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Fauji Fertilizer Comapny Ltd

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					                                      INTRODUCTION

FFC occupies a special niche in the industrial and agricultural development of the country with a
successful track record of excellence business performance. The company moved from one high
level of achievement to other establishing records year after year and is now ranked as a top tier
player in the fertilizer industry with highest production capacity and market participation.


During the year, FFC acquired 100% management control. Of PSFL, a wholly owned subsidiary of
NFC, through competitive bidding on payment of RS.8.15 billion to the Privatization commission.
With the integration of PSFL, which now stands dissolved and merged with FFC effective july1,
2002, pursuant to a scheme of amalgamation approved by the Honorable High Court of Sindh, the
production capacity of our urea manufacturing facilities has more than tripled from 570 thousand
tones p.a. in 1982 to almost 2 million tones p.a. in this short span of less than 25 years of existence.
FFC now owns three mega plants worth over 1 billion dollars in terms of replacement value,
besides over 49% stake in FJFC.


2002 was a difficult year and business conditions were challenging because of the economic fall out
of the recent regional crisis. Uncertain economic and weather conditions, high natural gas prices,
global product oversupply, falling international urea prices and weak domestic demand contributed
to an extremely difficult operation environment during the year which created a downward pressure
on prices and margins.


These adverse factors are continuing since past few years and have created intense competition for
the industry players; however, once again our diversification has paid dividends and strategies
implemented over the years allowed the company to maintain solid financial foundation throughout
this prolonged downturn.

With a vision to acquire self - sufficiency in fertilizer production in the country, 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.



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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).


FFC commenced commercial production of urea in 1982 with annual capacity of 570,000
metric tons


Through De-Bottle Necking (DBN) program, 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 (formerly FFC-Jordan Fertilizer Company 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. This
excellent performance was due to hard work and dedication of all employees and the
progressive approach and support from the top management. 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 privatisation process
of the Government of Pakistan. This acquisition at Rs. 8,151 million represents one of the
largest industrial sector transactions in Pakistan

Recently Fauji Fertilizers Company offered the highest bid of Rs 8.151 billion for the
Pak-Saudi Fertilizers Limited here on Saturday. Second highest bidder was the Dawood
Hercules that offered Rs 3.78 billion while the lowest bid of Rs 3.602 billion was
received from Engro Chemicals. In simple words Fauji Fertilizers Company offered Rs
4.50 billion rupees more than Engro and Rs 4.371 billion more than Dawood Hercules in
bidding for Pak-Saudi Company. Sealed bids for the privatization of Pak-Saudi Fertilizer
Company were opened by journalists on the request of Privatization Minister in the
presence of bidders, senior government officials and private sector representatives. Three



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companies, Fauji Fertilizers, Engro Chemical and Dawood Hercules filed bids for the
said company. Fauji Fertilizers offered Rs 135.85 for each share of the Pak-Saudi
Company, Dawood Hercules offered Rs 70 per share, while Engro Chemical offered Rs
66.70 for a share. Seeing a far high difference in the price offered by Fauji Fertilizers, the
other two bidders did not take interest in contesting privatization of the said company and
wished a good luck for FFC. Announcing price offers by the private sector, Minister for
Privatization Altaf Saleem declared the Fauji Fertilizers Company as the highest bidder
that intends to buy 100 percent shares.


NATURE OF THE BUSINES

The company is a public company incorporated in Pakistan under the Companies Act,
1913, (now the Companies Ordinance, 1984 and its shares are quoted on the stock
exchanges in Pakistan. The principal activity of the company is manufacturing,
purchasing and marketing of fertilizer, including investment in other fertilizer
manufacturing operations.


FFC HISTORY


    FFC was incorporated on May 8, 1978.
    Based Unit at Goth Machhi commenced commercial production in June 1982
       with annual designed capacity of 570 thousand tones urea.
    Based Unit up-graded in April 1992 to produce 695 thousand tones annually.
    Expansion Unit at Goth Machhi commenced commercial production in March
       1993 with designed capacity of 635 thousand Tonnes.
    FJFC founded in November 1993 with initial contribution of Rs. 1 billion. The
       company‘s investment in FJFC now stands at over RS 4 billion.
    PSFL acquired on May 31,202 and merged with FFC on July 1,2002. Situated at
       Mirpur Mathelo the plant has annual designed production capacity of 574
       thousand tones.




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 The aggregate designed production capacity of FFC is three plants now stand at
   almost 2 million tones annually.
 Since inception to 2002, FFC has produced and marketed 21million tones of urea.
   In terms of import substitution this has resulted in national savings of well over 3
   billion dollars in foreign exchange.
 Since inception the company has contributed Rs. 42 billion to the national
   exchequer in the form of taxes and government levies.
 The company earned a net profit after tax of over Rs. 3 billion for the fifth time
   since inception, including 2002.
 The company was the highest tax payer in the corporate Sector ub 1993/1994.
 Since inception the company has sold/marketed almost 28 million tones of
   fertilizers.
 FFC is the only company providing Mobile Farm Extension Services at the
   farmers, door-step since 1986.
 FFC was the first company in fertilizer Sector to achieve in 2002 the highest ever.
 FFC was the first company in Fertilizer sector to achieve ISO 9002 certification
   in 1997.
 FFC has been placed amongst the list of top 25 companies of PAKISAN BY KSE
   for eight years consecutively, topping the list in 1997.
 21.5 million Man-hours of operation without injury were achieved in 2003, the
   highest ever.
 The company‘s annual Reports have been adjudged as one of the best reports in
   the Chemical sector twice by joint committee of ICAP/ICMAP.




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                          Vision Statement




                                         Vision Statement




FFC is focused on harmonizing its capabilities and maximizing its potential. FFC's vision for
   the future envisages diversification and undertaking ventures at home and abroad in
                     collaboration with leading international partners.




                                                                                           5
              Mission Statement


FFC's mission is to sustain its role as the leader in industrial
and agricultural advancement of Pakistan by setting and
achieving new and higher goals, and taking initiatives. The
Company is committed to ensuring safe and conducive work
environment, providing high quality products and allied
services to its customers and profitable returns to its
shareholders.




                                                              6
                         Objectives of the company

The broad objectives of the company are,

      To sustain its role as market leader in urea production and marketing.
      To deliver exclusive values and services to the shareholders and customers
      through its strategies
      To place great value on social responsibilities and welfare
      To develop a culture based on principles of honesty, integrity, faireness and
      respect.
      To create the agricultural awareness in farmers through media and training.
      To provide farmers technical services through technical services department free
      of cost.
      To hire and retain satisfied workforce
      To play a vital role in agricultural development of the country
      To provide the quality products
      To set high standards for production and sale and achieve these objectives
      To be environment-friendly organization
      To promote education in the farmers community by awarding merit scholarships.
      To help upgrade the capability of fertilizer research, extension and marketing
      personnel in the transfer of fertilizer technology.
      To provide a neutral common platform to resolve contentious issues in fertilizer
      sector.




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                                       Vision 21

FFC has progressed remarkably from its inception in 1978 till to date. Three projects in a
span of less than 20 years have been set up. Each of these have incurred an investment of
over 300 million US$ amounting to one of the largest investments in Pakistan. This
performance record is considered unparalleled in the country and matches high standards
any where in the world. At this point in time, the company is preparing to harmonize
itself with new century. Building on the foundations of the last 20 years, the company is
confident to take on the new challenges. FFC 's vision for the 21st century looks for
diversification and establishing projects beyond the territorial limits of the country in
collaboration with world famous international industrial holdings. The list of different
projects that are being evaluated at present are:



                    Oil Refinery
                    Paper Mill Project
                    Software Development House
                    Off-Shore Fertilizer Complex
                    Mineral Acid Production
                    Petrochemical
                    Revamp of existing FFC facilities




                                                                                        8
QULITY POLICY OF FFC




                       9
Company Manufacturing Facilities
The Company has three plants and is a shareholder in FFBL. It markets the whole production of
FFBL.
PLANT-I          Goth Machhi, Sadikabad, Rahim Yar Khan
PLANT-I          Goth Machhi, Sadikabad, Rahim Yar Khan
PLANT-III        Mir Pur Mathelo
PLANT-IV         Fauji Fertilizer Bin Qasim Limited

Company Information
Chairman

Lt. Gen. Syed Muhammad Amjad, HI, HI(M) (Retired)


CHIEF EXECUTIVE AND MANAGING DIRECTOR
Lt. Gen. Mahmud Ahmed, HI(M) (Retired)

Secretary                                             Brig(Retd.) M. Akram Khan


Registered Office                                     93-Harley Street, Rawalpindi


Plantsite                                             Goth Machhi, Sadikabad,
                                                      Rahim Yar Khan.


Marketing Division                                    Lahore Trade Centre,
                                                      11 Shahrah-e-Aiwan-e-Tijarat,
                                                      Lahore.

Karachi Office                                        D-143, Block-4, KDA Scheme - 5,
                                                      Kehkashan Clifton,
                                                      Karachi.

Auditors                                              A.F. Ferguson & Co.,
                                                      Chartered Accountants


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BUSINESS AREAS OF THE COMPANY

    Engineering
    Manufacturing
    Marketing

Engineering

After the successful start-up of the first plant in mid 1982, a group of selected engineers
was assigned to Technology Division-TD (then called CED) Head Office with the
objective of providing engineering and technical backup to the plant operations

Additional responsibilities that are assigned to TD, include monitoring plant
performance, development of new projects, handling capital investment projects, advising
management on technical matters and development of a technological base along with
consultancy functions.

Since 1982, TD has made tremendous progress in the field of Plant Engineering, Project
Management, Project Feasibilities and Project Development.

The development of TD was equally supported by the FFC management which has
recognized the need to promote research and technological development activities.

TD is manned by a team of highly trained project engineers, process engineers and IT
specialists. Nearly half of the strength is located at the plant to provide on-the-spot
assistance to the manufacturing units besides feeding vital plant data to the Head Office
for immediate processing.

TD is equipped with latest computing facilities along with engineering software from
world famous engineering designer M/s Haldor Topsoe of Denmark and other technical
software purchased from the engineering companies as well as in-house developed
software related to engineering and other general purpose need of the company. This
technology enables TD to undertake detailed process/engineering design related



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assignments and to provide most valuable assistance to other departments within the
company.

TD‘s most significant contributions to date have been successful project management of
FFC Project 1 debottlenecking, FFC Plant Expansion Project 2 and the Fauji Fertilizer
Bin Qasim (formerly FJFC) Project. TD‘s role in all projects starts from the conceptual
stage and concludes at the successful commissioning and handing over of the project to
the Operation Group. The success achieved so far by TD proves that FFC now possesses
requisite in-house capabilities to ensure successful completion of large scale projects
within allocated budgets and assigned project schedules.

Manufacturing

The largest urea manufacturing facility of Pakistan consisting of two ammonia/urea units
owned by FFC, is built at Goth Machhi in district Rahim Yar Khan.Goth Machhi is
situated at a distance of 2 kms from the main Lahore-Karachi highway and is adjacent to
the main railway line.

The two plants are based on natural gas from Mari Gas Fields and have an annual
designed     production      capacity     of     1.3       million    tons     of     urea.
Over the years, the plants have demonstrated an operational excellence which has
become a reference for the engineering companies whose process technologies are used
here. Delegations from China, Middle East and Far East keep visiting the plant site for
gaining first hand knowledge before deciding to purchase a new plant

Marketing Division, setup in July, 1978 is responsible for all marketing operations
including planning, distribution, sales, farm advisory services, field warehousing, finance
and administration. With the commencement of commercial production in June 1982, the
company started marketing its urea under the brand name "Sona".




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Marketing

The company markets not only Sona urea but also imported nitrogen, phosphate and
potash                                    based                                   fertilizers.
The Company is also marketing half a million tonnes of sona urea granular manufactured
by Fauji Fertilizer Bin Qasim (formerly FFC – Jordan Fertilizer Co. Ltd).
When FFC came into the market with its production in June 1982, the other
manufacturers namely Engro, Dawood Hercules and National Fertilizer Corporation were
already well established in the market. The brands of Engro (Engro) and Dawood
Hercules (Babber Sher) were considered premium brands in Sindh and Central Punjab
respectively. FFC had to face very tough competition from the beginning. This
competition coupled with the huge surplus of urea in the domestic market posed a great
challenge to the company in the initial years. FFC not only met the challenge by
capturing the desired market share but in the process, enhanced the brand image of its
product Sona urea which has become the number one brand. During the period 1983 to
1986 when a large urea surplus existed in the country, FFC pioneered urea exports which
not only helped in stabilizing domestic urea but also earned valuable foreign exchange
for                                       the                                       country.
The Government of Pakistan deregulated the trade and prices of phosphatic fertilizers on
21 August 1993. Subsequent to this decision FFC started import of these fertilizers and as
a result timely supplies were arranged. Farmers were thus provided with quality product
in bags with guaranteed correct weight and this brought about a very positive qualitative
change in the phosphatic fertilizer business in the country. The Marketing Division now
has   the   necessary    expertise   to     handle   fertilizer   imports   and     exports.



FFC believes in selling a programme rather than just a product. For this, the company has
adopted a customer oriented strategy, marketing quality products backed by efficient and
effective support services with emphasis on developing the market through practical and
innovative farmer education.




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IT is a Joint Venture

Office Cherifien des Phosphates (OCP) Group of Morocco and Fauji Group including
Fauji Foundation, Fauji Fertilizer Company Limited and Fauji Fertilizer Bin Qasim
Limited, have entered into a Joint Venture Company in Morocco named ―Pakistan Maroc
Phosphore S.A‖ with equity of 800 Million Moroccan Dirhams. The proposed project is
planned to be located at Jorf Lasfar , Morocco , where OCP already has a large chemical
complex. This Project will produce 375,000 MT Phosphoric Acid per year by consuming
1,300,000 MT Phosphate Rock and 370,000 MT Granular Sulfur. It is not a grass root
project and will utilize basic infrastructure and ancillary facilities already present at Jorf
Lsafar Site. The cost of the project is estimated at US$ 203 Million and is likely to start
commercial production by early 2007. It will meet total requirement of phosphoric acid
for the DAP production in FFBL plant at Bin Qasim.

Fauji Fertilizer Bin Qasim Limited

Fauji Fertilizer Bin Qasim Limited is a US$ 461 Million Project, one of the largest in
private sector in Pakistan, producing both DAP and Granular Urea for the first time in the
country. The project is sponsored by the largest and well known industrial group of
Faujis and Jordan Phosphate Mines Company.

Fauji Fertilizer Bin Qasim Limited at a glance:

Capital Cost:                                  $461 million
Joint Venture of Fauji Foundation and Fauji Fertilizer Company Limited
Production Capacity:                           1,670 metric tones per day of Granulated
                                               Urea and 1,350 metric tones per day of Di-




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                                             Ammonia Phosphate (DAP)



FFBL has the distinction of producing 13% of urea and 31% of Di-Ammonia Phosphate
of the country's total requirement.

Termination agreement with Jordan Phosphate Mines Company Limited (JPMC) was
signed on 24/06/2003, with the same JPMC is no more a partner or equity holder in the
Company.

A long term agreement for the Supply of Phosphoric Acid between Maroc Phosphore
S.A, a wholly owned subsidy of Office Cherifien Des Phosphates, Morocco was signed
on July 21, 2003.

DAP Plant recommenced its production on September 22, 2003 and supply of DAP in the
market started thereto.

Company History Of FFBL

By the early nineties, Pakistan was importing almost one million tons of urea and
800,000 tons of DAP per annum. At that time management of Fauji Fertilizer embarked
on the FFC-Jordan Fertilizer Project in order to make Pakistan self-sufficient in urea and
reduce the import of DAP.

After initial discussions with the Jordan Phosphate Mines Company, a preliminary
feasibility was undertaken in 1992. By 1993, the detailed feasibility studies was
completed and the Lake Charles, USA, ammonia plant was procured for relocation. New
plants of DAP and urea were installed and the first production of DAP commenced in
Nov 1998, followed by urea in April 1999.




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                           Vision Statement of FFBL



Our vision and overall corporate strategy is to:




                  Be a leading fertilizer company with a diverse product base
                  Gain excellence in operations
                  Ensure exemplary Business Ethics
                  Ensure Safety, Healthy and friendly environment
                  Exercise effective corporate governess




                                                                                 16
                         Mission Statement of FFBL



To produce competitively priced, quality fertilizers and achieving sustainable and viable
growth rate through excellence and generating optimum profits to the total satisfaction of
all stakeholders




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PRODUCTS OF FFBL

Sona Granular

It produces 13% of total production




                                      SONA Granular




SONA DAP

FFBL produces 31% of country‘s demand. It is the sole producer of DAP




                                       SONA DAP




                                                                        18
                                Fauji Foundation

Profile of a Welfare Organisation for Ex-Servicemen

                           AN ARMY OF BUSINESS INTERESTS

 Institute of Management & Computer Sciences                  1

 College of Education                                         1

 Intermediate Colleges                                        2

 Model Schools                                                81

 Vocational Training Centres                                  67

 Technical Training Centres                                   9

 Referral Hospitals                                           6

 Rural Hospitals                                              5

 Fauji Foundation Medical Centres                             24

 Mobile Health Units                                          2

 Dispensaries                                                 27

 Wards in CMH 1                                               1 (CMH Mardan)

 Fauji Corn Complex, Jehangiria

 Fauji Cereals, Rawalpindi

 Foundation Gas, Rawalpindi

 Fauji Metals, Rawalpindi

 Fauji Polypropylene Products, Hub Chowki

 Fauji Sugar Mills, Tando Muhammad Khan

 Fauji Sugar Mills, Khoski

 Fauji Sugar Mills, Sangla Hill

 Fauji Foundation Experimental & Seed Multiplication Farm, Nukerji, Sind.

