komal afs report

8/4/2019 Komal Afs Report

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Companies:-

1. Engro Chemical Company Ltd

2. Fauji Fertilizer Company Ltd.

3. Fauji Fertilizer Bin Qasim Ltd. (for calculating industry average)

ENGRO CHEMICHALS PAKISTAN LIMITED

Introduction:Engro Chemical Pakistan Limited is the second largest producer of Urea fertilizer in Pakistan.

The company was incorporated in 1965 and was formerly Exxon Chemical Pakistan Limited until 1991, when

Exxon decided to divest their fertilizer business on a global basis and sold off its equity of 75% shares in our

company.


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The Employees of Engro, in partnership with leading international and local financial institutions bought out

Exxons equity and the company was renamed as Engro Chemical Pakistan Limited. Engro is a public limited

company listed on the Stock Exchanges of Karachi, Lahore and Islamabad.

Location of Head Office:

Clifton Karachi

Regional Offices:

Hyderabad

Quetta

Nawabshah

Rahim Yar Khan

D G Khan

Multan

Lahore

Gurjanwala

D I Khan

Factories:

Dharki, Sindh.

Bin Qasim, Karachi


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PRODUCT OFFERED

FERTILIZER BY ENGRO CHEMICAL PAKISTAN LTD

Nitrogenous Fertilizers:

. Engro UREA is a trusted, high-grade fertilizer which is suitable for all crops on all types of soils. Engro Urea

is an excellent source of Nitrogen for the vast majority of cultivated soils of Pakistan.

Phosphatic Fertilizers

. Engro DAP: contains 46% P2O5 and 18% N. It is a good source of P fertilizer for all crops. It is an equally

good source on problem soils. On an overall basis it suits to about 90% soils of the country.

. Engro Zorawar: is one of the highest grade phosphatic fertilizers. It is acidic in reaction more than 90% is

water soluble. It is a beneficial fertilizer for all crops on all soils of Pakistan and produces excellent results on

alkaline soils, due to its acidic nature.

. Engro Phosphate: is brown colored mono ammonium phosphate with 11% nitrogen and 52% phosphorus. It is

being marketed as relatively cheaper alternate of DAP.


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Blended Fertilizers

. Engro Zarkhez: is homogenously granulated fertilizer which maximizes crop yield by providing balanced

nutrition for a wide variety of crops through the uniform availability of Nitrogen, Phosphorous and Potassium.

Fertilizers have low moisture content, high crush strength; 2mm-4mm granule size and free flowing nature -

attributes which ensure excellent handling and application characteristics.

. Engro NP: It provides 22% nitrogen, and 20% phosphorus. ECPL entered into NP business in 2005 to Primary

focus area for ENP marketing is South Zone (Sind).

Micro Nutrients:

. Zingro: Zinc Sulphate, a highly effective, primarily targets Zinc deficiency in crops like Rice, Potato, Maize,

Sugar cane, Wheat, Cotton, vegetables and fruits. Zingro increases crop yield and enhances crop appearance.


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FAUJI FERTILIZER CORPORATION

Introduction:

FFC was incorporated in 1978 as a PVT. Basically this was the joint venture between Fauji foundation and

Haldor Topsoe of Denmark. The initial capital of the company was 813.9 Million Rupees. The present share

capital of the company stands at Rs. 3.0 Billion. FFC has Rs. 1.0 Billion stakes in the subsidiary Fauji Fertilizer

Bin Qasim Limited (formerly FFC-Jordan Fertilizer Company Limited).

Location of Office:

Rawalpindi

Regional Offices:

Multan

Lahore

Sukkar

Mirpur khas


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Nawabshah

Plant Location:

There are 3 plants of FFC in Pakistan

2 plants are located in Goth Machhi

1 plant in Mirpur Mathelo

PRODUCT OFFERED

. Sone Urea: most widely used fertilizer in the country. Fertilizer is white in color, free flowing, readily soluble

in water and both contain 46% Nitrogen. Because of its high solubility, it is suitable for solution fetilizers.

