FFC 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. The initial authorized capital of the company was 813.9 million rupees.

The present share capital of the company stands at Rs 3.0 billion. Additionally, FFC has Rs 1.0 billion stakes in the subsidiary Fauji Fertilizer Bin Qasim Limited (formerly FFC-Jordan Fertilizer Company Limited).

-- Through De-Bottle Necking (DBN) programme, the production capacity of the existing plant increased to 695,000 metric tons per year.

-- Production capacity was enhanced by establishing a second plant in 1993 with annual capacity of 635,000 metric tons of urea.

-- FFC participated as a major shareholder in a new DAP/urea manufacturing complex with participation of major international/national institutions. The new company Fauji Fertilizer Bin Qasim Limited commenced commercial production with effect from January 01, 2000. The facility is designed to produce 551,000 metric tons of urea and 445,500 metric tons of DAP.

-- In the year 2002, FFC acquired ex Pak Saudi Fertilizers Limited (PSFL) urea plant situated at Mirpur Mathelo, District Ghotki from National Fertilizer Corporation (NFC) through privatization process of the Government of Pakistan.

FFCL is the largest fertilizer company in the country. It is a leader in the urea market with a market share of 61% in FY06. It also leads the DAP market; with a market share of 54% in FY06 compared to a 40% share in FY05. 155 thousand tonnes of 'Sona' urea granular and 2 thousand tonnes of imported urea were also marketed on behalf of FFBL enabling the company to achieve market share of 58% in Jun'07.

YEAR 2007 PRODUCTION: In the year 2007, there was a significant urea carryover stock of 233 thousand tonnes, which was thrice the volume of opening inventory of 2006. Urea production for the year at 4,755 thousand tonnes declined by 1% against last year's production, while 55 thousand tonnes were imported initially despite an over-supplied situation and low demand.

Urea sales picked up in the third quarter of the year, recording highest ever urea off-take. An additional 150 thousand tonnes of urea imports have been arranged by the government for the Rabi 2007-08 to bridge the demand-supply gap. The Industry concluded the year with an aggregate off-take of 4,917 thousand tonnes. Total urea sales however, registered a drop of 6% as compared to off-take of 2006.

DAP - (DI AMMONIUM PHOSPHATE) The government announced farmer subsidy of Rs 250 per bag in September 2006, on phosphatic and potassic fertilizers, for promoting balanced fertilizer usage. The relief was enhanced to Rs 400 per bag in March 2007 which was later increased to Rs 470 per bag following the steep increase in the international prices of DAP from US $250 FOB per tonne at the end of December 2006 to US $620 FOB per tonne toward s the year end 2007.

Fertilizer demand has been increasing for the last few years and the trend is expected to continue in the future as well. As a result, fertilizer imports have also been increasing. Out of the total fertilizer consumption, the urea accounts for the highest percentage.

Urea supply has not been able to keep up with the demand, resulting in shortages and subsequent imports. The FY06 saw an increase in urea off-take of only 1% whereas production increased by 2%. Excessive imports of fertilizer, coupled with low increase in demand resulted in an oversupply condition in the industry in FY06. This is illustrated in the graph below.

Indigenous DAP production by FFCL's subsidiary FFBL was recorded at 357 thousand tonnes which decreased by 21% compared to 2006 due to FFBL DAP plant revamp shutdown while 1,200 thousand tonnes were imported by the industry during the year to complement total availability, in addition to opening inventory of 119 thousand tonnes.

DAP off-take of 1,424 thousand tonnes during 2007 registered a decline of 6%, equivalent with urea decline, and the industry carried 252 thousand tonnes of DAP at the end of 2007. The carryover stock is, however, anticipated to meet the requirements of Rabi 2007-08 season.

Although, the gross profit increased by 6% over FY05, the gross profit margin registered a decline from 36.06% to 32.4% in FY06. However the company managed to maintain its above average standing on gross profit margin and below average standing on net profit margin. The company was able to improve the gross margin from 37% last year to 43% in 2007 due to considerably lower imported fertilizers' sales in 2007 where the margins are negligible.

The gross profit increased by 6% over FY05, but registered a decline from 36.06% to 32.4% in FY06. However, the company managed to maintain its above average standing on gross profit margin and remained below average on net profit margin.

This increase in sales revenue from urea can be attributed to higher urea prices in FY06, as shown in the graphs below. The effect of higher prices was partially marred by a decline in urea production of the company. DAP prices, declined in the last quarter of FY06 as a result of Rs 250 per bag government subsidy.