 Fauji Software Company, Rawalpindi.

 Fauji Medical Transcription, Rawalpindi.

 Fauji Institute of Information Technology & Medical transcription

 Fauji Foundation Institute of Management & Computer Sciences, Rawalpindi

 Fauji Oil Terminal Company, Karachi.

 NIC Project, Islamabad.

 Fauji Cement Company Ltd

 Fauji Fertilizer Company Ltd




                                                                               19
           Fauji Jordan Fertilizer Company Ltd

           Fauji Kabirwala Power Company Ltd

           Mari Gas Company Ltd



                   OVERVIEW OF AN EX-SERVICEMEN’S
                               WELFARE ORGANISATION

An ex-serviceman who spends his life in an atmosphere of discipline - and fairplay finds
it rather difficult to adjust to the ‗cavy‘ conditions. A large number of these simply
cannot adjust to the non-egalitarian environments - and some are simply baffled and
disillusioned.

It is unfortunate that the economic conditions - and monetary environments in the country
do not permit full social benefits to these otherwise potential human resources. it is here
that the Fauji Foundation comes in a big way in providing them social security and such
facilities as education for their children and health coverage.

Education

           Colleges                             2
           Schools                              64
           Scholarships                              1,30,942

Technical Training:

           Technical Training Centres                9
           Vocational Training Centres               66
           Fauji Institutes of Comp. Sciences        2

Medical:

           Hospitals                                  12
           Day Health Centres                         24
           Mobile Dispensaries                        48


                                                                                        20
The data explains that some quarters thought that the Foundation was a rather
‗privileged‘ outfit. Far from it, the Foundation pays its full quota of taxes, levies and
other liabilities as surcharges et al and is never a defaulter on any count. I went on to find
the sore point of employment of retired officers and for which a very large number of
applicants come up.

categorically that the number of vacancies with the Foundation is very small and now the
GHQ Welfare Directorate has also been associated with the process of finding work for
retired officers. But now some more vacancies have been created within the Foundation.

It is not possible to present the entire budget of the Foundation in this presentation nor
even a glimpse of its entire gamut of activities. I have tried just to highlight some of its
more important facets.

Finally, one should think that Fauji Foundation is a unique outfit for the welfare of ex-
servicemen. It is both highly humanitarian and forward looking in its industrial planning.
One should hope that the present MD will continue with the good work of presenting the
activities of his outfit personally, as he did so admirably so far. He must be congratulated
for that.

Fauji Foundation (FF) may be singled out for its unique performance and operation. It is
run with vision and egalitarian purposes. Of course it must make money for its dual role
but as I have put it the outfit has much loftier overall goals which are humanitarian and
not purely money minting which any thrifty and miserly business house can easily make
notwithstanding the dubious means employed for this goal.

FF is unique in this respect that it looks after the welfare of a good over nine million ex-
servicemen who are invariably ignored by the other government agencies - and are
terribly oppressed and miserable once they shed their uniforms. These poor souls -
notwithstanding their expertise are misfits and it is FF which comes to their rescue - in
providing, health, education and re-employment facilities. FF in fact has a massive
mandate as it rightly claims to be ‗A charitable trust for the welfare of ex-servicemen,




                                                                                           21
and their dependents.‘ No other business house in the country has such a massive
egalitarian mandate - irrespective of the profits made by it.

FF is a bit of a miracle - and over a short period of time it has grown phenomenally - and
its present assets stand at over 9 billion which were just around Rs 18 million in mid-
fifties. Surely it is remarkable feat - and a real success story.

FF has earned a very considerable applause outside the country - and it also earned the
coveted ‗The World Veterans Federation Rehabilitation Prize‘ in 1997 at Seoul (Republic
of Korea). The citation for this remarkable prize is worth quoting. It runs that the prize
was awarded ‗for its remarkable achievements in looking after ex-servicemen and their
families in providing healthcare, education, technical training, employment, artificial
limbs and other facilities for the rehabilitation of disabled ex-servicemen, thus enabling
them to be full-fledged citizens contributing to the welfare of their communities.‘ Very
few like outfits or NGOs can boast of such a remarkable performance.

The performance of FF is more remarkable especially as the foundation is a self-
supporting entity in entirety. It is a charitable trust which receives no financial assistance
from either the Federal or the Provincial governments. It also does not get any donations
from any other source. It has to generate its own funds for the massive humanitarian
mandate.

FF beneficiaries include the following categories of service personnel:

       Released, retired and discharged personnel of the Regular armed forces who are
        citizens of Pakistan.
       Legally wedded wives and widows of the above personnel.
       Sons of ex-servicemen up to the age of 18 years - and beyond for education and
        technical training stipends.
       Unmarried daughters of ex-servicemen - and divorced daughters until remarried.
       Invalid sons of ex-servicemen for medical treatment (No age bars.)
       Cadets of service academies invalided out of service for disabilities attributable to
        military service.


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This is a mouthful - and out of sheer necessity, the foundation has to do well in its
commercial ventures where it must invest wisely, and run the business shrewdly.

A very brief business profile of FF is indicated as below:

Fully Owned Projects include:

          Fauji Sugar Mills Tando Mohammad Khan.
          Fauji Sugar Mills Khoski.
          Fauji Sugar Mills Sangla Hill.
          Fauji Sugarcane Experimental & Seed Multiplication Farm.
          Fauji Cereals.
          Fauji Corn Complex.
          Fauji Polypropylene Products Foundation Gas.

Shareholding Projects include:

          Fauji Fertilizer Company Limited.
          Fauji Oil Terminal and Distribution Company Limited.
          Fauji Cement Company Limited.
          Mari Gas Company Limited.

New Projects consist of:

          Fauji Kabirwala Power Company Limited.
          FFC- Jordan Fertilizer Company Limited.

It is through wise investment and expert management that FF has established a nitche in
the Private Sector. The industrial units/ projects have been set up with great care and
some of the factors which have been taken into account for this area:

          Availability of raw material in the area.
          Marketing prospects for the finished goods/products.
          Preference given to declare tax free areas by the government.


                                                                                    23
           Geological and environmen

Parameters related to the project.

         Availability of civic amenities, administrative facilities and infrastructure.
         Setting up of profit earning intensive mega projects with foreign investors,
            over labour intensive smaller projects.
         Terms and conditions and at times restrictions imposed by financial
            institutions - and the lenders.

At first glance it appears that the welfare projects have been established somewhat
arbitrarily, and many ex-servicemen who do not have such facilities located in their areas
feel that way. In fact it is far from it - and there is a perfect rationale for the location of
every such facility. And at some repetition the criteria for such locations has a perfect
reason. The main factors taken into account for each location are as below:

           Proliferation of the benefits to the area which are densely populated by the ex-
            servicemen.
           Creation of a balance between the province and different regions within the
            province by setting up of projects on the basis of percentage of ex-servicemen
            residing in the area.
           Setting up of the projects in areas with good communications and other
            administrative facilities needed for the smooth running of these projects.

In fact as commonly - and rather erroneously thought there was no arbitrary consideration
for setting up of a particular project in a special area.

It is most confidence giving and interesting to see the pace of growth of welfare projects.
This growth is indicated in an inset. It will be seen that it is most accelerated in the
medical and education sectors especially in the current year.

Finally here we have an outfit which has set a pace both in industrial development - and
welfare sectors which is most confidence giving. And sure, the management of this outfit



                                                                                            24
has been most prudent to have developed to such an extent from almost a scratch over
such a short time.

It is heartening that the foundation has in its pipeline still higher goals - and diverse
investment which I am sure will be equally profitable as the previous investments have
been.




                                                                                            25
INTRODUCTION TO INDUSTRY

About Fertilizer

Fertilizer is, simply, plant food.

Macronutrients


Plants need large amounts of three nutrients –
    nitrogen,
    phosphorus,
    Potassium.

Just like the human body needs vitamins and minerals, plants need nutrients in order to
grow. Plants need large amounts of three nutrients -- nitrogen, phosphorus, and
potassium. These are commonly referred to as macronutrients. Fertilizer makers take
those three nutrients from nature and put them into soluble forms that plants can easily
use.

Minor nutrients or Micronutrients

There are a number of other nutrients plants need in small amounts. These are referred to
as the minor nutrients, or micronutrients.

These many nutrients are typically produced separately, but end up being mixed together
in varying amounts to match the needs of a particular crop. The analysis found on each
bag or bulk shipment of fertilizer tells the farmer or consumer the amount of nutrients
being supplied. States have a system of laws and regulations that ensure the fertilizer is
properly labeled and delivers the amount of nutrients stated on the bag.

Our world would be vastly different without commercial fertilizers.

Following World War II, new technologies allowed for the rapid expansion of fertilizer
production. Coupled with growing food demand and the development of higher-yielding


                                                                                       26
crop varieties, fertilizer helped fuel the Green Revolution. Today, the abundance of food
we enjoy is just one way fertilizers help enrich the world around us.

While fertilizers provide many important benefits that are necessary for our way of life,
the improper use of fertilizers can harm our environment. In order to capture the
important benefits of fertilizer, we will have to work hard to ensure our products are
safe. We've used the most recent developments in science to study our products and
make sure safety comes first.




GLOBAL OVER VIEW OF FERTILIZER

World Fertilizer Use

Our world would be vastly different without agriculture and agriculture is impossible
without fertilizer. Around the globe it is produced and used. The following data is about
consumption and then production.

In thousand metric tons of nutrient, years ending June 30*

           World         Item
                         Nitrogenous   Phosphate     Potash        Total
           Consumption
                         Fertilizers   Fertilizers   Fertilizers   Fertilizers




           1961/62           11,588       10,931         8,664             31,182
           1962/63           13,137       11,612         9,231             33,981
           1963/64           14,760       12,929         9,999             37,688
           1964/65           16,474       14,490        10,920             41,884
           1965/66           19,097       15,799        12,106             47,003
           1966/67           22,179       17,414        12,736             52,329




                                                                                      27
1967/68   24,210   18,140   13,928   56,277
1968/69   26,248   19,037   14,525   59,810
1969/70   28,471   19,801   15,210   63,482
1970/71   31,756   21,117   16,435   69,308
1971/72   33,536   22,435   17,340   73,310
1972/73   36,144   24,009   18,542   78,695
1973/74   39,204   25,870   20,401   85,475
1974/75   38,425   23,986   19,534   81,945
1975/76   44,420   25,609   21,370   91,399
1976/77   45,263   27,323   22,849   95,435
1977/78   49,120   28,549   22,938   100,607
1978/79   54,252   30,046   24,456   108,754
1979/80   57,223   31,196   24,054   112,472
1980/81   60,776   31,700   24,244   116,720
1981/82   60,452   30,946   23,749   115,147
1982/83   61,173   31,086   22,853   115,112
1983/84   67,117   33,177   25,410   125,704
1984/85   70,836   34,442   25,959   131,237
1985/86   70,354   33,463   25,673   129,490
1986/87   72,481   34,769   26,167   133,417
1987/88   75,811   36,291   27,374   139,476
1988/89   79,543   37,612   28,005   145,159
1989/90   79,115   37,568   26,685   143,368
1990/91   77,175   35,970   24,684   137,829
1991/92   75,633   35,241   23,732   134,606
1992/93   73,657   31,190   20,492   125,339
1993/94   72,388   28,962   19,131   120,480
1994/95   72,430   29,566   20,051   122,046
1995/96   78,357   30,663   20,661   129,681
1996/97   82,590   31,104   20,885   134,579
1997/98   81,317   33,293   22,577   137,188
1998/99   82,814   33,312   22,041   138,167
1999/00   84,917   33,288   22,096   140,302
2000/01   80,949   32,472   21,778   135,198
2001/02   81,970   33,050   22,711   137,730



                                               28
Major Fertilizer Producing Countries

Million metric tons, years ending June 30*


Country           1997/98       1998/99      1999/00     2000/01   2001/02




                                             Nitrogen
China              20.2          21.5         22.8        21.5      22.1
India              10.1          10.5         10.9        10.9      10.7
United States      13.8          13.5         11.2        9.9       10.6
Russian
                   4.1           4.1          5.0         5.4       5.5
Federation
Canada             3.7           3.7          4.1         3.9       3.5




                                             Phosphate
United States      9.0           9.0          8.5         7.3       7.6
China              6.4           6.7          6.4         6.7       7.4
India              3.0           3.2          3.4         3.7       3.9
Russian
                   1.9           1.7          2.0         2.3       2.4
Federation
Brazil             1.4           1.4          1.4         1.5       1.4




                                              Potash
Canada             9.0           9.2          8.2         9.2       8.2
Russian |
                   3.4           3.5          4.0         3.7       4.3
Federation
Belarus            3.3           3.4          3.6         3.4       3.7
Germany            3.4           3.6          3.5         3.4       3.5
Israel             1.5           1.7          1.7         1.7       1.8


Source: Food and Agriculture Association (FAO)




                                                                             29
FERTILIZERS ISSUES

The core purpose of The Fertilizer Institute is to bring the viewpoints and interests of
members to bear on public policy issues. Here's a rundown on the position on some of
the hottest current issues.

Fertilizer and the Environment

The fertilizer industry is committed to producing and helping farmers use fertilizer in
ways that meets the environmental challenges of modern society. At both production
sites and across the world in daily working with farmers, we continue to improve our
environmental performance.

International Trade

As an internationally-traded commodity, fertilizer is an important part of the export
economy. Fertilizer manufacturers serve customers around the globe. The members of
The Fertilizer Institute support the removal or reduction of trade-distorting subsidies,
tariffs, and non-tariff barriers to trade. the members believe free trade benefits both
manufacturers and consumers of fertilizer products.

Methamphetamine

In some areas, thieves are stealing fertilizer products to manufacture the illegal drug
methamphetamine. This practice needs to stopped urgently.

Metals in Fertilizers

Some fertilizer products contain very small amounts of metals that are not beneficial to
plant growth. These metals occur in products because they occur in nature as part of the
ore bodies or in the raw materials used to make fertilizers. Three separate scientific
studies on the safety of these metals in fertilizers have all come to the same conclusion --
that they generally do not pose a threat to human health or the environment.




                                                                                         30
Perchlorate

Perchlorate is a compound found in natural deposits and is also manufactured for various
industrial purposes, mainly as a propellant for rocket fuel. Perchlorate is also used as a
solid propellant for fireworks, road flares and air bags. Recent evidence also indicates
that perchlorate is naturally occurring in the atmosphere and in certain arid environments;
including in trace amounts in Chilean nitrate deposits. Chilean nitrate fertilizers represent
about 1/10th of 1 percent of the commercial fertilizer market. The primary manufacturer
of these Chilean nitrates has modified its manufacturing process to reduce perchlorate
contents below 100 ppm, and when blended into other fertilizers, the perchlorate content
is usually less than 10 ppm, and often undetectable. A joint TFI/EPA round robin study
published in 2002 indicated that commercial fertilizers in general do not contain
perchlorate.

Transportation

Fertilizer is transported from manufacturing plants and terminals by rail, truck, barge and
pipeline. Fertilizer transportation is regulated at both the Federal and state level. The
respective Boards hold jurisdiction over the railroads and over rail mergers, another area
of concern for the fertilizer industry. In the past, The Fertilizer Institute has worked to
monitor transportation issues -- whether hazmat or rail mergers -- on behalf of its
members




                                                                                          31
       PAKISTAN

       Pakistan is a agricultural economy. The importance of fertilizer in agrarian economy is
       above abord.