. Sona DAP: is the most concentrated phosphatic fertilizer containing 46% P2O5 and 18% Nitrogen. It is the

widely used phosphatic fertilizer in the world as well as Pakistan. The solubility of DAP is more than 95%. Its

nitrogen to phosphorus ratio ( 1 : 2.5 ) makes it an ideal fertilizer, to meet the initial requirement of most of the

crops.

. Sona SOP: This fertilizer is an important source of Potash, which is a quality nutrient for production of crops

especially fruits and vegetables. Potash improves the resistance of the plants against pests, diseases and stresses

like water.


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GEOGRAPHICAL LOCATION OF FERTILIZER COMPANIES

FACTORIES LOCATION

CITIES

NUMBER OF FACTORIES

Bin Qasim 2

Sheikhupura 1

Sadiqabad, Rahim Yar Khan 2Multan 1

Haripur 2Faisalabad 1

Mirpur Mathelo, Dist Gotki 1

Daudkhel 1

WAREHOUSES

Mian Chunnu

Faisalabad

Khanewal

D.G. Khan

Dera Ismail Khan

Sukkhar

Lahore

Karachi

Larkana

Dadu

Thatta

Mirpur khs

Nawabsha

Multan

Sheikupura


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TOTAL PRODUCTION OF FERTILIZER INDUSTRY

(IN

THOUSAND

TONS)

YEAR

UREA SUPER

PHOSPHAT

E

AMMOMIU

M

NITRATE

NITRO

PHOSPHAT

E

AMMONIU

M

SULPHATE

1998-1999 3521.7 21.6 338.8 265.0 -

1999-2000 3785.0 145.8 386.5 261.3 -

2000-2001 4005.1 159.6 374.4 282.5 -

2001-2002 4259.6 161.0 329.4 305.7 -

2002-2003 4401.9 147.2 335.3 304.9 -

2003-2004 4431.6 167.7 350.4 363.5 -

2004-2005 4606.4 163.1 329.9 338.9 -

2005-2006 4806.4 16.8 327.9 356.6 -

2006-2007 472.5 148.9 330.8 325.8 -

2007-2008 4924.9 157.6 343.7 329.7 -

2007-2008(JULY-

MARCH)

3660.5 114.8 246.0 218.4 -

2008-2009

(JULY-

MARCH)

3652.4 143.2 245.7 218.4 -


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CRITERIA FOR SELETING THESE COMPANIES AS MAJORPLAYERS

As the graph shows the market share of all the players of the industry, it is clearly shown that major players

of the industry are ENGRO and FFC. And this is the reason for selecting these companies as the major

players.

IMPACT ON THE INDUSTRY

Since these (ENGRO, FFC) are the major players of this industry, they enjoy as the price setter in the

industry. They have so much influence on the other players and they are also a barrier to the new entrants.

The new comers will not have to face intense competition but huge competitors like these.

TRADE ASSOCIATION

In this particular industry, there is no local trade association in the country. The country is the member of the

International Fertilizer Association (IFA). Pakistan trade Union defense campaign (PTUDC) which works

for safeguarding the rights of the workers


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ANALYSIS OF FINANCIAL RATIOS :- ( FAUJI FERTILIZERS)

Liquidity ratios

Current ratio; 2009 0.84 (2008 0.82)

Current assets increased during the year and the increase was majorly in short term investments and cash and

bank balances which showed that the liquidity position of the company had improved as per the previous

year. The increase in short term investments was by 92% and in cash and bank balances by 300%. However,

this positive increase was offset by the increase in liabilities where trade and other payables increased by

33% and short term borrowings increased by 100%, thus making the overall position stand at the same level

where it was in the last year.

Quick ratio; 2009 0.66 (2008 0.54)

Quick ratio increased because of the decline in stock levels at year ends. In 2009, stores and spares and stock

in trade were significantly lower as compared to 2008 levels, thus affecting the quick ratio. On the other

hand, other things remained the same as per the justifications given in the above paragraph.

Cash ratio; 2009 0.59 (2008 0.38)

The improvement in the ratio can be attributed the significant increase in short term investments which were

made by the company due to surplus cash available being supported by better operations and increased sales

of 18% as compared to last year.