An increase of 15.5% in fuel prices followed by a 9.94% increase in both fuel and feed prices led to increasing the cost of sales and resulted in a decline in gross and net profit margins. However, the effect of the gas price increase was cushioned by the increase in revenues, improved productivity and plant efficiency.

The 'Sona' urea sales generated record revenue of Rs 22.161 billion in FY07, which improved by 5% compared to last year's performance. Revenues from imported fertilizers, phosphates and urea, were recorded at Rs 5.47 billion and Rs 798 million respectively, registering declines of 14% and 68% owing to lower imports. This resulted in a net reduction of 5% in aggregate sales revenues in 2007 as compared to 2006.

The cost of sales also lower by 10% at Rs 18.312 billion, mainly on account of lower imported fertilizers' sales. The company was therefore, able to improve the gross margin to 36% with gross profitability of Rs 10.117 billion which improved by 4% compared to last year. The subsidy receivables from the government on import of DAP amounted to Rs 936 million as at Balance Sheet date.

The company paid Rs 2.42 billion for marketing of fertilizers all over the country. The distribution cost decreased by 12% compared to last year mainly due to lower imported fertilizer sales. Other income grew to Rs 1.66 billion depicting an increase of 32% in 2007. The growth is attributable primarily to substantial increase in dividend income from FFBL, of Rs 1.31 billion as against Rs 832 million last year, in addition to returns from our treasury operations.

Financial cost was higher by Rs 195 million compared to last year mainly due to financial charges on long term loans for DBN of Plant III and long term working capital requirements of the company. Net profit after tax was, therefore, earned a record of Rs 5.361 billion, which improved by 16% over the last year's figure. Earnings per share of Rs 10.86 increased by Rs 1.47 compared to 2006 while the price earnings ratio was recorded at 10.93%.

The ROA has been lower than the industry average for the last five years. However it increased in FY07 owing to better profits. ROA also increased with increasing profit margins but maintained its above average standing.

The company's liquidity position has been the weakest among the major players. The current ratio declined slightly during FY07 even as current liabilities declined. This change came about as a result of a decline in the company's short-term investments. Presently, the current ratio is approximately 1 signifying the enough liquidity for the company.

The inventory turnover, which has historically remained below the industry averages, increased in FY06 and FY07, as industry average increased further. This can be accounted for by the high growth in sales revenue. The level of closing inventory was also considerably higher than FY05, due to excessive imports by TCP during FY06.

However, Rs 250 per bag government subsidy on DAP boosted the sales during the last quarter of FY06, leading to a closing inventory being 62% lower than last year. The DSO remained higher than average for FFCL.

FFCL has maintained a higher than average total assets turnover. These measures of asset management improved further during the FY06, although capacity utilization stayed constant at 119%. Hence the changes may be attributed to higher sales revenue from higher sales prices compared to previous years.

The company's debt to asset and long term debt to equity ratio has traditionally remained lower than industry averages. The debt to equity ratio also fell below average during FY06 but rose in FY07. These figures reflect the company's lower leverage level. The FY06 saw a drastic decline in the TIE as well.

This was the compounded result of a decline in profits and a 58.7% increase in its financial costs largely due to an increase in short term borrowings. The declining trend persisted in FY07 as well. Much of it can be attributed to the rising interest rates and tight credit terms. Debt to equity however has shown a rising trend signifying increasing dependence of the company on debt rather than equity financing.

The EPS increased slightly, although, the industry average suffered a decline. Despite this, the EPS remained below the industry average. The DPS for FY06 was the highest in the last five years. This growth in EPS and DPS came about despite a fall in the profit margins and an increase in the number of shares issued.

The first quarter of FY07 saw an increase in the prices of DAP and urea prices also registered a positive trend up to April. The urea off-take however declined because of excessive rainfall, which hampered the distribution on a countrywide basis. DAP off-take on the other hand has been increasing, mainly as a result of Rs 250 per bag government subsidy. As a result of these developments, FFCL enjoyed a nominal growth of 4.8% compared o the same period last year.

POST BUDGET OUTLOOK: The budget 2008-09 announced an increase in subsidy on DAP. This is likely to increase the demand of the fertilizer sector as farmers increase their usage of the product. In light of GDP growth's correlation with fertilizer consumption, higher GDP growth rate is expected to lead to higher fertilizer demand and consumption