       Population                                    over 150 millons

       Land                                          796096 km square

       Population with agricultural profession       70 %


                         Domestic Production of Fertilizer by Products

                                                   Urea
                                                                                     (tonnes)
                                    NFC           NFC        NFC
              Dawood                                                   NFC Pak-
PERIOD                    Engro     Pak-          Pak-       Pak-                   FFC           Total
              Hercules                                                 Amercian
                                    Saudi        China*      Arab
                                              Kharif Season
1989           153,672    130,600   312,218       57,219      57,004          0     312,162      1,022,875
1990           209,534    137,674   252,223       46,896      48,907          0     312,829      1,008,063
1991           142,856    133,378   286,475       52,021      60,710          0     311,973       987,413
1992           157,381    128,669   288,045       59,719      62,908          0     367,700      1,064,422
1993           212,243    124,484   281,767       58,546      45,865          0     650,900      1,373,805
1994           207,776    285,204   249,456       52,740      59,899          0     689,600      1,544,675
1995           225,203    290,565   271,347       60,372      38,622          0     700,100      1,586,209
1996           218,610    355,510   310,955       24,928      56,956          0     698,184      1,665,143
1997           217,334    322,589   329,352        9,116      52,559          0     729,866      1,660,816
1998           250,317    298,369   304,120       54,901      57,432       2,000    721,559      1,688,698
1999           249,641    385,416   320,062       56,054      54,451     115,778    816,157      1,997,559
2000           214,340    391,258   273,260        3,580      58,684     151,017    915,360      2,007,499
2001           197,006    375,207   292,752              0    58,250     176,963   1,007,834     2,108,030
2002           237,982    461.665    63,981              0    52,238     146,762   1,262,314     2,224,942



                                                                                                 32
2003      244,522   466,412        0          0       59,408   179,226   1,341,099   2,290,667




                                        Rabi Season
1989-90   190,590   123,184   306,085    60,468       61,499        0     332,920    1,074,746
1990-91   182,769   134,057   291,643    53,603       57,486        0     295,474    1,012,032
1991-92    85,695   138,633   280,298    60,657       53,474        0     307,588     926,345
1992-93   186,090   136,026   256,157    53,228       44,930        0     413,100    1,089,540
1993-94   214,628   323,669   329,846    60,701       39,488        0     622,400    1,590,732
1994-95   173,918   333,221   271,287    48,989       40,313        0     610,800    1,478,528
1995-96   141,199   405,572   272,971    41,364       60,965        0     702,900    1,624,971
1996-97   167,263   350,150   241,602    31,501       62,685        0     765,793    1,618,994
1997-98   152,802   380,078   308,455       471       34,714        0     766,254    1,642,774
1998-99   161,446   416,320   299,734    41,322       39,925    69,747    701,967    1,730,461
1999-00   188,011   407,777   313,600    41,072       47,184    74,744    857,448    1,929,836
2000-01   193,780   416,597   309,571         0       50,852    57,933    903,140    1,931,873
2001-02   168,408   430,128   318,696         0       41,683   126,459    978,001    2,036,375
2002-03   190,094   413,140        0          0       47,776   136,775   1,356,952   2,144,737
2003-04   165,464   489,115        0          0       64,555   127,453   1,341,654   2,188,241




                                                                                     33
                        Domestic Production of Fertilizer by Products


                                                    Urea
                                                 Fiscal Year
1989-90       402,906    251,168      602,222     112,568      114,880              0    625,121    2,108,865
1990-91       369,299    270,134      538,942     106,064      115,970              0    629,869    2,050,278
1991-92       218,064    264,686      562,026     109,276      118,188              0    630,054    1,902,296
1992-93       380,457    274,392      512,767     110,071      102,523              0    925,900    2,306,110
1993-94       424,677    544,913      617,095     123,020       87,649              0   1,306,500   3,103,854
1994-95       398,619    582,438      525,595     100,822       91,739              0   1,301,100   3,000,313
1995-96       360,223    731,396      565,120      72,620      111,487              0   1,417,200   3,258,046
1996-97       377,278    692,799      556,050      65,545      112,667              0   1,453,796   3,258,135
1997-98       384,721    663,364      618,383      26,986       92,104              0   1,498,610   3,284,168
1998-99       412,101    772,188      624,732      97,344       96,809       124,612    1,422,671   3,550,457
1999-00       435,962    818,374      602,676      73,070      101,750       200,124    1,736,195   3,968,151
2000-01       376,107    780,677      605,464            0     109,625       233,838    1,877,546   3,983,257
2001-02       397,704    871,960      517,327            0      98,720       300,600    2,073,518   4,259,829
2002-03       424,914    887,510             0           0     102,000       289,690    2,703348    4,407462
2003-04       411,663    855,836             0           0     122,590       310,717    2,734,028   4,434,834


      *: M/S Schon Group purchased the plant operated for sometime and now is closed.




                                                                                                    34
        MAIN FERTILIZER PRODUCER IN PAKISTAN




1. Fauji Fertilizer Company (FFC)
2. Fauji Fertilizer Bin Qasim (Pvt) Ltd. (FFBQ)
3. National Fertilizer Corporation of Pakistan (Pvt) Ltd.
4. Dawood Hercules (DH)




                                                            35
                             FERTILIZER PRODUCTION IN PAKISTAN


                                     Fertilizer Production Capacity in Pakistan 2002-03
                                                                                                                          000 Tones

S. No.                  Plant and Location                          Company Name                Product      Start Year   Capacity
         Lyallpur Chemicals and Fertilizer Limited,       National Fertilizer Corporation of
                                                                                               SSP             1957            0
  1      Faisalabad                                       Pakistan (Pvt) Ltd. (NFC)12
         Jaranwala                                        NFC 12                               SSP10           1967         90
  2      Hazara Phosphate Pvt. Ltd. Haripur.              NFC12                                SSP3            1989         90

  3      Pak American Fertilizer (Pvt). Ltd. Daudkhel     NFC                                  Urea1           1998         346

                                                          NFC                                  Urea4                        92
  4      Pak Arab Fertilizer (Pvt). Ltd. Multan           NFC                                  CAN9            1962         450
                                                          NFC                                  NP                           305

  5      Pak. Saudi Fertilizers Pvt. Ltd. Mirpur Mathelo FFC                                   Urea            1980         557

         Pak-China, Haripur (Presently not in
  6                                                       Schon Pak-China                      Urea13          1982         102
         operation)
  7      Dawood Hercules, Sheikpura                       Dawood Hercules (DH)                 Urea5           1971         445
                                                                                               Plant1
         Engro Chemical Pakistan Ltd. Dharki                                                                   1968         850
                                                                                               Urea8

                                                          Engro Chemical Pakistan Limited
  8      (Dahirki)
                                                          (ECPL)
                                                                                               Plant2 Urea
                                                                                                               1993
                                                                                               11
                                                                                               NPK             2001         100
                                                                                               Plant 1
                                                                                                               1982
                                                                                               Urea6
  9      Fauji Fertilizers Co. Ltd., Machi Ghot             Fauji Fertilizer Company (FFC)                                 1330
                                                                                               Plant 2
                                                                                                               1993
                                                                                               Urea7
                                                                                               Urea2           1998         550
                                                          Fauji Fertilizer Bin Qasim (Pvt)
 10      Fauji Fertilizer Bin Qasim (Pvt) Ltd, Karachi.
                                                          Ltd. (FFBQ)
                                                                                               DAP2            1998         446
                        Urea Total                                                                                         4,272
                     Total All Products                                                                                    5,753




                                                                                                                          36
 Product Wise, Domestic Production Of Fertilizer in Pakistan

                    Product Wise, Domestic Production Of Fertilizer
                                                                                  000 Tons

                                  1997-98   1998-99 1999-2000 2000-01   2001-02   2002-03

Urea

Dawood Hercules                     385      412      436      376       398        425

Engro                               663      772      818      781       872        888

NFC Pak-Saudi                       618      625      603      605       517        613

NFC Pak-China                        27       97       73       0         0          0

NFC Pak-Arab                         92       97      102      110        99        102

NFC Pak-Amercian                     0       125      200      234       301        290

FFC                                1,499     1423     1736     1,877     2,073     2,703

            Sub Total              3,284     3,551    3,968    3,983     4,260     4,407

DAP

Sona FFC                             0        46      298      325        67         0

CAN

NFC PAK-ARAB                        315      339      386      374       329        335

AS

NFC PAK-American                    0.5        0       0        0         0          0

NP

NFC PAK-ARAB                        293      284      261      285       306        305

SSP

NFC LC&FL J.Wala                     0         4       73       78        78         75

NFC Hazara Fert.                     0        17       73       81        84         72

            Sub Total                0        21      146      160       162        147

N:P:K                                1         1       1        2         63         75

             TOTAL                 3,894     4,242    5,060    5,128     5,187     5,269




                                                                                             37
                                   Spot analysis

                   SPOT ANALYSIS OF FERTILIZER SECTOR

                                   Number of Units
     a. Public                                          4
     b. Private                                         6

                 Total                                  10

     Employment                                       7,563

     Technology                                 High Technology

     Source of Machinery           Italy, England, Denmark, USA, Japan, Local




                           Installed Capacities (000 Tons)
          Public Sector                                           1,373
          Private Sector                                          4,384

                           Total                                  5,753
     Total Investment                                         Rs. 87 Billion

     Contribution to GDP                                         0.40%



Fertilizer Policy 2001

         Fertilizer Policy has been announced with effect from 1st July, 2001.
         In next 10 years Pakistan will need additional 2 million tons of fertilizers for
          local consumption.




                                                                                       38
Salient Features

Policy has four parts:

                Existing Fertilizer Plants
                New Fertilizer Plants

                Existing Plants Planning for expansion and BMR
                NPK Compounds.

For Existing Plants, annually gas prices would increase effective July 2001 to July 2006
@ Nil, 5%, 7.5%, 10%, 12.5%, 15% respectively.

The feedstock gas prices are frozen for 10 yrs in case of new plants but only for 7 yrs in
case of expansion / BMRE.

Thereafter the price is to be $ 1.10 MMBTU or prevailing Middle East price which ever
is higher.

Fuel Gas price will be same as for other industrial consumers in the country.

For new Investments the price of feed gas will be the Middle Eastern Price prevailing on
the date of signing of the GSA or $ 0.77/MMBTU which ever is higher and a discount
(less the discount of 10%)

Gas will be allocated to new fertilizer plants on the principle of first come, first served
basis.

Recognizing the expected growth in fertilizer demand, the government has decided to
dedicate the shallow reservoir of Mari Gas field to the Fertilizer Industry.

Custom duty of 5 % under SRO: 457(I)/2004 is leviable on import of plant, machinery &
equipments (not Manufactured Locally) for fertilizer Projects.

Second hand machinery/plant is importable at same duty as new plants i.e. 10%.


                                                                                        39
Duty free import of raw materials for NPK production i.e. Di-Ammonia Phosphate,
Mono-Ammonia Phosphate, Triple Super Phosphate etc.

Selling price shall remain deregulated and benefit would be passed to customers. To
ensure this objective Ministerial Committee would meet when required.

Reduction in withholding tax on import of certain types of fertilizer from 6% to 1%, to
reduce the cost of fertilizer inputs.

Withholding taxes at the time of import of fertilizer shall be adjusted against assessed
income tax of the year in case fertilizer is imported by a manufacturer of Fertilizer.

Tax relief: First year allowance or Initial Depreciation Allowance @ 50% of Machinery
& equipment cost or as provided under income tax laws shall be allowed.

Concessions as per declining in concession policy for additional feed gas in the case of
expansion, BMR resulting in enhanced production capacity would be available for 5
years.




                                                                                         40
A relief of Rs.100/- per bag in the price of Phosphatic Fertilizer.

                                          Import of Fertilizers
                                                                                           000 Tons
         Product        1999-00                2000-01            2001-02            2002-03
          Urea              114                   86                0                  0
           AS                21                   15                32                 17
          DAP               819                  773               919                1,124
           NP               122                   47                26                 30
          TSP                15                    0                0                  9
           SSP               22                    0                0                  0
          SOP                11                    0                20                 16
        10:15:20             5                    15                5                  0
          MOP                12                   22                11                 0
          Total             1,141                958               1,013              1,223


                                    Supply – Demand Projection
                                     Urea                                   DAP
                                               Deficit /                                Deficit /
          Year      Supply Demand              Surplus        Supply        Demand      Surplus
         2003-04    4,170         4,390          -220             292        1,069          -777
         2004-05    4,170         4,499          -329             450        1,123          -673
         2005-06    4,170         4,612          -442             450        1,179          -729
         2006-07    4,170         4,727          -557             450        1,238          -788
         2007-08    4,170         4,845          -675             450        1,300          -850
         2008-09    4,170         4,966          -796             450        1,365          -915
         2009-10    4,170         5,090          -920             450        1,433          -983
         2010-11    4,170         5,218         -1,048            450        1,505          -1,055
         2011-12    4,170         5,348         -1,178            450        1,580          -1,130


                                                                                        41
National Fertilizer Development Centre (NFDC)

The National Fertilizer Development Centre (NFDC) was set up by the Government of
Pakistan (Planning and Development Division) in December 1977. After a brief period of
aid from the United Nations Development Programme (UNDP) it has been assisted by
the Food and Agriculture Organization (FAO) of the United Nations with Trust Funds
from Norway (NORAD) upto May 1981, and from the Netherlands upto December,
1997.

NFDC is a multidisciplinary research and development organization at the federal level
that integrates disciplines such as economic planning, pricing and subsidies, privatization
and deregulation, production and imports, marketing and credit, agronomy and soil
science, research, extension and training. In co-operation with the various federal and
provincial institutions, NFDC studies all fertilizer-related problems from the supply
source to the farmers' fields, with a view to helping in the formulation of Government
policies and their implementation and to give support to other institutions.

Bottlenecks in fertilizer imports and production, trade and use, agronomic efficiency and
impact on crop productivity are increasing both in frequency and intensity due to
increasing fertilizer use consumption in Pakistan crossed the 10,000 nutrient tonnes mark
in 1956, the 100,000 nutrient tonnes mark in 1966-67, 1,000,000 nutrient tonnes mark in
1979-80, 2,000,000 nutrient tonnes mark in 1992-93 and touching 3,222,000 nutrient
tonnes mark in 2004-05. Per hectare average fertilizer use for cropped area increased
from about 5 kg in 1964-65 to about 55 kg in 1981-82 and 147 kg in 2003-04.

The existence in Pakistan of a number of agencies and organizations, working on
different aspects of fertilizer production, trade, research, extension and use made it
desirable for the Government to have neutral institution with the objectives to provide a
common platform.




                                                                                        42
OBJECTIVES OF NFDC

The current broad objectives of NFDC are:

    To provide objective and comprehensive advice to all levels of Government, to
       the fertilizer industry and to other parties as may be relevant, on all matters
       related in any way to the fertilizer sector of Pakistan and its relations with the
       international fertilizer community.

    To conduct research studies on physical and economic returns on fertilizer use to
       farmers, impact of input prices on crop output, deregulation/privatization of
       fertilizer in order to facilitate policy decisions.
    To conduct fertilizer use surveys at farm level to monitor fertilizer use by crops,
       impact on crop productivity, crop responses to fertilizers and problems faced by
       farmers.
    To monitor the status of all aspects of fertilizer use development: production,
       imports, consumption, prices and evaluate situation critically for the information
       and action by the concerned organizations, so that timely actions can be taken to
       effect improvement.
    To promote efficient, balanced and environmental friendly integrated use of plant
       nutrients for sustainable agricultural growth.
    To help upgrade the capability of fertilizer research, extension and marketing
       personnel in the transfer of fertilizer technology.
    To provide a neutral common platform to resolve contentious issues in fertilizer
       sector.
    To launch new initiatives in soil fertility and plant nutrition management.




                                                                                      43
PROGRAMMES AND ACTIVITIES

NFDC's programmes are classified as core activities, special programmes and areas of
special interest and collaboration.

Core activities Constitute those regarded as the central functions of NFDC. These
include data base; demand forecasting; intenrational prices; fertilizer situation reviews;
(monthly, seasonal and annual); special technical notes; fertilizer use surves; crop
responses; fertilizer bibliographic updates; fertilizer esearch reviews, training courses
contributions to and participation in national and international fora and computerized
library documentation and retrival of literature.

Special programmes and areas of special interest and collaboration include:



        Studies on privatization in the fertilizer sector
        Fertilizer use development programme, e.g. integrated crop nutrition, balanced
           fertilization and fertilizer use efficiency
        Fertilization in horticulture (e.g. fertigation, investigations with new products
           and application techniques)
        Fertilizer advisory services
        promotion of blends/compounds
        Assist soil testing laboratories
        Establishment of a regional centre on pant nutrition management and
           development.




                                                                                       44
ORGANIZATIONAL LINKS OF NFDC

National

NFDC works in close collaboration with the Federal Ministries and their executive arms
concerned with fertilizer use development. The most important among these are: Ministry
of Food and Agriculture, its Fertilizer Cell; Department of Plant Protection; Pakistan
Agricultural Research Council, Ministry of Finance and the credit institutions; Ministry
of Industries and Production and the National Fertilizer Corporation operating public
sector fertilizer plants, Ministry of Petroleum and Natural Resources, etc.

At the provincial level NFDC maintains liaison with the Provincial Governments,
agricultural universities and research institutes, soil testing and soil fertility laboratories
and extension and training organizations, pesticides associations, importers and
distributors, and testing laboratories, etc.

NFDC works in close liason with private sector fertilizer producers and marrketing
agencies. Some joint activities are being planned. NFDC is also represented on various
committees at national and provincial level.

International


Food and Agriculture Organization (FAO) of United Nations : NFDC since its
establishment is getting financial as well as technical support from FAO. NFDC is
regarded as a pioneer institution of the FAO Plant Nutrition Management Service, Land
and Water Development Division and is termed as a `Centre of Excellence‘.

     Agricultural Economics Institute (LEI), Hague, Netherlands : NFDC and LEI,
        Hague, the Netherlands have signed a memorandum of understanding for
        technical co-operation between both the organizations.
     Fertilizer Advisory Development and Information Network for Asia and the
        Pacific (FADINAP) - ESCAP, Bangkok : NFDC is a technical liaison office for




                                                                                            45
 FADINAP and jointly had carried a number of studies, training programmes and
   information management/dissemination in the country.
 International Fertilizer Industry Association (IFA) - Paris, France : NFDC is a
   member of IFA and shares international statistics of fertilizer consumption,
   production and trade in addition to studies on Plant Nutrition Management
 World Phosphate Institute (IMPHOS), Morocco : World Phosphate Institute and
   NFDC work jointly in promotional activities particularly on balanced fertilization,
   establishment of soil test crop response calibration studies.
 International Fertilizer Development Centre (IFDC), Muscle Shoals, USA :
   NFDC has close technical collaboration with IFDC in human resources
   development and exchange of technical know-how.
 Egyptian Fertilizer Development Centre (EFDC), Egypt : NFDC has signed a
   MOU with EFDC for technical co-operation in the field of fertilizer use
   development activities.
 International Potash Institute (IPI), Switzerland : IPI and NFDC has close
   technical collaboration and some joint studies on potash use development are
   carried out in the country.
 Other International Institutions : NFDC shares information with number of
   national/regional institutions such as : Fertilizer Association of India, Fertilizer
   and Pesticides Authority, Manila, Philippines, National Fertilizer Secretariat, Sri
   Lanka and Arab Fertilizer Association, Cairo.