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Efficiency turnover ratios

Receivable turnover; 2009 96.07 (2008 27.58)

The increase in the ratio is supported by the increase in sales by 18% whereas debtors did not report a

significant increase. Credit period remained the same as per the company policy. Thus, the only change in

the ratio is due to sharp increase in sales.

Receivable turnover in days; 2009 3.80 (2008 13.23)

The reasons mentioned above can be used for justification of the change in the ratio. The paragraph above

states that sales increased by 18% as compared to last year, thus increasing the debtor turnover because of

which the ratio in days also improved by greater value.

Total asset turnover; 2009 0.94 (2008 0.96)

The ratio has decreased insignificantly and the reason is the change in assets. Assets increased by Rs. 7

billion in totality whereas sales increased by Rs. 6 million, thus the change in sales being offset by increase

in assets.

Fixed assets turnover; 2009 2.58 (2008 2.40)

The ratio has increased because of the 18% increase in sales as compared to last year whereas the change in

fixed assets was by 6%, the main increase being in property, plant and equipment due to additions of assets.

Equity turnover; 2009 2.76 (2008 2.49)

The reason in the increase in turnover is due to the sharp increase of 18% in sales as compared to last year

whereas the increase in equity was minimal.


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Gross profit margin; 2009 0.43 (2008 0.40)

There are two major components of this ratio; sales and cost of sales. Sales of the company increased by

18% whereas cost of sales increased by 12%. The company was able to manage its margin by increasing its

sales and by controlling its costs.

Operating profit margin; 2009 0.34 (2008 0.32)

The reasons mentioned above, which justify the increase in gross profit ratio can be used to answer the

change in operating profit. The other element, distribution costs, had no major impact as it changed

insignificantly.

Pre tax margin; 2009 0.36 (2008 0.33)

The ratio remained almost same as compared to last year. Although the sales had increased by 18%, Other

expenses and distribution costs increased because of which the increase in sales was affected. However, the

position is better as compared to last year.

Net profit margin; 2009 0.24 (2008 0.21)

The net profit margin increased as compared to last year as a result of increased sales and controlled costs.

The increase in sales was far better as compared to the increase costs, thus keeping the ratio on the positive

side.

Return on assets; 2009 0.36 (2008 0.34)

The return on assets did not change significantly and the slight increase can be observed due to the 18%

increase in sales. Moreover, assets also increased in the same proportion, thus the ratio remained at the same

level.


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Return on total equity; 2009 0.67 (2008 0.53)

The ratio has increased sharply due to equity remaining at the same level, while sales jumped up by 18%,

thus making the position for the shareholders far better as compared to previous year.

Debt to capital; 2009 1.95 (2008 - 1.6)

The main reason behind the increase in this ratio is the increase in current liabilities. Short term borrowings

increased by 100% to reach at an amount of Rs. 6 million whereas trade and other payables also increased by

Rs. 2 million. On the contrary, equity reflected a minor change which was immaterial.

Debt to equity; 2009 0.26 (2008 0.30)

The ratio is changed as compared to last year. The small change is due to the change in amounts of

borrowings which decreased the areas of short term borrowings by Rs. 6 million and in trade and other

payables by Rs. 2 million.

Interest coverage ratio; 2009 12.82 (2007 13.44)

The change in interest coverage ratio is minimal as compared to last year. But still the company needs to

manage its finances properly, the finance cost has increased due to which the interest coverage ratio has

decreased.

Payout ratio; 2009 73% (2008 79%)

last year company declared greater dividends as compared to this year, therefore the payout ratio in the year

2009 was lower than 2008.


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ANALYSIS OF FINANCIAL RATIOS :- (ENGRO CHEMICAL PAKISTAN

LIMITED)

Current ratio; 2009 1.68 ( 2008 2.01)

The ratio has declined significantly due to a fall in current assets by Rs. 2 million whereas current liabilities

increased by a small amount, thus making the difference and creating a negative impact on the ratio.

Quick ratio; 2009 1.46 (2008 1.09)

This ratio has increased because of the decline in inventory levels of Rs. 4 million at the end of the financial

year end, because of which the liquidity position has improved.

