCA with some background of financial evaluation like Ratio Analysis and this is my prime objective to gain some expertise in this field. The subjects which I like the best in ACCA are the Financial Reporting and Business Analysis and now I am studying these two subjects for December, 2008 exam and this will help me out my preparation for exam also. This kind of research always helps the student to evaluate the Organization Performance and a good tool also for decision making especially for an investment decision. That’s why I have chosen this topic.

2. Reason for choosing the Fauji Fertilizer Company Limited.

Agriculture Sector being the backbone of the country depends upon fertilizer producing companies. The effect of global food demand and supply is major concern for every nation. The world population is increasing day by day and Agriculture Sector is the one which is responsible to meet the increasing demand of food for the population. Agriculture sector is heavily supported by the Fertilizer sector through the production of fertilizer and DAP (Di-Ammonium Phosphate) which are the sources through which the production capacity of agriculture sector can be enhanced.

The reason why I have selected the FFCL for research and analysis is that because FFCL is the largest fertilizer producer of Pakistan. It is a well established Organization in the country and occupies the position in top 25 Listed Companies of the country (FFCL Annual Report 2007)[i]. It was incorporated in 1978 as a Private Limited Company. This was a joint venture between Fauji Foundation a leading charitable trust in Pakistan and Haldor Topsoe A/S of Denmark. It also holds 50.88 % stack in its subsidiary Fauji Fertilizer Bin Qasim Limited formerly FFC-Jordan Fertilizer Company Limited. In the year 2002 “FFCL acquired ex Pak Saudi Fertilizers Limited Urea Plant, situated at Mirpur Mathelo, Distt. Ghotki from National Fertilizer Corporation (NFC) through the privatization process of the Government” (Business Recorder, Islamabad)[ii].

FFCL is listed in Karachi, Lahore and Islamabad Stock Exchanges. It got several prizes for Best Financial Reporting from Institute of Chartered Accountants of Pakistan and Institute of Cost and Management Accountants of Pakistan. FFCL’s Annual Reports for the year 2003 to 2006 have also won international SAARC Region Awards for Best Presented Accounts in the Manufacturing Sector from the South Asian Federation of Accountants-SAFA.

“These awards reflect FFC’s unrelenting commitment on quality and accountability through transparency, timeliness and completeness of information, excellent governance framework and dedication to best practices, ethics and values”. (Annual Report 2007)[iii].

It has a good track record over the past and has shown tremendous results in terms of profitability as well as return on capital employed. As Pakistan has an Agro-Based Economy, FFCL is the one which contribute more to strengthen the country economy through providing Good Quality Fertilizer and through paying huge amount to the treasury of the Government by paying taxes, levies, excise duties and sales tax which is demand demonstrated by the payment of PKR 11,979 Million in FY2007.

3. My Research Questions are

“How and why the FFCL has shown good results in the past 3 years when the whole economic situation was stricken by the high rate of inflation especially the energy sector which constitute larger portion of the cost of fertilizer in the Fertilizer Industry?

Why the FFCL has a good strong Brand name in the...

References: [x] www.igisecurities.com.pk/fertilizer Page#: 5 (visited 26 August 2008).
[xi] www.pakistan.gov.pk/ministry of food, agriculture, and livestock (visited 26 August 2008).
[xii] www.igisecurities.com.pk/fertilizer sector in Pakistan. Page#: 10, (visited 26 August 2008).
[xiii] www.google.com/technolgical changes in the world in fertilizer sector. (visited 2 September, 2008).
[xiv] www.ecltrade.com /fertilizer sector, ECL Research Report, (visited 8 September, 2008).
[xvi] www.igisecurities.com.pk/fertilizer sector in Pakistan. Page#: 10, (visited 26 August 2008).
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