                                                                                    46
FERTILIZER INDUSTRY’S PERFORMANCE

Three leading manufacturers of urea in the country have recently released their accounts
for the first half of 2005. It was encouraging to note that urea off-take during these six
months increased by 18 per cent as compared to the corresponding period last year. But,
according to the manufactures, the demand has flattened out gradually. Still the off-take
was comparable with the consumption in the pervious two years. Indigenous production
of urea has improved requiring lesser import of the commodity. The demand for
phosphatic fertilizer took a quantum leap registering a 16 per cent increase.

Various types of fertilizers are used in the country but urea remains the commodity with
in the largest demand sector. The urea market is dominantly shared by three
manufacturers namely, Fauji Fertilizer Company Limited, Dawood Hercules Chemicals
Limited, Engro Chemical Pakistan Limited . All the three are listed at the Karachi Stock
Exchange. Fauji has the largest production capacity and contributed 46 per cent of the
total sale in 1997 followed by Engro 20 per cent and Dawood 11 per cent. The other
manufacturer controlling any significant market share is Pak Saudi Fertilizer. FFC-Jordan
Fertilizer Company Limited is a joint venture between Fauji Fertilizer Company and a
Jordanian company.

DEMAND VS SUPPLY

The demand for urea has been increasing consistently and significantly. This is due to
two factors: the government of Pakistan (GoP) besides offering various incentives to the
fertilizer manufacturers to keep the cost of production low also extending soft term loans
to growers for the purchase of various inputs. The manufacturers have been able to take
the fullest advantage of the GoP policies and have expanded the production capacities
over the years. This, on the one hand, has helped the country in achieving self sufficiency
in the production of urea and, on the other hand, has reduced the foreign exchange
expenditure on import of the product.




                                                                                        47
Consumption of urea is seasonal. In the past, during the peak consumption period, some
unscrupulous elements used to indulge in black marketing of the commodity. However,
with the enhanced availability of indigenously produced urea and an elaborate dealers
network the manufacturers have been able to minimise such incidence.

GAS SUPPLY

One of the factors responsible for phenomenal increase in the indigenous production of
urea is the policy of the government regarding supply of gas (feedstock) at concessional
rate. The policy has benefited the country.

When the first urea manufacturing plant was established in the country in 1967 by Exxon
Chemical, its installed capacity was only 148,000 tonnes per annum. The policy has
encouraged establishment of new units and expansion of installed capacities by the
manufacturers. The total installed capacity in the country now exceeds 3.2 million tonnes.
This capacity will be further increased by one million tonnes by the end of this year when
the current expansion by ECPL and FFC-Jordan starts commercial production.

However, some of the analysts believe that the advantage of supply of gas at concessional
rates to fertilizer manufacturers is not being passed on to the farmers. In their views, at
present the international prices of urea are lower than its domestic price. And therefore,
they suggest that efforts should be made by the manufacturers to lower urea price. The
manufacturers do not agree with this. They say that they have been importing expensive
urea in the past and selling at lower prices – virtually subsidising urea sale — a
responsibility of the government. Therefore, if the price of urea has declined in the
international market, they should not be asked to lower the domestic price. In their views,
it is a temporary phase as there is an over supply situation in the global markets. At this
time the GoP must protect the local industry.




                                                                                        48
NEED FOR NITROGENOUS FERTILIZER

Since the lands in the country are deficient in nitrogenous material, urea has to be used to
overcome the deficiency. The urea sale is directly linked to the purchasing power of
farmers and the availability of credit to them. The cash flow to farmers is directly related
to the prices of agriculture produce and the yields achieved during the preceding year.
When there is a bumper crop and support prices are higher, the growers get more cash
inflow. During the last few years, the income of cotton growers was adversely affected
due to curl leaf virus (CLV) attacks on cotton crop.

Following the losses incurred to the cotton growers on various grounds, many of the
farmers, particularly in Punjab, in order to avoid further losses, switched over to
sugarcane cultivation. But, they could not get the similar income mainly because the
climatic conditions of the area were not suitable for the cultivation of sugarcane. The
result was that per acre yield was low and recovery of sugar was also below than the
average recovery achieved in Sindh – the main sugarcane growing belt in the country.

The manufacturers also say that over the years, urea production capacity in the country
has been increased which has gradually lowered the import bill of urea. While many
other industries enjoying similar incentives have not taken the fullest advantage of the
GoP policies, it is most probably, the fertilizer industry, which has exploited the best
advantage of the policy. The country is almost self sufficient in indigenous production of
urea. The industry has achieved the stage of potential earner of foreign exchange for the
country. The export of surplus production can be done by the urea manufacturers to pay
for the import of DAP type fertilizer and completely free the GoP from its import. With
the commencement of DAP type fertilizer by FFC-Jordan the import bill of the
commodity will be reduced partly because the country will be importing a major portion
of the raw material from Jordan.

Some of the industry experts say that the country has exported urea in the past and,
therefore, concerted efforts should be made to make this a regular export commodity.
They say that by the end of this year the installed capacity in the country will be



                                                                                         49
increased by one million tonnes. Therefore, the country is expected to achieve surplus in
2007 — may be a temporary phase but the country must make the best efforts to exploit
this potential.

According to these analysts, during the last few years, the capacity utilisation of urea
manufacturing units remained low on account of load-shedding of gas.

To substantiate their point of view they quoted the example of Dawood Hercules. During
1997 the capacity utilisation was around 82 per cent. The plant has been running above
designed capacity in the past. They also said that while all the other urea manufacturing
unit had increased their installed capacity, Dawood Hercules had not been able to expand
its capacity in spite of increasing demand for urea in the country.

However, the other group believes that the industry is still to achieved the status of
potential export earner. The quantities imported over the year have varied sharply. While
the total import of urea in 1994 was only 78,000 tonnes, and import of another 450,000
tonnes is expected before the end of the year.

LOGISTICS

During the peak demand period the three urea manufacturers, Engro, Fauji and Pak
Saudi, face serious logistic problems. This include availability of trucks and railway
wagons, heavy traffic and frequent traffic jams on National Highway as all these units are
located within a radius of 100 kilometers. The manufacturers have been demanding, for a
long time, of the government to expand the roads but the problem still persists.

                          Market                 Share

                          Fauji                  60%

                          Engro                  20%

                          Dawood                 10%

                          Others                 10%




                                                                                       50
Engro Chemical Pakistan Limited, formally known as Exxon Chemical Pakistan, was
established in 1967 with an installed capacity to produce 147,000 tonnes of urea
annually. The Company has already expanded the urea production capacity to 750,000
tonnes per annum. After the completion of current expansion programme, the annual
production capacity will be enhanced to 850,000 tonnes per annum besides improving
plant energy efficiency and strengthening the environment conservation measures. The
delay in manufacture and shipment of some critical equipment by an overseas supplier
has delayed completion of project from March 2004 to last quarter of the year. The
project cost due to the change in scope and delayed commissioning has increased from
US$ 59 million to US$ 72 million. However, according to the Company sources, the
project economics remain unchanged due to enhancement in gas utilisation efficiency.

After undertaking major expansions, ECPL is diversifying its operations. Engro Paktank
Terminal Limited, the 50:50 joint venture of the Company with Royal Pakhoed of The
Netherlands was formally inaugurated in May this year. The jetty and chemical storage
facility at Port Qasim was built at a cost of US$ 65 million.

Engro Asahi Polymer & Chemical Limited (EAPCL) is a joint venture of ECPL with
Asahi Glass and Mitsubishi Corporation of Japan for the production of PVC resin. The
project is also being built at Port Qasim. It will have a capacity to produce 100,000
tonnes of resin annually. The project cost is estimated around Rs. 4 billion.

Dawood Hercules

Chemicals Limited has not been able to enhance its production capacity lately. The
Company operates on a gas network which is primarily domestic consumer oriented. Any
increase in demand for gas or reduced gas availability, due to the fault in the system,
immediately results in diversion of supply to domestic consumers particularly in winter
months. fertilizer plants in some other areas were able to achieve at least 10 to 12 per cent
production above the designed capacityindicating capacity utilisation at 85 per cent as
against a capacity utilisation of 76 per cent during the corresponding period in 2004. It is
believed that the average capacity utilisation for the year will improve to 90 per cent



                                                                                          51
provided there is no load-shedding of gas. However, to achieve capacity utilisation above
designed capacity the Company needs supply of gas at optimum level. This will not be
possible without improving the pipeline network.

OUTLOOK

By the end of year 2005, approximately one million tonnes of additional urea
manufacturing capacity is expected to come on stream in the country. This would not
only improve the availability of the product but would also result into greater
competition. With the present downward trend in the international price of urea, the
ability to recover escalation in cost through higher prices will be limited. To remain
successful in the tough competition it will be necessary for the manufacturers to focus on
cost control and improved productivity.

The policies of the government assign the highest priority to allocation of gas for the
fertilizer industry to boost agriculture production in the country. It is necessary that the
government abides by the policy and meets industry demand for allocation of additional
gas at reasonable price. To ensure availability of urea at competitive prices the
government must avoid any escalation in the gas (feedstock) prices in the near future as
the government intends to enhance production of food and cash crops in the country.
Besides, the industry has become a potential foreign exchange earner. Efforts should be
made to enable the industry to earn foreign exchange after freeing the country from its
import liability.




                                                                                         52
                       BOARD OF DIRECTORS

Chairman
Lt. Gen. Syed Muhammad Amjad, HI, HI(M) (Retired)


Chief Executive Officer and Managing Director
Lt. Gen. Mahmud Ahmed, HI(M) (Retired)


            DIRECTORS                        NOMINATED BY
Dr. Haldor Topsoe                    Fauji Foundation
Mr. Qaiser Javed                     Fauji Foundation
Brig. Arshad Shah, SI(M) (Retired)   Fauji Foundation


Mr. Tariq Iqbal Khan                 National Investment Trust (NIT)
Brig. Aftab Ahmad (Retired)          Fauji Foundation
Brig. Ghazanfar Ali (Retired)        Fauji Foundation
Syed Zaheer Ali Shah                 Government of Pakistan (GOP)
Mr. Khawar Saeed                     National Bank of Pakistan (NBP)
Dr. Nadeem Inayat                    National Investment Trust (NIT)
Mr. Istaqbal Mehdi                   Pak Kuwait Investment Company


Brig. Munawar Ahmed Rana             Fauji Foundation
(Retired)




                                                                       53
 Responsibilities, Powers and Functions of Board of Directors

The role and responsibilities of the chairman and the chief executive officer are distinct,
clearly defined and documented and are carried out separately by the two officers. The
board exercise its powers to carry out its duties with a sense of object judgment and
independence in the best interests and the company has circulated a‖ statement of ethics
and business practices‖ to establish a standard of conduct, as a model corporate citizen ,
for the board and employees of the company. Each year, the director attend the
orientation coerces of their duties and responsibility to manage the affairs of the company
on behalf of the shareholders; these courses are also attended by the management of the
company.

The board has also adopted vision and mission statements and an over all corporate
strategy for the company and formulated policies including risk management,
procurement of the goods and services marketing ,terms of credit and discount,
acquisition and disposal of of fixed assets and write-off inventories, bad debts, loans and
advances, investments and disinvestments of funds with maturity period exceeding six
months, borrowing, donations, charities, delegations of financial powers, transitions with
related parties, loans and advances, human resource management including succession
planning , healthy ,safety and environment . decisions on material transitions or
significant matters are documented through resolution passed at their meetings and
circulated for approval.

The board monitors the operations of the management through three standard
committees. Implementations of the decisions, policies and strategies along with
maintenance of their record have been delegated to the management under the
supervision of the Chief Executive and Managing Director of the company and is
executed and controlled through management committees.




                                                                                        54
                             Management

Chief Executive Officer and Managing Director
Lt. Gen. Mahmud Ahmed HI(M) (Retired)


GENERAL MANAGERS
General Manager Technology & Operations
Mr. Abdul Waheed Sheikh

General Manager Finance (Operations)
Mr. Abid Maqbool

General Manager Marketing
Dr. Muhammad Sadiq

General Manager Admin

General Manager HR

General Manager Technical Operations

Mr. Abdul Waheed

General Manager Industrial Relations

General Manager Plant (Goth Machhi)
Mr. Tahir Javed

General Manager Plant (Mirpur Mathelo)
Syed Iqtidar Saeed

COMPANY SECRETARY
Brig. Muhammad Saleem Suleman SI(M) (Retired)




                                                55
                            Meetings of the Board.

The chairman presides over meetings of the board and encourages the participation and
contribution of executive and non executive directors. The directors meet at least once in
each quarter. Additional meetings are called upon when required. In 2004 a total of seven
meetings were held which were also attended by chief Financial Officer and the
Comp[any Secretary. The chief Financial Officer and the Comp[any Secretary are the
employees of the company and are not entitled to cast votes at the meetings. Written
notices of the meetings along with agenda and its details were circulated seven days in
advance. Minutes of each meeting are recorded and circulated by the company within 30
days.

    In these meetings the issues generally discussed are:
    Approval of quarterly financial statements
    Approval of half yearly financial statements
    Approval of annual financial statements
    Annual business plans
    Annual budgets
    Quarterly forecasts and annual forecasts
    Cash flow projections
    Performance monitoring
    Internal audits reports
    External audit recommendations
    Agreements and contracts
    Amendment of laws
    Agreement with staff unions‘ Collective Bargaining Agents (CBA)
    Status of payments of debts and obligations and repayments of loans

The board, after each meeting, gives the recommendations to strengthen and formalize
the corporate decision making process.




                                                                                       56
Meeting of the Marketing Division.

All the heads of departments meet every Tuesday to



    To present the weekly reports to GMM
    To discuss the sales situation
    To look at the competitors‘ activities
    To monitor the performance against monthly and annual plans
    To monitor fertilizer supply and demand situation.
    Tries to devise strategies to over come problems if any.

In every month a monthly meeting is held in which reports for the month of all
departments are presented to GMM.

In monthly meetings the targets and plans for next month are also set.

In these meetings monthly sales of FFC against the same period of last year and monthly
sales of competitors‘ are also analyzed.

Sales of all regions are rewieved.

Sales performance of all sales officers are compared with targets

Best sales officer of the month is selected and rewarded.

Expenses for the month are approved.

These meetings are presided over by GMM.

All these meetings are held at Lahore marketing office.

Annual meeting of all the managers of Marketing Division is also held.




                                                                                    57
Marketing Network




                    58
                     Departments in Marketing Division

Marketing Division Lahore contains the following departments. These departments are
listed according to the schedule of my internship schedule at the office.

   1. Distribution
   2. Warehousing
   3. Administration
   4. Human Resources
   5. Industrial Relations and Welfare
   6. Procurement
   7. Finance
   8. IT Unit
   9. Technical Services
   10. Planning
   11. Sales Promotion
   12. Sales North Zone
   13. Regional Office Lahore
   14. General Manager Marketing




                                                                                59
                  Introduction of All the Departments:

Sales Promotion

No of the executives                     3

Department Head                          Mrs Nabila

Senior SPO                               Mr. Sultan Ahmad

SPO                                      Mr. Iqbal Ahmad

No of the Staff                          3

Total employees                          6

Objectives

    To create ,augment and maintain the demand of FFBL and FFCL products
    To enhance and sustain brand image and corporate image
    Improve company visibility in the mind of consumers
    To safe guard company logo
    To strengthen brand loyalty




                                                                            60
Sales North Zone

General Manager Marketing                           Dr. Muhammad Sadiq

Senior Sales Manager                                 Zia Mahmood Minhas

North zone contains these regions

Total No of Management Employees (lhr. Off.)         4

Regional officers                                    5

No. of staff Employees                              3

Total Regions                                        5

   1. Lahore
   2. Faisalabad
   3. Sahiwal
   4. Peshwar
   5. D.I.Khan

Functions of North zone
        Conduction sale forecast for regions include in North zone
        Monitoring sales allocation as per decided ratios
        Monitoring daily sales
        Studying competitors price structure
        Co-coordinating regions included in North zone
        Managing sales force of North zone
        Checking and inventory
        Coordination wit top management
        Ensuring availability controlling warehouses
        Monitoring of product
        Monitoring and keeping record of turnover of productivity


                                                                          61
REGIONAL OFFICE LAHORE



General Manager Marketing                            Dr. Muhammad Sadiq

Senior Sales Manager                                 Zia Mahmood Minhas

Regional Manager                                     Mr. Arshad Mahmood

Sales officer Lahore                                 Mr. Masood

Technical sales Officer                               Mr. Zahid Nawaz


No. of staff Employees                               3


The regional office Lahore is a front line department. It is actually involved with direct
sales of fertilizer and interacting with dealers. The regional manager, regional TSO and
the sales officer Lahore district are working with assistance of stock members .For three
days
Tuesday –Thursday the officers are on field visits and for rest 2 working days they
perform their office work. The districts included in Lahore region :


Lahore Region
   1. Gujranwala
   2. Sheikhupura
   3. M.B.Din
   4. Rawalpindi
   5. Sialkot
   6. Hafizabad




                                                                                       62
Activities
    Monitoring product wise /district wise achievement with respect to targets
    Monitoring current market situation with respect to fertilizer industry
    Monitoring competitors activities in detail
    Managing warehouses, their sales and closing stocks
    Appointing and terminating dealers as regard to their performance, literate goal is
       to have a strong dealer network


Distribution Department

General Manager Marketing                           Dr. Muhammad Sadiq

Senior Distribution and Warehousing Manager         Mr.Shakeel Ahmad
Senior Executive Distribution                       Mr. Riaz Ahmad
Executive Distribution                              Mr. Afzal Mughal
Distribution Officer                                Mr. Salman Ali
No. of staff Employees                              3


Distribution department is of the major department helping the sales force. The primary
function of distribution department is to ensure effective and efficient distribution of
product from plants up to the final customers.