Cash ratio; 2009 0.70 (2008 0.54)

The position of cash flow improved for the company and it was able to hold Rs. 2.2 million of surplus cash

as compared to last year, thus contributing positively to the liquidity position of the company.

Receivable turnover; 2009 67.59 (2008 89.16)

The main reason behind the sharp fall in the ratio is the increase of Rs. 2.2 million in trade debts. This

increase in trade debts is the reason for turnover to decrease.

Payable turnover; 2009 31.99 (2008 11.98)

The change can be attributed to change in cost of sales which increased by Rs. 6 million or 35% as compared

to last year. Furthermore, there was a decline in stock levels by Rs. 4 million and which accounted to 90%

of the previous years figure, thus quantifying the decrease in payable turnover in days.


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Payable turnover in days; 2009 11.41 (2008 30.47)

As the above ratio suggests that payable turnover in times has increased, the simultaneous ratio showing that

how many days are required for the turnover is also showing a positive change suggesting that in 11 days the

stock turnover takes place as compared to 30 days in the last year.

Total asset turnover; 2009 0.32 (2008 0.41)

The fall in the ratio can be linked with the fact that assets in totality increased by Rs. 36 million (64%) as

compared to the last year whereas sales increased in a lower proportion of 30% (Rs. 6 million) thus reducing

the asset turnover ratio overall to 0.32 from 0.41 in 2008.

Fixed asset turnover; 2009 0.69 (2008 - 0.36)

The main reason behind the increase in this ratio is the sharp rise in fixed assets due to purchase of property

plant and equipment. The additions were worth Rs. 35 million and were showing an increase of 83% as

compared to 2008. On the other hand, sales did increase by 47% which is huge change and due to which

fixed assets were utilized to its most.

Equity turnover; 2009 1.12 (2008 1.11)

There was not a major change in this ratio as equity changed with almost the same amount as compared to

sales. The change in equity was of Rs. 5.8 million (27%) and the change in sales was of Rs. 6.8 million

(20%) as compared to financial year 2008.


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Gross profit margin; 2009 0.23 (2008 0.27)

In the financial year 2009 costs and sales increased simultaneously by approximately Rs. 6 million. But the

proportion of change in the two elements was different. The change in sales was of 30% whereas in the case

of cost of sales the change was 36%, because of which the gross profit margin declined as compared to last

year.

Operating profit margin; 2009 0.17 (2008 0.19)

The change in the operating profit is evident as compared to last year. The decrease can be justified from the

reasons given in the above mentioned paragraph where it is seen that cost of sales increased in a greater

proportion as compared to the increase in sales which therefore impacted the operating profit margin as well.

Pre-tax margin; 2009 0.17 (2008 0.22)

Pre tax margin has also changed. The main reason is the significant rise in cost of sales by 36%, whereas

other most important element i.e sales reported a comparatively lesser rise. Other elements of the ratio such

as distribution costs, other income, financial charges changed but their effect in totality was immaterial

because of which they did not contribute much to the changing of this ratio.

Net profit margin; 2009 0.13 (2008 0.18)

The reasons given in the above 3 paragraphs also justify the decline in net profit margin. The main reason

being the surge in cost of sales with a greater proportion of 36% as compared to the proportionate rise in

sales of 30%.

Return on assets; 2009 0.07 (2008 0.12)

The net profit for the year remained unchanged however there was a significant rise in total assets of Rs. 36

million (net) or 63% as compared to the financial year 2008. The change can be observed in property plant

and equipment of Rs. 35 million and increase in cash and cash equivalents at year end of Rs. 2.5 million.


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Return on total equity; 2009 0.15 (2008 0.20)

The profit for the year remained unchanged as compared to last year. On the contrary, equity increased

during the year due to further issue of shares, thus making the ratio of return on equity less as compared to

year ended 2008.

Debt to capital ratio; 2009 0.71 (2008 0.63)

The reason behind the surge in this ratio is the significant increase in borrowings by Engro. Long term

borrowings increased by Rs. 30 million which is 111% as compared to year 2008. Similarly, trade and other

payables also increased along with borrowing costs in form of accrued markup. On the contrary, equity did

not increase to match the rise in borrowings because of which the ratio has risen to a negative side.