Objectives of Distribution Department

    Ship out entire production of FFC and FFBL plants and imported fertilizer in
       accost effective manner(3.4 MT approx)
    Satisfying 3580 dealers , 1632 direct customers and 169 warehouses.
    Truck generation for 1556 sales points.
    Plan and undertake self imports/exports and ensure prompt handling , quality
       packing ,correct weight, timely delivery and documentation.


                                                                                     63
    Monitor packing availability and arrange safe storage of surplus production
        during lean months.
    Follow up of product quality complaints.
    Coordinate with plant management to ensure smooth operations.
    Maintain liaison with Pakistan railway , NLC, port authorities and suppliers.




Transportation Arrangements


    Private trucking contractions
    NLC
    Pakistan railways




Dispatches 2004


        Fig in KT




                                     Road         Rail         Total        Ratio
Ex Goth Macchi                       1348         111          1459         92:08
Ex Mirpur Mathelo                    652          73           725          90:1
Ex Bin Qasim                         871          85           956          91:09
Ex Port                              244          12           256          95:05
Total                                3315         282          3397         92:08




                                                                                     64
Customer served



Dealers                      3580


Direct customers             1632




Total                        5212




Warehousing Department

General Manager Marketing                              Dr. Muhammad Sadiq

Senior Marketing Service Manager                       Mr. Asad Sultan

Senior Distribution and Warehousing Manager            Mr. Shakeel Ahmad
Warehousing Manager                                    Brig.Retd. Ghulam Rasool Sahi
Senior Executive Warehousing                           Mr. Riaz Ahmad
Warehousing Manager                                    Mr. Ahsan khan
No. of staff Employees                                 3
The ware housing department is involved in completing the formality For hiring And
dehiring of warehouses (on need basis) , appointment of handling contractors, watch and
ward contractors. The record of inventories is maintained and physical inspection of the
warehouse and product are carried out to ensure safety and security. This department
works in collaboration with distribution department.




                                                                                       65
Functions of warehousing department


       Coordinating of warehouse department with regions regarding warehouse
        selection, training of supervisors, planning capacity of warehouses
       To conduct inspections of the warehouses on planned and surprise basis
       Each warehouse is inspected around 17 time a year.
       Warehousing department is considered with processing of


                                  o Lease agreements
                                  o Watch and ward agreements
                                  o Handling agreements
                                  o Watch and ward bills




                Conduct the training of warehouse supervisors.
                Preparing the operational , capital and revenue budgets on yearly basis.
                Formulating warehouse plans.
                Preparing weekly capacity reports.


Zone wise Warehouses and capacity



Zone                   Regions                Warehouses              Capacity MT
North                  5                      63                      136700
Central                5                      53                      119400
South                  4                      49                      78400
Total                  14                     165                     334500




                                                                                        66
Type of Warehouses


     Strategic Warehouses
     Permanent warehouses
     Temporary warehouses
     Purely temporary warehouses


s




                                    67
Administration Department

General Manager Marketing                            Dr. Muhammad Sadiq

Administration Manager                               Col. Retd. Muhammad Khalid


Administration Esxecutive                            Maj. Retd. Khaani


No. of staff Employees                               3


Administration department is involved with conducting the administration function of the
fauji fertilizers of the marketing division

Functions
Provision and maintenance of transport i.e. Cars, Jeeps and Poor vehicles
Ensure availability of utilities like gas, electricity, telephone, E-mail, and Photocopy
facility.
Under take protocol duties. i.e. reception, transport, and ticketing etc. For company
gussets and officers
Ensure the implementation of company policies and rules
Provision of uniform to entitle staff (Qasids, Chowkidars, electricians and drivers)
Ensure proper maintenance of the office premises and guesthouses
Take disciplinary action under the rules where necessary
Disposal of unusable assets of company
Managing three major types of transport system related to marketing division;
       Company maintained
       Company assisted cars/Jeep
       Pool transport




                                                                                       68
0




Transport holding
Holding of marketing division transport is as under
Company assigned cars                                     23
Company assisted cars                                     91
Company maintained cars                                   63               Total=177



Human Resource Department

General Manager Marketing                             Dr. Muhammad Sadiq

Administration Manager                                Col. Retd. Muhammad Khalid


Senior Executive HR                                   Col. Retd. Asad Sukhaira


HR Officer-I                                          Mr. Qamar


No. of staff Employees                                3


The FFC Management, acknowledging the importance of human resources has always
placed personnel management at the top of its priority list. The Human Resources
Department, therefore, right from the inception of the Company has played a vital role in
steering the Company through all its phases, operations and progress.

The functions of Human Resources Department vis-a-vis personnel management and
human resources development are going side by side and it is due to the progressive
approach and dynamic philosophy of the management that Personnel Management
remains abreast with the latest style of management ensuring high level of motivation and
satisfaction of the work force under varied situations. Personnel policies are kept updated
and are periodically modified to respond to the latest socio-economic changes and market
trends                       of                           the                     country.



                                                                                        69
Hiring quality manpower, keeping them happy, satisfied and motivated are the pillars of
the Human Resources Department; justice, fair play and merit oriented treatment are
some of the ingredients of processing cases by the Human Resources Department.
For Human Resource development, another aspect which receives its due share is
training. The employees are exposed to various kinds of cross training, technical courses,
management courses, workshops and seminars both at home and abroad. At Plant site, the
Company has a Technical Training Centre, which is unique, and the only centre in Asia
having a true replica of the Plant for providing realistic training as far as possible, to the
employees.
Employees' welfare has all along received due consideration by the Management. A
number of agreements have been signed with CBA

Workers Union, resulting in handsome remuneration packages to employees. The
company, since its inception, has undertaken five salary revisions for Management
employees, to remain amongst the top paying organizations of the country. It is due to the
sheer sincerity, welfare oriented policies and concern for every single employee that there
has never been any strike, lock out or go slow in FFC.

Human resources department of the marketing division is responsible for the employees
related to marketing division. Maintaining their attendance and payroll of the staff while
officers and executives get their pay directly from head office.

Functions

Work out warehouse supervisor visor‘s requirements in consultation with regional
manager and arrange recruitment and transfer activities according to head office
instructions.

   1. Maintain up to date personal records, statistics including leave records , relating to
       management and non- management employees.
   2. Interpret company policy and provision of necessary ruling where required.




                                                                                           70
Handling cases relating to following subjects


    Employment/appointment of non management employees. Temporary / contract /
       daily wages according to authorization.
    Promotion of non management employees
    Pay and allowances of non management employees.
    Leaves (annual, causal, special, sick) are managed for all employees.
    Transfer claims of all employees.
    House/rent allowances advances
    Also the House building loans


Industrial Relations and Welfare Department

General Manager Marketing                          Dr. Muhammad Sadiq

Administration Manager                             Col. Retd. Muhammad Khalid


Senior Executive IR & W


No. of Staff Employees                             2


The IR department in organization is formed under the IRQ 69 [industrial relation
ordination] of Punjab labor laws act and is under the approval of Management & joint
Labor Department of Punjab Govt .IR basically deals with the Labor laws implication in
an organization and has to negotiate legislatively with the CBA certified labor union at
the office .The criterion for formation of IR department is a office having at least 50
employees and its provisions given in the Punjab as well as GOP labor laws. The IR
department not only negotiates with the labor unions but also responsible handling with
the labor




                                                                                     71
One of the functions of IR department at FFC to tackle with all types of court problems.
There are labor courts at regional level .At present there are 24 courts in Pakistan. Any
employee who may have a complaint about the management can go to the court so IR
department representative follow the case



Major Activities
    Leave records of workers
    Appointment records
    Record of upgrading
    Annual increment record
    Vertical performance appraisal records
    Staff no allocation

Procurement Department

General Manager Marketing                           Dr. Muhammad Sadiq

Administration Manager                              Col. Retd. Khalid


Senior Executive procurement                        Col. Retd. Ghyoor


Manager Procurement


No. of Staff Employees                              2


Procurement department at marketing is responsible for the purchases. Purchases for the
following offices are made by Lahore Marketing Division,3 zonal officies,14 regions,5
FAC,s,Finance and distribution offices at Goth Macchi ,Mirpur Mathelo distribution
office at FFBL port and head office requirements
GOALS         ―To procure quality goods at the most economical and competitive rat




                                                                                       72
FUNCTIONS
         Quality, Economical and timely procurement of items /spares for marketing
          division and plants ensuring complete backup support /after sales services.
         Price enquiry of different items to estimate the price so that the budgeted amount
          may be endorsed on the PR before initiation
         Disposal of obsolete /surplus/scrap material
         Continuous updating of reliable vendors list for both plants and marketing
          division
PROCEDURES INVOLVED IN PROCUREMENT STEPS


        Raising of purchase request
        Approval of PR
        Request for quotation
        Bid opening
        Comparative statement
        Placement of order
        Delivery receipt of goods
        Verification of bills against orders
        Final payment


IT DEPARTMENT

General Manager Marketing                                Dr. Muhammad Sadiq

Administration Manager                                   Col. Retd. Khalid


Senior Executive IT                                      Mr Sherazi


No. of Staff Employees




                                                                                         73
Information Technology unit was properly setup in FFC Marketing division Lahore. IT
unit is one of the most important departments working at marketing division Lahore. The
Unit has to play a leading role in the marketing division in order to enable all the
department to perform all their functions effectively and efficiently .It enables the
management to make timely decisions.


OBJECTIVES OF IT UNITS


      To meet computing needs of all the departments of all the departments of the
       marketing divisions.
      To design and develop, efficient, effective and user friendly information systems
      To provide the maintenance services and proper updating of all these systems
      To properly cope with the security and ethical challenges related to information
       technology and information system
      To design proper feed back and control procedures toward achievement of its
       goals.


SYSTEMS DEVELOPED BY I.T UNITS


      Sales accounting system
      General accounting system
      Order processing system
      Regional information system
      Sales promotion system
      Distribution management system
      Procurement system
      Human resource system




                                                                                       74
Finance department
The finance department working at marketing division Lahore is responsible for all the
sales collections either sales are made directly through plant or through warehouses. the
finance department is divided into two sections.
    1. General accounting
    2. Sales Accounting


Specific responsibilities of General accounting
        Payroll of permanent and temporary staff employees
        Deduction of income tax from payroll and deposition in govt. treasury.
        Forwarding detailed of provident fund contribution of permanent employees
           to head office.
        Reimbursement of regional imprested/distribution imprested.
        Forwarding of L/C opening request to head office for import of fertilizer.
        Processing of export related documents.
        Deduction of income tax from various supplies and deposit into government
           treasury.
        Maintenance of books of account including fixed assets ,supplies , employees
           etc
        Payment of telephone , electricity and medical bill
        Payment in respect of bags and line for imported fertilizers
        Clearing and forwarding charges in respect of import of fertilizer


Specific responsibilities of the Sales Accounting

            Maintenance of dealership records
            Processing and banking of sales and proceeds received from field force for
             the sale of fertilizer
            Transfer of data to plants for shipment
           Transfer of funds to head office recording of invoices for sales ex-warehouses



                                                                                      75
           Receiving data from plants for direct sales
           Processing of bank Guarantees for secured credit sales
           Monitoring of unsecured credit sales to fauji sugar mills/forms
           Preparation of pricing and discount structure for various fertilizers
           Receiving data from plants for warehouse shipment
           Recording of stock movement reports
           Overall reconciliation of stock movement with intimation of head office
           Follow up receivables for sale through rail
           Recording of stocks receives from FFBL for sale on their behalf
           Sending the information regarding dealers balance           to field force for
            recovery of receivables on various accounts
Annual Business plan of FFC

Review and development of
    Historical data
    Key assumptions
    Inputs from regions


Review meeting
    SMs/RMs/Deptt.Managers
    GMM

Collation and submission to Head office, review by management, Board of directors,
approval

Budgetary control
    Circulations to cost controllers
    Quarterly budget variance reports
    Monthly revised cash flow statements
    Review of import requirements of fertilizer




                                                                                       76
FFC related statements/ reports


Daily / fortnightly


    Remittance status
    Sales status


Monthly


    Trial balance and related schedule
    Receivables report along with age analysis
    Revised cash flow statements
    Finance dept progress report
    Capital budget utilization statues
    Progress report of sales and w/h dispatches
    Stock report to insurance company and banks
    Bank reconciliation statements
    Tax deduction at source
    Dealer network status report


Quarterly

    Budgeted vs actual expenses comparison
    Performance review of marketing operations


Yearly

    Trial balance and related schedule
    Proposed capital and revenue budget
    Inputs for tax returns
    Inputs for company‘s annual reports


                                                   77
   Technical Department

General Manager Marketing                             Dr. Muhammad Sadiq

Technical Services Manager                            Mr. Riaz Ahmad

Technical Services Executive                          Mr. AurangzaiTechnical

Services Officer                                      Mr. Naseem Ahmad

Technical department is providing support function to sales. Company is providing
technical services all over the country free of cost. Senior technical executive who is
reporting to SMSM heads the technical department. The 14 technical officers are serving
in 14 regions all over the country in coordination with sales officers.
Mission Statement of Technical Department
‗Help the farmer optimize utilization of his resources to rejuvenate farm productivity and
increase his income‘


Objectives
    Farmer education /training
    Dissemination of latest and complete package of technology
    Promotion of balanced fertilizer use
    Focus on increasing farmers income
    Counter fertilizer misconception
    Enhancing crop yield/overall crop production
    Supplement government effort for agricultural


Functions
    Establish proper linkage sales and technical services
    Increase and faces on farm management expertise
    Professional development on personnel
    Collaborative research


                                                                                       78
Farm Advisory Services

Fauji Fertilizer Company Limited has been providing Agricultural Advisory Services to
the farming community throughout Pakistan since 1981, for increasing the agriculture
production in general and the farmers‘ economic returns in particular. Our organization in
pursuit of its national commitment and moral obligation maintains regular contact with
farmers and Agricultural Institutions to ensure constant and efficient transfer of latest
technology.

The company is providing quality farm advisory services all over the country through its
5 Farm Advisory Centers and 14 Regional Technical Services Officers. Farm Advisory
Centers are located at D.I. Khan, Jhang, D.G. Khan, Mirpur Khas and Kasur. Each centre
has a team of five Agricultural Experts, providing multifarious advisory services through
crop demonstrations, field days, farmer meetings, village meetings, crop seminars, farm
visits and group discussions. All the centers are fully equipped with modern sophisticated
computerized Soil & Water Testing Laboratories and high-tech extension equipment.
Moreover, FFC has also established a micronutrient testing laboratory at Farm Advisory
Centre Jhang having Atomic Absorption Spectrophotometer and other analytical
instruments. Soil Testing is a valuable tool to propagate appropriate and balanced use of
chemical fertilizers and to identify soil problems. Soil/water samples are collected from
farmers‘ fields and analyzed in the laboratories. Fertilizer recommendations are
developed on the basis of soil analysis and recommendation reports are delivered to the
growers for proper and balanced fertilizer use. The soil/water testing and micronutrient
analysis facility is offered free of cost. Besides these five farm advisory centers, we have
14 Technical Services Officers based at 14 Regional Offices of FFC spread all over the
country extending these services in their respective areas.

To further strengthen our advisory services and facilitate our farmers, we also publish
crop, vegetable, orchard brochures, agro-grams, posters and pamphlets containing latest
information regarding production technologies of crops, and orchards grown in Pakistan.
For a stronger direct link and timely guidance of farmers, we publish a quarterly Urdu
News Letter “Zari Report” containing season specific information regarding crops,


                                                                                         79
fruits, vegetables, improved agronomic practices and articles on agricultural issues.
Following is the list of crop brochures available with us:

       Wheat                                                  Sugarcane
                                 Cotton Brochure                                             Rice Brochure
        Brochure                                                Brochure


                                                                                              Citrus
       Maize Brochure           Potato Brochure              Mango Brochure
                                                                                               Brochure


       Banana                                                 Vegetable                     Guava
                                 Apple Brochure
        Brochure                                                Brochure                       Brochure


       Oil Seed                 Salt-affected Soils
        Brochure                  Brochure



These brochures and Zari Report are also available in the Kashtkar Desk of our website .


To improve the fertilizer use efficiency and to obtain optimum crop yields, a “Fertilizer
Guide Book” has also been published containing comprehensive information on various
fertilizers available in Pakistan, their application methods and their economic use.

FFC has also adopted the pragmatic approach of telecasting crop documentaries on PTV
before the onset of sowing season of major crops. In these documentaries all the
components of crop production are covered with sufficient elaboration. Cotton, wheat,
sugarcane and rice documentaries can be viewed in the Kashtkar Desk of our website.

We encourage our farmers to get registered on our mailing list by sending a request in
writing or through e-mail at the following addresses to receive copies of our published
material free of cost. For any further information or agricultural advisory service, please
visit any of our nearest Farm Advisory Centers or Regional Offices closer to you.




                                                                                                          80
Technical Services Department

(Marketing Division)

Fauji Fertilizer Company Limited

Lahore Trade Centre,

11-Shahrah-e-Aiwan-e-Tijarat, Lahore

Phones: 042 – 6365119

Farm Advisory Centre                                Farm Advisory Centre


D.I. Khan                                           Jhang


Faqir Manzil, Dial Road, D.I. Khan                 Near Chenab College, Chiniot Road,
Jhang

Phone: 0961 – 741701                              Phone: 0471 - 671118



Farm Advisory Centre                               Farm Advisory Centre
Kasur                                              Vehari


Faqiriay Wala, 3 – km Khudian Road,          2.5 – km, Khanewal Road,
Kasur                                              Vehari
Phone: 0492-671848, 0492-2003977             Phone: 067-3361913, 3360223

Planning Department
The planning department is the integral part of fauji fertilizer company. Senior executive
planning who is responsible to SMSM ,heads it. The department coordinate the activities
of all other departments within marketing division .Major responsibility of the
department is collection of information about competitors and analyzing their strategies.




                                                                                        81
Functions
   Coordination and development of annual business plan
   Provision of historical information to regions and senior sales managers for
     developing sales forecast
   Finalizing sales forecast with coordination related sales force
   Preparation of fertilizer data book
   Monitoring international fertilizer price trend
   Preparing Pakistan industry Urea market participation reports
   Chairman‘s report for board of directors meeting containing analysis,FFC
     performance
   And industry situation. These reports are prepared on need basis
   Preparation of Fertilizer Industry Report
   Reviewing FFC sales performance on quarterly basis
   Develop plans for training of officers
   Monthly analysis of FFC ex-plant road and rail fright analysis




                                                                             82
Policy Formulation Procedure
At FFC, polices are devised at the peak level. Board of Directors and Executive
Committee devise strategies keeping in view the vision, mission and the objectives of the
company. These strategies are executed according to the instructions of top level of
hierarchy. Top management and middle management are given powers to carry out the
operations for the achievement of long-term objectives. They encourage the views and
suggestions of employees as well. It helps in the effective implementation of the
formulated strategies.


Corporate Governance Practices

Good governance has always been vied as an inspiration by the board in enhancing the
timeliness , accuracy, comprehensiveness and transparency of financial and non financial
information and the board endorses the practices contained in the code of corporate
governance of the listing regulations in performance of the board‘s duties and
enforcement at all management and non- management levels.

Corporate responsibility for the overall strategy , assets management and operations of
the company and for identifying and overcoming any challenges , business and
macroeconomic risks faced by the company and devising business ventures for sustained
growth in long term profitability of the company aimed at enhancing the shareholders
returns.




                                                                                      83
Managerial Policies:

AUDIT PRACTICES
A number of excellent manuals are available for the professional auditor or the member
of a director‘s examining committee who wishes to familiarize himself with specific audit
techniques. Good auditing can be said to consist of substantial verification of the
accuracy and completeness of a FFC records and of the safety and efficiency of its
operations. In FFC most direct form of auditing is simple rechecking have a second
person redo what someone else has already done. In addition to this, some direct spot-
checking has an important place in the audit program even where controls are well
developed.


POLICIES FOR ATTRACTING DEPOSITS
Although management and directors of FFC do have absolute control over the level of
their deposits, they can never the less influence the amount the FFC hold. Because
deposits are so important to the profitable operation of FFC, the FFC tends to compete
aggressively for them.
Among the factors determining the level of deposits in a FFC are some that the FFC
usually cannot affect significantly, some of the leading are monetary and fiscal policy and
the level of general economic activity.




POLICIES REGARDING EMPLOYEES

Some of the policies adopted by the FFC regarding employees and personnel are as:




                                                                                        84
RECRUITMENT

The standards set by FFC when it first selects its employee largely determine the caliber
of the staff in the future. The FFC urges the recruitment of several young MBA‘s at
competitive salaries.
There is a known need for officer replacements in five or 10 years, it behooves
management to look for prospective employees who are believed at the outset to have
officer potential because of their education, aptitude, interest or previous experience for
clerical personnel, the FFC maintains close relationships with guidance directors of local
high schools and colleges it also encourages employees to bring in their friends and it see
to it that students have opportunities to visit the FFC and head about some of the
advantages of working there.


The FFC allows summer employment programs to allow college students to see the
challenges of fertilizer careers and    are always alert for able and interested people
employed at other companies or in other fields.


TRAINING

The newly hired employee generally starts as a clean state on which nothing has yet been
written. The employee‘s attitude towards the FFC and job are shaped by the first few
weeks of experience. In the process of learning the first few simple tasks the employee
grasps the relationship between what he is doing and the work of the department or the
FFC as a whole.
New employees have a fundamental need for a broad idea of their job- in short for
orientation.
As we can say, good training is an art if not a science and should be entrusted only to
those within an organization who have an aptitude for it or who have received special
training in the instruction of others. Thus FFC emphasizes both cases i.e. to challenge the
employees so that they will continue to be interested in FFC and will realize the need for
continued training as their responsibilities become greater.




                                                                                        85
SALARY (PAY SCALES)
The principal criteria for a well considered salary policy are, first, the relationship of the
FFC salary scale to salaries paid for comparable jobs in the community and the industry
and, second, the relationship of the salary paid to one person to that paid to others for
jobs of comparable difficulty within the FFC.


The salary administration of FFC is reasonable as at many factors contribute towards the
working conditions job security, prestige and opportunity for advancement all enter into
the competitive package.
FFC provides fringe benefits to or better than those offered in other industries pension
plans, hospitalization, and group life insurance are the rules prevailing in the FFC. A
more effective incentive is a well designed profit sharing plan with benefits that vary
from year to year in direct proportion to the financial success of the FFC operations.


COMMUNICATION
A good deal of verbal interchange takes place in FFC each day. It is a two way street. The
competent officers discuss rather than directs, listens as well as interacts. The FFC makes
the communication channel more effective by staff meeting eventually it is an extent ion
of the conversational or discussion technique but embraces a larger segment of the
organization. Such meetings are regular features of efficiently operated FFC and take a
wide variety of forms, ranging from daily or weekly officers meetings to annual weekend
conferences.
The major portion of communication necessary for the day to day operations of a FFC
consists of simple person to person conversation more complex ideas, however, gain
clarity if they are put in writing. Thus the FFC is talented in the ability to write clearly
which is an invaluable management talent that needs constant practice and development.




                                                                                           86
EDUCATION:
FFC focuses on the higher quality of education. The officers employed in the FFC are
mostly graduated from either foreign universities or some of the leading universities in
the country.
MOTIVATION LEVEL
Job design for motivation is another personnel approach that has been increasingly
emphasized in recent years. Job contents, methods and relationships are structured not
only to satisfy technological and organizational requirements but also to accommodate
human needs for meaningful and self-fulfilling work. Jobs are being designed to fit the
people who hold them in the hope that greater employee motivation (which is essential to
higher productivity) will result.
Sensitivity training and / or organizational development programs have been used to aid
in the broad development of Top executive talent and teamwork.
RETIREMENT
The FFC does not emphasis on having regular employees. Mostly the employees are
hired on contractual basis, making them feel insecure about their jobs. Therefore most of
the time the employees are interested in finding secure and more appropriate job.


GROWTH OPPORTUNITIES
FFC provides growth opportunities to its employees and officers, as it deals with many
leading institutions.


Major managerial policies, practices/styles

FFC has the strong management system to run the business. Today FFC is one of the
most successful companies and its all due to its superb managerial policies. There are
many planned policies which are adopted by the company.




                                                                                      87
Human Resource Policy


FFC has strong human resource policy. The management believes that their employees
are major assets of the company. Just because of this policy the company continues to
benefit from the efforts of its valuable people, who are actually, the strength of FFC
through training and development activities the human resource policies aim at the
improved working conditions all over the organization. The various personnel strategies
can be that the employees are chosen solely on the basis of merit and they are given
monetary rewards and incentives with a view to increasing the commitment and
motivation of the employees. Although the salaries are not really competitive if you look
at the market scenario yet the employees are quite satisfied as they are working in an
excellent environment and enjoying as an employee of a market leader.


Marketing and Sales Policies


Marketing and sales departments serve as backbone in the company. FFC has fully
planned and organized marketing and sale policies. Meetings are held where decisions
are taken for the efficient functioning of the company‘s marketing and sales areas
because the company depends a lot on its marketing and sale policies. Marketing budget
is carefully determined and sales people incentives and salaries are reviewed from time to
time. There are certain other essential things about the sales strategies. Products are sold
throughout Pakistan with no change in prices anywhere. In case of consumer products the
freight are born by the company. The customers are offered no discount and also products
are sold on cash basis. In case of industrial products freight are the responsibilities of the
customer. Moreover, the cost of change in design is charged to the customer. Marketing,
however, supports all these sales strategies by product development through the creation
of public awareness, promotion and customer contacts.




                                                                                           88
Backward Integration Strategy


FFC follows the backward integration to support their business. They try to acquire the
related companies or part of business to give a boost to the business growth.


Financial Policies


FFC has the well established rules for their financial transactions. One of the most
important strategies in this regard is of investment. Before making investment future is
seen rather than the present i.e. investment is made only in the projects, which will
increase the sales in the future.


Customer Relationship


FFC adopts the strong customer relationship policy. They think customer as the king.
They are following 20 – 80 strategy in dealing with the customers.


Internal Strong Relationship


Packages maintain a strong relationship between the departments. All departments are
interrelated. It is one of the main aspects of strategic management that all the various
functions performed in the company by the different departments must have interrelation
and collaboration if company wants to achieve success. Thus synergy is given a lot of
importance.
FFC has many other policies to run their business. These all contribute to the success to
the success of the FFC.




                                                                                      89
                      MANAGERIAL STYLES


Management is process of utilizing material and human resources to accomplish
designated objectives. It involves the organization, direction, coordination and evaluation
of people to achieve these goals. The role of manager is to assemble the best work team
he can obtain and then to provide a supportive motivational environment to guide that
team to accomplish agreed upon objectives. The essence of management is the activity of
working with people to accomplish results. It involves organizing, motivating, leading,
training communicating with and coordinating others.


MANAGING THE ORGANIZATION
The management of the FFC focuses on some of the objectives that it wants to achieve.
The way managers treat and deal with their subordinates in order to accomplish the
multiple objectives of the organization is determined primarily by management system of
beliefs about the nature of man and about the determinants of cooperation in an organized
endeavor.


IMPACT OF MANAGEMENT STYLES ON EMPLOYEES:

MOTIVATION
The term motive implies action to satisfy a need. Motivation can be defined as a
willingness to expend energy to achieve a goal or a reward.
The management styles adopted by the FFC affect greatly, and employees are motivated
in order to enhance their performance and achieve the derived goals.

MORALE AND PRODUCTIVITY
The employees of the FFC possess high morale, and thus exhibit high productivity. The
employees are happy and are also productive workers. Job attitudes and morale are quite
positive for two reasons.
Firstly employees gain social satisfaction from interactions at the work place. Working
conditions and supervision good, secondly high morale result from high motivation to


                                                                                        90
produce. In other words we can say, that management should put its eggs in the basket
that creates a high-motivated work force.
PROMOTION

FFC decisions about promotions are decided upon the basis of merit in one‘s present
position and ability and potential to assume the impossibilities of higher level positions.
Sometimes other factors are considered such as length of service, education, training
courses completed, previous work history and the like.


The guiding principles for Recruitment

FFC encourages the recruitment of fresh graduates than experienced once, except for
high managerial posts where experience is must. The management believes in developing
the employees according to the requirements of the organization.

Recruitment and Selection Criteria


FFC has designed a sound but easy method of recruitment. When any department needs
an employee, it sends its requirement to the Human Resource Department, which in turn
advertises the vacancy in the leading newspapers and asks for the qualified people. In
case of the posts requiring some experience, only interview method is used to select the
best candidate.

Recruitment of Workers

Minimum qualification for the post of the workers is Matriculation 2nd Division with
science subjects. The workers should not be more than 21 years old and must be
medically fit. These are employed as "Apprentice Trainee". If the performance of the
worker is satisfied during the probation period, he is hired. Normally workers get
promotion after two years on the recommendation of their supervisors. This post is not
advertised.




                                                                                          91
Recruitment of Executives

      1) Job Identification
When any department requires an employee, it sends its requirement to the Human
Resource Department.

      2) Recruiting & Hiring
For recruiting and hiring some factors are taken into consideration. These factors are as
follow:

 Nature of the job; and
 Time required filling the vacancy.

Keeping in view the time constraints, advertisements are given in the newspapers.
Otherwise if the vacancy has to be filled immediately, the Human Resource Department
contacts the authorized institutions, universities etc.

 Budget constraints
 Process

The recruiting and hiring process starts from the applications submitted by the degree
holders. They provide their CVs along with the applications. These applications and CVs
are screened out on the basis of:

 Merit;
 Institute; and
 Experience etc.

After this, approximately 50% of the applicants are selected for the further process. Then
the H.R Department lists out the salient features of the CVs (only the accepted CVs).
Then the H.R. Manager takes a test based on:

 English comprehension;
 Basic mathematics;


                                                                                       92
 Data sufficiency;
 I.Q. and
 Some questions about the particular job, for which the applicants have applied.

After taking the test, the top 10, 20 or 30 applicants (according to the job requirement)
are chosen for the first interview. At this stage the selection of applicants also depends on
the H.R. Manager and the departmental head. Normally 30% of the applicants, who have
given the test, are selected for interview. Through telephone calls or letters, the selected
applicants are informed about the date and time of the interview. Normally two
interviews are taken. H.R. Manager and the departmental head take first interview. In this
interview they observe:

   Alertness;
   Confidence;
   Leadership skills;
   Relevant knowledge;
   Social acceptance;
   Interests;
   Communication skills;
   First impression; and
   Maturity

According to these observational factors rating or grading is made. Normally 5% rating in
each factor is acceptable. Then successful candidates are called for final interview which
is taken by:

   General Manager
   Deputy General Manager
   Human Resource Manager
   Departmental Head (sometimes)




                                                                                          93
Previous traits or factors are once again examined. After the final interview, the selected
applicants are sent for medical test and then the Industrial Relations Manager issues them
the appointment letters.
Training & Development*
Appointed persons are trained for six months; they are given the title ―Management
Trainee”. In the Consumer Products Division after one year they are given the
designation of ―Assistant Manager Sales‖.


The trainee is given a brief view (orientation) of the company, various processes, rules &
regulations etc. this orientation is two months. After the orientation program, the
participants may ask to put forward a short report or presentation
.
After the 6 months training, the trainee goes to H.R. Manager and tells him what he has
learnt in this program. Some external courses may be offered not only to the existing
employees but also to the new trainees. These courses are held in,

    LUMS
    PIM
    Intek Solution
    British Council
    Informatics
    Employers Federation of Pakistan


Performance & Appraisal

Performance & appraisal are two sides of a coin. Immediate officer appraises
performance. For the appraisal of the performance, there is a Performa, which is filled by
immediate officer. This Performa is named as (PPE) Performance Planning & Evaluation.
There are seven sections in this form. The particulars of the candidates are written on the
top of the form.




                                                                                        94
Plant Sites

The year witnessed exceptional performance at every level . plant operating efficiencies
surprised all previous records with large margins. Cost effective and professional solution
are adopted to address any major potential reliability threats.
Plants reliability improvements projects remained of prime importance and significant
progress has been achieved by addressing major unreliable areas and chronic problems.
System implementation through enforcement of FFC,s operational, maintenance, plant
monitoring, housekeeping and safety practices remained in the lime –light and
deficiencies were overcome utilizing the gap analysis approach.
The continued with selective investments necessary to sustain profitability , improve
operations and maintain its position at the leading fertilizer manufacturer in the country.



Plants Goth Machhi

Operational performance of the plants 1&2 Goth Machhi was excellent during the year
with a total ―SONA‖ urea production of 1458 thousand tonnes. Plant 1 created a new
record of daily urea production this year.
Annual maintenance turnarounds of both plants were carried out in the first quarter of
2004 and were executed safely and successfully within the stipulated time.
Comprehensive inspection and major overhauls of equipment and machines were carried
out in house . various modification jobs were also executed to improve operational
efficiencies. With on going efforts to improve plant reliability and performance,
maintenance turnarounds are now schedule on bi-annual basis.
The continious decline in natural gas supply pressure from Mari gas field poses a new
challenge with a direct impact on production . general water shortage in the country with
frequent canal closures and declining water fliw in the rivers in the past few years has
also put more strain on our water supply wells. Dedicated booster compressor have been
planned to be commissioned in the first quarter of 2005 to boost gas supply pressure and
further expansion of raw water resources and its optimization is currently under way to
meet water requirements.In our endeavour of self reliance in areas of critical maintenance



                                                                                          95
activities, refurbishment of old bimetallic stripped of plant 3 was successfully completed
in the fabrication shop which made this expensive equipment operational again at plant 1.
detailed engineering of energy revamp project of plant 1 Ammonia unit is under process
and commissioning is expected in 2006. this implantation would result in an energy
saving of 0.3 Gcal/ Met ammonia. Utilization of the safe natural gas would also result in
18 thousand tonnes of additional urea production.
]evaluation of existing BFW heat exchanger E-211 was carried out for vibration and
leakage estimation. The exchanger has completed its useful life and order has been placed
for a new exchanger with modified design.



Plant Mirpur Mathelo


Taping the potential of our recently acquired plant Mirpur Mathelo has resulted in a
noteworthy efficiency of 125% of name plate capacity with annual production 716
thousand tonnes, 14% in excess of last year output.
We are pleased to report that the company was able to achieve the required ―SONA
urea‖ quality level for‖FFC urea‖ produced by the plant 3, which was formally declared
As ―SONA urea‖ on March 2004. we are confident that benefits will continue to acquire
to the company by providing value added quality products to our customers.
To fulfil our commitment with the GOP for enhanced urea production, annual
maintenance turn around of the plant was deffered to 2006 after careful technical review
of efficiency maintained during tge period of meet the increase in demand.
To meet its commitment to the Govt . FFC has also planned de- bottlenecking of its plant
three for increasing nameplate production capacity to 725 thousand tonnes annually in a
normal year.
Almost all the piping isometrics of Urea Hydrdolyzer projects have been approved and
most of the piping / equipment erection work has been completed. The project is ready
for commissioning after turnaround 2006 and will help reduce NH3 contents of effluent
water and provide additional urea production of 17 MTPD. Cooling tower packing
replacement for another two cells shall be completed before the onset of next summer



                                                                                       96
season and is expected to yield a saving of Rs. 12.50 million per annum through
improved energy efficiency.
Information technology culture was successfully inculcated at the plant in order to reduce
and simplify routine workload and to keep pace with modern technology. the marks are
modern fiber optic network , new inventory management system and computer training
of all employees.