Debt to equity ratio; 2009 67% (2008 53%)

The reason mentioned above in debt to capital ratio can be used to justify the change in this ratio. The change

in borrowings was greater as compared to the change in equity because of which the ratio has worsened. This

shows that the company is highly geared and the ratios need to be considered and measures need to be taken

to curtail leverage so as to improve the financial position and strategic outlook of the company.

Interest coverage ratio; 2009 1.44 (2008 25.32)

This shows that the company has increased its use of debt financing. The interest coverage ratio of EPCL has

decreased by 94.3% from 25.32 to 1.44. This shows that EPCL is covering its interest charges by a low

margin of safety, and the extent to which its operating income can decline before it is unable to meet its

annual interest costs has greatly reduced


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Cash flow Analysis:-

Engro Corporation Pakistan

The cash flow analysis on Engro Corporation Pakistan is that the cash flow from the operating activities

increased in the year 2009 because of the major increase in sales. In 2008 the value was negative however in

2009 it stretched to positive.

The cash flow from investing activities shows further negative value as compared to 2008. This is mainly

because of the purchase of fixed assets by the company for expansion project. In 2008 the value was

(20,797,108,000) and which became (36,217,620,000). The company is investing heavily.

The cash flow from financing activity showed an increase at the positive side of cash flow mainly because

we have taken a big loan and received its payments.

Cash flow Analysis:-

Fauji Fertilizer corporation

The cash flow of the Fauji fertilizer shows that the cash from operating activities showed a great change on

positive side. The main reason for the positive change on operating cash flow is the increase in sales.

Although the finance cost, income tax has increased but still the sales of the company has increased so much

that the company managed to have a positive operating cash flow.

The cash flow of the Fauji fertilizer from investing activities showed a lower negative side as compared to

the last year. This has happened due to the investment in Fauji cements in 2008; however we didnt invest

any further in Fauji cements in 2009. Therefore the investing side of the cash flow showed a decrease on

negative side.

The cash flow from financing activity also showed a decrease as compared to last year. This happened due to

the less short term borrowing in 2009.


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ANALYSIS OF FINANCIAL STATEMENT

GROUP MEMEBERS:

SANDAL ALI - 7283REHMA SAEED - 7322SIDRA HABIB - 7010KOMAL RANI - 7712

COMPANIES:

1. Engro Chemical Company Ltd

2. Fauji Fertilizer Company Ltd.3. Fauji Fertilizer Bin Qasim Ltd. (for calculating industry average)

DATE OF SUBMISSION: 13TH DECEMBER, 2010

DAY OF CLASS: MONDAY (6:00-9:00)

COURSE INSTRUCTOR: MR. FAISAL DHEDHI


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ACKNOWLEDGEMENT

First of all we would like to thank our teacher Mr. Faisal Dhedhi for giving our group the opportunity to do

this Analysis of financial statements of the important companies of our fertilizing sector. Through which, all

of us experienced the practical side of analyzing financial statements emphasizing on the entrepreneurial

aspects and significance apart from just concentrating and studying the theoretical part. It seems that by

carrying out this project we have realized what the meaning of financial terms and statements is and what the

issues with the start up businesses in the real world are. It is not just selling something or providing a service

but it stands stable on the pillars of customer relation building, persuading them and trying to analyze the

problems of designing and launching a product and then eventually selling it. This project personally has

given all of us an experience and has given a touch of how different it is to conduct business and how to

speculate things in the market related to the companys shares and stocks traded in the stock market

We thank you for providing us this chance to learn something that wouldnt have been possible if we hadnt

stepped into the fields for this plan.

Group members:-

Sandal Ali

Rehma Saeed

Sidra habib

Komal Rani


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TABLE OF CONTENTS

Acknowledgement.

Engro Chemical PakistanLimitedIntroductionProduct offered

Fauji Fertilizer

Corporation..IntroductionProduct offered

Geographical Location of FertilizerCompanies.

Total Production of Fertilizer

Industry.

Criteria for selecting Engro and Fauji as MajorPlayers.

Impact on theIndustry.

TradeAssociation..

Analysis of FinancialRatios.


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Cash flowAnalysis..

Conclusion.

komal afs report

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