                                                                                       97
MARKETING MIX

Marketing Mix consists of major components: Product, Place, Promotion and
Price. These components are called marketing decision variables because a
marketing manager can vary the type and amount of each element. One primary
goal is to create and maintain a marketing mix that satisfies consumer‘s needs for
a general product type. Marketing mix often is viewed as ―controllable‖ variables
because they can be changed. However, there are no limits to how much these
variables can be altered. They are not totally controllable.

Major components of Marketing Mix:


       1.   Product

       2.   Place

       3.   Price

       4.   Promotion

   1. PRODUCT:

It can be defined as every want satisfying attribute a consumer receives in making an
exchange, including psychological as well as physical benefits. It includes product
planning, product research and development; product testing; and the service
accompanying the product.


   2. PRICE:

       It is the value that one puts on the utility that one receives of goods and services.
It includes price determination; pricing policies; and specific pricing strategies.




                                                                                         98
   3. Place:

       It is the making available of products in quantity desired to as many customers as
possible and to hold the total inventory, transportation and storage costs as low as
possible. It includes selection. Coordination, and evaluation of channels; transportation;
warehousing; and inventory control.


   4. Promotion:

       It is used to facilitate exchanges by informing one or more groups of people about
an organization and its products. Promotion includes such areas as sales management;
personal selling; advertising sales promotional programs and all other forms of marketing
communications.


Product

Sona Urea

Sona Urea is the most concentrated solid, straight nitrogenous and most widely used
fertilizer in the country. Mostly it is manufactured in the form of prills, but FFC is
producing in prilled as well as granular forms. Prilled and granular fertilizers are 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 and folira application. Urea is the
best suited to our soild because some of the salient physical and chemical charecteristices
of Sona Urea Prilled and Granula are below.




                                                                                            99
                                                       ActualStatus
            Description
                                          Prilled                     Granular
        Physical Condition          Free Flowing Prills        Free Flowing Granules
            Nitrogen(%)                      46                           46
           Moisture (%)                    < 0.30                       < 0.30
             Biuret (%)                 0.80 ~ 0.87                  0.80 ~ 0.87
             Fines (%)                     < 1.0                      Dust Free
        AV Prill Size (mm)               1.82 ~ 2.0                    2.0 ~ 5.0



DAP

Sona DAP is the most concentrated phosphatic fertilizer containing 46% P2O5 and 18%
Nitrogen. From nutrients' concentration point of view, it has got the highest quantity of
total nutrients in a 50 KG bag i.e. 32 KG of nutrients / bag. The highest concentration of
plant nutrients i na bag helps saving costs of transportation, handling, storage and
application. It is the widely used phosphatic fertilizer in the world as well as Pakistan.
The solubility of DAP is more than 95%, which is highest among the phosphatic
fertilizers available in the country. Due to high solubility it can also be used through
fertigation as well as by foliar application. Its nitrogen to phosphoris ratio ( 1 : 2.5 )
makes it an idea fertilizer for Basal application to meet the initial requirement of most of
the crops. Having an ultimate acidic effect on the soil, it is well suited for our alkaline
soils. Its salient characteristics are listed below:

                                           Sona DAP




                                                                                              100
                        Description                                Actual Status
    Nitrogen(%)                                                          18
    P2O5 (%)                                                             46
    Crushing Strength (Kg)                                               6
    Size (mm)                                                          2~4
    Moisture (%)                                                       < 0.7




FFC SOP

This fertilizer is an important source of Potash, which is a quality nutrient for production
of crops especially fruits and vegetables. Potash is an important nutrient for activation of
enzymes in the plant body and helps increasing sugar and starch contents. Potash
improves the resistance of the plants against pests, diseases and stresses like water / frost
injury etc. FFC SOP contains 50% K20 in addition to 18% sulfur, which is also an
important nutrient especially for oil seed crops and it also has an ameliorating effect on
salt-affected soils. As readily soluble in water so it can be used through fertigation as well
as foliar application. SOP is well suited fertilizer for all types of crops and soil. Use of
potassic fertilizer in Pakistan is minimal, which needs to be promoted for qualitative as
well as quantitative crop production.




                                                                                           101
               Price
Sona Urea(P)           Rs. 480

Sona Urea(G)           Rs.485

Sona DAP               Rs.1035

Sona SOP

Sona Boron




                                 102
PLACEMENT

The product is distributed directly from the plants. There is a great demand of fertilizers
in the country and company is having in advance orders. But to make the whole system
very smooth a company is having well structured distribution department. Which
coordinates with carriers both company and individuals, Because fertilizers is required in
all the parts of the country and FFC being a national firm takes it as it obligation that its
product is distributed trough out the country. The company also ensures that the prices of
the product do not vary in any part of the country because of transportation cost. For this
purpose company gives some discount to those dealers, who belong to far-flung areas.
The distribution department makes contract with private contractors to accomplish the
tasks. The contractors are responsible for any loss to the product on the way. The
management also pays surprise visit at different dealers shop to ensure that the quantity in
the bag, quality and price are the same as suggested by the company policy.



Distribution

Distribution department is of the major department helping the sales force. The primary
function of distribution department is to ensure effective and efficient distribution of
product from plants up to the final customers.


Objectives


    Ship out entire production of FFC and FFBL plants and imported fertilizer in
       accost effective manner(3.4 MT approx)
    Satisfying 3580 dealers , 1632 direct customers and 169 warehouses.
    Truck generation for 1556 sales points.
    Plan and undertake self imports/exports and ensure prompt handling , quality
       packing ,correct weight, timely delivery and documentation.




                                                                                           103
    Monitor packing availability and arrange safe storage of surplus production
        during lean months.
    Follow up of product quality complaints.
    Coordinate with plant management to ensure smooth operations.
    Maintain liaison with Pakistan railway , NLC, port authorities and suppliers.


Transportation Arrangements


    Private trucking contractions
    NLC
    Pakistan railways




Dispatches 2004


Fig in KT




                                     Road         Rail         Total        Ratio
Ex Goth Macchi                       1348         111          1459         92:08
Ex Mirpur Mathelo                    652          73           725          90:1
Ex Bin Qasim                         871          85           956          91:09
Ex Port                              244          12           256          95:05
Total                                3315         282          3397         92:08




                                                                                     104
Customer served



Dealers                     3580


Direct customers            1632




Total                       5212


Zone wise Warehouses and capacity


Zone               Regions          Warehouses   Capacity MT
North              5                63           136700
Central            5                53           119400
South              4                49           78400
Total              14               165          334500


Type of Warehouses


    Strategic Warehouses
    Permanent warehouses
    Temporary warehouses
    Purely temporary warehouses




                                                           105
       Promotion

       Promotion is the backbone of the successful marketing network. But in fertilizer
industry in Pakistan companies need little promotion to achieve its objectives. And the
reason is because demand is greater than supply. But FFC does it for many good reasons
one of them is to protect its brand name, that is SONA Actually company wants that
whenever any former in the country thinks to use fertilizers the only name that should
come into his mind should be SONA.

       Fertilizer industry is different from FMCG‘s. IN fertilizer industry the users
mainly residing in rural areas. So, many problems including media and education level
arises. FFC in spite of all these hurdles take all the option to promote their product. As a
matter of fact, FFC is using different mediums to promote its product. Especially
promotion becomes crucial when company needs to introduce a new product.




                                                                                        106
       FFC marketing division Lahore has a sales promotion department, which is
working under marketing service department, is responsible all the promotional activities.
The department is using various ways to promote their products. These are




Different Medias used at FFC for promotion


    Television
    Radio
    CCTV
    Print media
    Road side
    Point of purchase


Electronic Media


    Ptv
    Ptv -world
    KTN (Sindhi Language)
    GEO
    Indus T.V
    ARY-Digital



Campaigns


    Kharif campaign
    Rabi campaign




                                                                                      107
Radio


   National radio channels
   Add duration 10sec-60sec
   All around the year



CCTV

   Islamabad airport
   Multan airport
   Faisalabad airport
   Lahore railway station
   Multan railway station
   Hyderabad railway station
   Faisalabad railway station
   Daewoo coaches
   Daewoo lounges
Print Media

   National daily‘s
   Regional news paper
   International magazines
   National magazines
   Regional cultural magazines
   Add size 108 pcm(standard size of add)


  Road side Advertisement

   Jumbo hoardings
   Bill boards
   Ware house boards



                                             108
  Dealer shops boards
  Plastic whole signs



Point of Purchase


  Crop posters
  Corporate posters
  Crop booklets
  Agro grams
  Zari reports
  Buntings




                         109
              Company Analysis in Terms Of:


 Vertical Analysis (Common size statements)

 Horizontal Analysis (indexed analysis)

 Ratio Analysis

      o   Liquid ratios
      o   Financial leverage / solvency ratios
      o   Coverage ratios
      o   Activity ratios
      o   Profitability ratios
      o   Du-pont analysis
      o   Market ratios

 Book values per share (with assumed changes)

 Projections of income statement (with assumed changes)

 Sensitivity analysis




                                                           110
                             Balance Sheet

             Balance sheet

SHARE CAPITAL & RESERVES                     2004       2003
        share capital                        2949703    2564959
        capital reserve                      160000     160000
        reserve for issue of bonus
        shares                               442455
        revenue reserve                      8742749    8797753
NON CURRENT LIABILITIES
                                             2868403    4556886
DEFERRED TAXATION
                                             2407000    2522000
CURRENY LIABILITIES
       trade & other payables                5831105    3356904
       interest & mark up accrued            74233      83562
       short term borrowings                 100000     2972333
       current portion of long term
                   financing                 2184088    1447011
                   loan                      1741       1740
                   murabaha                  83333      41667
       taxation                              598297     329910
       proposed dividend                                384743

               TOTAL LIABILITIES             26443107   27219468
               ASSETS

FIXED ASSETS (TANGIBLE)                      2004       2003
         property, plant & equipment         9180716    9259008
FIXED ASSETS (INTANGIBLE)
         goodwill                            1778464    1883079
LONG TERM INVESTMENTS
                                             5866999    7083151
LONG TERM LOANS & ADVANCES
                                             67328      63920
LONG TERM DEPOSITS &
PREPAYMENTS
                                             3492       3040
CURRENT ASSETS
       stores, spare & loose tools           1727309    1686980
       stock in trade                        219180     681297
       trade debts                           1407736    1876381
       loans & advances                      86368      63982
       deposits & prepayments                24633      23111
       other receivables                     560895     560526
       short term investments                4464157    2200845
       cash & bank balances                  1055830    1834148
               TOTAL ASSETS                  26443107   27219468


                                                                   111
                      Horizontal Analysis

           SHARE CAPITAL & LIABILITIES
SHARE CAPITAL & RESERVES                 2004
share capital                            15.00
capital reserve                          0.00
reserve for issue of bonus shares
revenue reserve                          -0.63
NON CURRENT LIABILITIES
                                         -37.05
DEFERRED TAXATION
                                         -4.56
CURRENY LIABILITIES
trade & other payables                   73.70
interest & mark up accrued               -11.16
short term borrowings                    -96.64
current portion of long term
 financing                               50.94
 loan                                    0.06
 murabaha                                100.00
taxation                                 81.35
proposed dividend                        -100.00
                  TOTAL LIABILITIES      -2.85
                       ASSETS
FIXED ASSETS (TANGIBLE)                  0.05
property, plant & equipment              -0.85
FIXED ASSETS (INTANGIBLE)
goodwill                                 -5.56
LONG TERM INVESTMENTS
                                         -17.17
LONG TERM LOANS & ADVANCES
                                         5.33
LONG TERM DEPOSITS & PREPAYMENTS
                                         14.87
CURRENT ASSETS
stores, spare & loose tools              2.39
stock in trade                           -67.83
trade debts                              -24.98
loans & advances                         34.99
deposits & prepayments                   6.59
other receivables                        0.07
short term investments                   102.84
cash & bank balances                     -42.43
                    TOTAL ASSETS         -2.85




                                                   112
            Horizontal Analysis of Balance Sheet

There is a decrease in cash and bank balance during 2003-2004, which is of 2.85%.
There is overall decrease in Total assets. Total liabilities have increased by 14.61%
which is due to increase in stockholder’s equity increased by 46.3%. company is

attracting more capital from investors in order to expand its operations.




                                                                                 113
                        HORIZONTAL ANALYSIS



LIABILITIES:


                                    liabilities horizontal analysis

 150




 100




  50




   0                                                                                                Series1
        1   2   3   4   5   6   7     8      9     10     11    12    13   14   15   16   17   18



  -50




 -100




 -150




                                                                                                       114
ASSETS:




                                   assets horizontal analysis

120


100


 80


 60


 40


 20                                                                                           Series1


  0
       1   2   3   4   5   6   7   8      9    10    11    12   13   14   15   16   17   18

 -20


 -40


 -60


 -80




                                                                                                 115
                         VERTICAL ANALYSIS :



Under vertical analysis of income statement each item is stated as a percentage of
net sales. Under vertical analysis of balance sheet each asset is stated as a
percentage of Total assets and each liability and stockholder’s equity item is
stated as a percent of Total Liabilities and Stockholder’s Equity.
Under common size statements all items are stated in term of percentages, as
calculated in vertical analysis.




                                                                              116
                                    Vertical Analysis

                                                            vertical analysis

SHARE CAPITAL & RESERVES                         2004                2003
share capital                                    11.1549             9.423252
capital reserve                                  0.605073            0.587815
reserve for issue of bonus shares                1.673234
revenue reserve                                  33.06249            32.32155
NON CURRENT LIABILITIES
                                                 10.84745            16.74128
DEFERRED TAXATION
                                                 9.102561            9.265427
CURRENY LIABILITIES
trade & other payables                           22.05151            12.33273
interest & mark up accrued                       0.280727            0.306994
short term borrowings                            0.37817             10.91988
current portrion of long term
 financing                                       8.259574            5.316088
 loan                                            0.006584            0.006392
 murabaha                                        0.315141            0.153078
taxation                                         2.262582            1.212037
proposed dividend                                                    1.413485
                  TOTAL LIABILITIES              100                 100
                        ASSETS

FIXED ASSETS (TANGIBLE)                          0.007579            0.007359
property, plant & equipment                      34.71875            34.01612
FIXED ASSETS (INTANGIBLE)
goodwill                                         6.725624            6.918133
LONG TERM INVESTMENTS
                                                 22.18725            26.02237
LONG TERM LOANS & ADVANCES
LONG TERM DEPOSITS & PREPAYMENTS
                                                 0.013206            0.011168
CURRENT ASSETS
stores, spare & loose tools                      6.532171            6.197696
stock in trade                                   0.828874            2.502977
trade debts                                      5.323641            6.893526
loans & advances                                 0.326618            0.23506
deposits & prepayments                           0.093155            0.084906
other receivables                                2.121139            2.059283
short term investments                           16.88212            8.085555
cash & bank balances                             3.992836            6.738368
                    TOTAL ASSETS                 100                 100




                                                                                117
                 Vertical analysis of balance sheet
Vertical analysis shows that

There is an increase in the capital from year 2003 to 2004 which is 9.42 to 11.15;
this significant increase shows that people are willing to invest in the business of
the company.


There is also increase in the reserves of the company due to which the worth of
the company has been increased.


Some of the current liabilities of the company are increasing with the minor
fractions but some of the current liabilities (trade payables, murabaha, current
portion of financing ) showing a little bit higher increase ,which means these
liabilities are increasing, but are backing up the short term investments and some
of the other current assets.


There is an overall decrease in the assets of the company in 2004 as compared to
2003, including fixed and current assets, but some of the current & fixed assets
are also increasing at the same time . But the company is using its assets
productively in its operations.




                                                                                118
                             Income Statement



                           PROFIT AND LOSS ACCOUNT

                                     2004              \2003



sales                                21027030        21034629

cost of sales                        13157653        13701319

gross profit                         7869377         7333310

other incomes                        933762          457413

                                     8803139         7790723

OPERATING EXPENSES

distribution cost                    1766652         1851170

other operating expenses             560494          488206

operating profit                     6475993         5451347

financial cost                       372949          520838

NET PROFIT BEFORE TAXATION           6103044         4930509

provision for taxation               2099000         1786000

NET PROFIT AFTER TAXATION            4004044         3144509

EARNING PER SHARE basic & diluted    13.57441        10.66044




                                                                119
                         Horizontal analysis



                                               2004



sales                                          -0.03613

cost of sales                                  -3.96798

gross profit                                   7.310028

other incomes                                  104.1398

                                               12.99515

OPERATING EXPENSES

distribution cost                              -4.56565

other operating expenses                       14.80686

operating profit                               18.7962

financial cost                                 -28.3944

NET PROFIT BEFORE TAXATION                     23.78122

provision for taxation                         17.5252

NET PROFIT AFTER TAXATION                      27.33447



EARNING PER SHARE basic & diluted              27.33447




                                                          120
        Horizontal analysis of Income Statement:

During 2003-2004 there is a significant decrease in cost of goods sold by 4%.
Financial charges have been decreased by 28% which is good sign for the
company and it is due to increase in the equity financing. Net profit increased by
27% which is tremendous achievement for the company.




                                                                              121
                           Vertical analysis



                                               2004       2003




sales                                          100        100


cost of sales                                  62.57495   65.13697


gross profit                                   37.42505   34.86303


other incomes                                  4.44077    2.174571


                                               41.86582   37.03761


OPERATING EXPENSES


distribution cost                              8.401814   8.800583


other operating expenses                       2.665588   2.320963


operating profit                               30.79842   25.91606


financial cost                                 1.773665   2.476098


NET PROFIT BEFORE TAXATION                     29.02476   23.43996


provision for taxation                         9.982389   8.490761


NET PROFIT AFTER TAXATION                      19.04237   14.9492


EARNING PER SHARE basic & diluted




                                                                     122
             Vertical analysis of income statement:


There is a very slight decrease in the sales but as compared to that decrease there
is a huge decrease in the cost of goods sold, due to which increase in the gross
profit, at the same time increase in the other incomes and decrease in the
operating & financial costs leading to a huge increase in the profits of the
company.




                                                                               123
                             Ratio analysis

                             Liquid ratios:

         Liquid ratios:                                   2004              2003

         (i) Current ratio                                1.076            1.036

         (ii) Quick ratio                                 1.051            0.957

         (iii) Cash to C. liability ratio                 0.119            0.213



CHART:
                                  liquid ratio analysis

1.2




 1




0.8




                                                                                                    2004
0.6
                                                                                                    2003




0.4




0.2




 0
         CURRENT RATIO              QUICK RATIO               CASH TO CURRENT LIABILITIES RATIO




                                                                                                  124
INTERPRETATIONS:

(i)
        Company has a sound current ratio in 2004 than 2003.


(ii)
        But the quick ratio is better than the current ratio, and this position has
improved within the years 2004 and 2003, this means that company can readily
pay off its liabilities.


(iii)
        The cash to current liabilities ratio is weak which means company’s cash is
more readily utilized, but the company must maintain a specific cash position to
improve its cash liquid position.




                                                                               125
                       Solvency / financial ratios

            Solvency / financial ratios                                     2004            2003

           (i) Debt equity ratio                                            0.195           0.324

           (ii) Debt to total assets ratio                                  0.108           0.167

           (iii) Total capitalization ratio                                 0.163           0.245

           (ix) Debt to fixed assets ratio                                  0.261           0.409



CHART:
                                      solvency (financial leverage)ratios

0.45


 0.4


0.35


 0.3


0.25
                                                                                                              2004
                                                                                                              2003
 0.2


0.15


 0.1


0.05


  0
       DEBT EQUITY RATIO   DEBT TO TOTAL ASSETS RATIO TOTAL CAPITALIZATION RATIO DEBT TO FIXED ASSETS RATIO




                                                                                                              126
INTERPRETATIONS:

(I)

In year 2004 the company’s debt has been reduced against the proportion of the
equity, due to payments of debts and increase in equity level the company’s
position of debt to equity has a significant decrease in 2004 as compared to the
2003,there is a decrease of 13% in the debt equity ratios of 2004 and 2003.

(ii)

There is a 6% decrease in the debt backing up the total assets, in 2004, this is a
significant sign that the company’s debt position is decreasing and it’s assets
position is improving.

(iii)

In 2003 the debt portion in the capitalization is 24% while in 2004 it is 16%, there
is a decrease in the debt portion of capitalization which is of 8%. Sign of
increasing equity.

(ix)

Fixed assets were backed by 40% debt financing in 2003, but in 2004 this situation
has reduced to 26%, showing trend of investment in equity.




                                                                                127
                          Coverage ratios

      Coverage ratios                                         2004      2003

     (i) Interest coverage ratio                              17.364   10.466


     Debt coverage ratio                                      3.645    --




                                   interest coverage ratio




                  20

                  18

                  16

                  14

                  12                                                   2004
                                                                       2003
                  10

                  8

                  6

                  4

                  2

                  0
                                    INTEREST COVERAGE RATIO




INTERPRETATIONS:


 Although the interest expenses of the company are increasing but the interest
covering capacity of the company is also increasing in 2004 as compared to the
    2003, it is also due to the decrease in the cost of the good sold and other
                                 operating expenses.




                                                                                128
                                      Turnover ratios


Turnover ratios                                                    2004             2033

(i) Debtors turnover ratio                                         14.94            11.21
    Debtors collection period (days)                               24               32

(ii) Creditors turnover ratio                                      6.23             19.72
     Creditors payment period (days)                               58.54            18.51

(iii) Inventory turnover ratio                                     60.03            20.11
      Inventory over in days                                       6.08             18.15

(ix) Total assets turnover                                         0.795            0.773

(x) Investment turnover                                            1.196            1.131




                                                turnover ratios

 70



 60



 50



 40
                                                                                                           2004
                                                                                                           2003
 30



 20



 10



  0
       DEBTORS    DEBTORS     CREDITORS   CREDITORS    INVENTORY     INVENTORY TOTAL ASSETS   INVESTMENT
      TURNOVER   COLLECTION   TURN OVER   COLLECTION   TURNOVER     TURNOVER IN TURNOVER       TURNOVER
        RAITIO     PERIOD       RATIO       PERIOD        RATIO         DAYS      RATIO          RATIO




                                                                                                           129
INTERPRETATIONS:

(i)

In 2004 there is a more rapid turnover of 14.94 against 2003 turnover which is
11.21, at the same time the debtors collection period has also decreased from 32-
days to 24-days. This is healthy sign for the company point of view.

(ii)

The creditors turnover of the company is decreasing from 19.72 in 2003 to 6.23 in
2004, and the payment period is also increasing from 18.51 in 2003 to 58.54 in
2004. With this help the company is in a position to use its cash and different
resources for other productive works.

(iii)

Inventory is showing a tremendous increase in the turnover from 20% to 60%, a
tremendous increase of 40% from 2003 to 2004,but at the same time the
company’s inventory turnover in days has decreased from 18-days to 6-days,
which is a remarkable achievement for the company.

(iv)

Total assets are showing an increased turnover of 79% in 2004 as compared to
77% of 2003.

(v)

Increase in the investment in the form of equity is showing a gradual improve in
its turnover from year 2003 to 2004.




                                                                             130
                            Profitability ratios


        Profitability ratios                                               2004                2003

       (i) Gross profit ratio                                              0.374              0.349

       (ii) Net profit ratio                                               0.190              0.149

       (iii) Return on investment ratio                                    0.151              0.115

       (ix) Return on equity ratio                                         0.272              0.223




                                          profitability ratios

 0.4



0.35



 0.3



0.25
                                                                                                      Series1
                                                                                                      Series2
                                                                                                      Series3
 0.2
                                                                                                      Series4
                                                                                                      2004
                                                                                                      2003
0.15



 0.1



0.05



  0
       GROSS PROFIT RATIO   NET PROFIT RATIO        RETURN ON INVESTMENT          RETURN ON EQUITY
                                                           RATIO




                                                                                                         131
INTERPRETATIONS:

(i)

Gross profit of the company is showing an increase of 3% from year 2003 to 2004,
which is due to the decrease in cost of goods sold. This is a slow increase but we
know that the sales are also decreasing.

(ii)

The net profit is improving from 14% in year 2003 to 19% in year 2004, there is an
increase of 5%, this shows that the company’s other expenses are also decreasing
although the financial cost is increasing.

(iii)

Investments are showing a constant and gradual improve in their returns
improving from 11.55% to 15.14% in 2003 to 2004 respectively.

(iv)

Increase in equity also showing an improving trend in their returns from 22%
to 27%.




                                                                              132
                            Du pont analysis:


Du pont analysis:          2004               2003

                           0.2723             0.2239



                                      du pont analysis

   0.3




  0.25




   0.2


                                                                           Series3
                                                                           Series4
  0.15
                                                                           2004
                                                                           2003


   0.1




  0.05




      0
                                    DU PONT ANALYSIS




INTERPRETATIONS:

(i)

Du pont analysis shows that company’s position of sales, total assets, net profit
and equity is improving from 22% to 27% in 2003 to 2004 respectively.




                                                                              133
                           Market ratios:

Market ratios:                              2004     2003

(i) Earning per share                       13.57    10.66
(ii) Dividend per share                     10.96    8.69
(iii) Dividend payout ratio                 0.81     0.81
(iV) Dividend yield ratio                   0.091    0.087
(V) Intrinsic value per share               121.74   108.69
(Vi) Price earning ratio                    8.84     9.38




                                                              134
(Vii) Market price to book value

                                                      market raios

 16



 14



 12



 10


                                                                                                     2004
  8
                                                                                                     2003


  6



  4



  2



  0
       EARNING PER    DIVIDEND PER     DIVIDEND     DIVIDEND YIELD   PRICE EARNING    MARKET PRICE
          SHARE           SHARE      PAYOUT RATIO        RATIO           RATIO       TO BOOK VALUE
                                                                                         RATIO


ratio                2.41               2.1



INTERPRETATIONS:

(i)

Company’s earning per share is increasing from 10.66 in year 2003 to 13.57 in
year 2004. This increase will strengthen the company’s position in the eyes of the
present as well as the potential investors.

(ii)

Company’s dividend is showing an increase of Rs.3 separate from the quarterly
announced dividends in the form of interim and other dividends, due to this
position the shares of the company have huge market price from its face value.



                                                                                                     135
(iii)

Dividend payout ratio of the company showing almost no change from year 2003
to 2004.

(iv)

Dividend yielding capacity of the company is showing an increase of 1% from
year 2003 to year 2004.

(v)

Intrinsic value of the shares of the company is increasing from 108 in year 2003 to
121 in year 2004. Showing a great market appreciation of the company’s shares in
2004.

(vi)

Price earning ratio is showing a slight decrease in the year 2004.




                                                                               136
                   BOOK VALUE PER SHARE

It is suggested that the company should raise its capital through debt financing
instead of equity financing because through debt financing the company’s book
value of the share increases while through equity financing the book value per
share decreases as u can see from the calculations given.



                           PROJECTIONS

The projections of the income statement for year 2005 shows that if company
raise its capital through debt financing then its earning per share increases to
16.38 while raising capital through equity keep the earning per share to 15.60.
Therefore company must raise its capital through debt financing.



                  SENSITIVITY ANALYSIS

Sensitivity analysis shows that increasing tax to 40% and 50% will lower down
the earning after tax to 3661826.4 and 3051522 respectively.

While increase in sales and decrease in cost leads an increase in the net profit
after tax.

Increasing cost by 50% will lower down the net profit after tax to 4983721.

Decrease in the assets value at the time of liquidation leads to the liquidity value
per share as 40.88/ share.




                                                                                137
         SIX YEARS TRENDS OF COMPANY’S MARKET

 year                                      1999   2000       2001    2002    2003      2004
 dividend payout ratio(before
 tax)                                         8       8        8.5       9      10       12
 price earning ratio                       5.08    4.59       3.76    7.02    8.96    10.27
 market price to book value ratio          1.46    1.52       1.06    1.22    1.32     2.81
 dividend yield ratio                     16.46   15.19      21.61   17.51   16.86    10.24
 market value per share                    53.2    41.1      40.85    73.1    95.5   139.45


Dividend payout ratio (before tax) analysis:


  14
  12                                                  1999
  10                                                  2000
   8                                                  2001
   6                                                  2002
   4                                                  2003
   2
                                                      2004
   0
              divdend payout ratio(before tax)



Company’s dividend payout ratio is increasing constantly in the last five years.

Price earning ratio analysis:

  12
                                                      1999
  10
                                                      2000
   8
                                                      2001
   6
                                                      2002
   4
                                                      2003
   2
                                                      2004
   0
                    price earning ratio



Company’s price earning ratio is showing a decreasing trend from year 1999 to
2001 and then increasing trend from year 2001 to year 2004.




                                                                                     138
Market price to book value ratio analysis:


    3
                                                    1999
  2.5
                                                    2000
    2
                                                    2001
  1.5
                                                    2002
    1
                                                    2003
  0.5
                                                    2004
    0
              market price to book value ratio



Market price of the company was decreased from year 2000 to year 2001, but
from 2001 to 2004 the market price in relation to the book price is increasing and
showing a huge increase in 2004.

Dividend yield ratio:


  25
                                                    1999
  20
                                                    2000
  15                                                2001
  10                                                2002

   5                                                2003
                                                    2004
   0
                    dividend yield ratio



The dividend yielding capacity of the company is showing a decreasing trend
from 2001 to 2004.




                                                                               139
Market value per share:




  160
  140                                              1999
  120                                              2000
  100                                              2001
   80
   60                                              2002
   40                                              2003
   20                                              2004
    0
                 market value per share



The market value of the shares of the company is showing a constant increasing trend
from year 2001 to year 2004




                                                                                       140
Training Programme

During my internship at FFC my training programme was arranged in the
following manner by visiting these departments.

                     Departments in Marketing Division

Marketing Division Lahore contains the following departments. These departments are
listed according to the schedule of my internship schedule at the office.

   1. Distribution
   2. Warehousing
   3. Administration
   4. Human Resources
   5. Industrial Relations and Welfare
   6. Procurement
   7. Finance
   8. IT Unit
   9. Technical Services
   10. Planning
   11. Sales Promotion
   12. Sales North Zone
   13. Regional Office Lahore
   14. General Manager Marketing


Distribution Department
Distribution department is of the major department helping the sales force. The primary
function of distribution department is to ensure effective and efficient distribution of
product from plants up to the final customers.




                                                                                           141
Objectives

    Ship out entire production of FFC and FFBL plants and imported fertilizer in
      accost effective manner(3.4 MT approx)
    Satisfying 3580 dealers , 1632 direct customers and 169 warehouses.
    Truck generation for 1556 sales points.
    Plan and undertake self imports/exports and ensure prompt handling , quality
      packing ,correct weight, timely delivery and documentation.
    Monitor packing availability and arrange safe storage of surplus production
      during lean months.
    Follow up of product quality complaints.
    Coordinate with plant management to ensure smooth operations.
    Maintain liaison with Pakistan railway , NLC, port authorities and suppliers.


Transportation Arrangements

    Private trucking contractions
    NLC
    Pakistan railways

Dispatches 2004

Fig in KT


                                     Road         Rail         Total        Ratio
Ex Goth Macchi                       1348         111          1459         92:08
Ex Mirpur Mathelo                    652          73           725          90:1
Ex Bin Qasim                         871          85           956          91:09
Ex Port                              244          12           256          95:05
Total                                3315         282          3397         92:08




                                                                                     142
Customer served

Dealers                   3580

Direct customers          1632


Total                     5212



Human Resource Department
The FFC Management, acknowledging the importance of human
resources has always placed personnel management at the top of its
priority list. The Human Resources Department, therefore, right from
the inception of the Company has played a vital role in steering the
Company through all its phases, operations and progress.


The functions of Human Resources Department vis-a-vis personnel
management and human resources development are going side by
side and it is due to the progressive approach and dynamic philosophy
of the management that Personnel Management remains abreast with
the latest style of management ensuring high level of motivation and
satisfaction of the work force under varied situations. Personnel
policies are kept updated and are periodically modified to respond to
the latest socio-economic changes and market trends of the country.
Hiring quality manpower, keeping them happy, satisfied and motivated
are the pillars of the Human Resources Department; justice, fair play
and merit oriented treatment are some of the ingredients of processing
cases        by     the          Human    Resources        Department.
For Human Resource development, another aspect which receives its
due share is training. The employees are exposed to various kinds of
cross training, technical courses, management courses, workshops and



                                                                       143
seminars both at home and abroad. At Plant site, the Company has a
Technical Training Centre, which is unique, and the only centre in Asia
having a true replica of the Plant for providing realistic training as far
as possible, to the employees.Employees' welfare has all along
received due    consideration by       the   Management.   A   number     of
agreements have been signed with CBA


orkers Union, resulting in handsome remuneration packages to
employees. The company, since its inception, has undertaken five
salary revisions for Management employees, to remain amongst the
top paying organizations of the country. It is due to the sheer
sincerity, welfare oriented policies and concern for every single
employee that there has never been any strike, lock out or go slow in
FFC.


Human resources department of the marketing division is responsible
for the employees related to marketing division. Maintaining         their
attendance and payroll of the staff while officers and executives get
their pay directly from head office.


Functions

Work out warehouse supervisor visor’s requirements in consultation
with regional manager and arrange recruitment and transfer activities
according to head office instructions.


   3. Maintain up to date personal records, statistics including leave
       records , relating to management and non- management
       employees.
   4. Interpret company policy and provision of necessary ruling
       where required.



                                                                         144
Handling cases relating to following subjects
    Employment/appointment of non management employees. Temporary / contract /
       daily wages according to authorization.
    Promotion of non management employees
    Pay and allowances of non management employees.
    Leaves (annual, causal, special, sick) are managed for all employees.
    Transfer claims of all employees.
    House/rent allowances advances
    Also the House building loans

Finance department
The finance department working at marketing division Lahore is responsible for all the
sales collections either sales are made directly through plant or through warehouses. the
finance department is divided into two sections.
    3. General accounting
    4. Sales Accounting

Specific responsibilities of General accounting
             Payroll of permanent and temporary staff employees
             Deduction of income tax from payroll and deposition in govt. treasury.
             Forwarding detailed of provident fund contribution of permanent
               employees to head office.
             Reimbursement of regional imprested/distribution imprested.
             Forwarding of L/C opening request to head office for import of fertilizer.
             Processing of export related documents.
             Deduction of income tax from various supplies and deposit into
               government treasury.
             Maintenance of books of account including fixed assets ,supplies ,
               employees etc
             Payment of telephone , electricity and medical bill
             Payment in respect of bags and line for imported fertilizers



                                                                                       145
Specific responsibilities of the Sales Accounting

   Maintenance of dealership records
   Processing and banking of sales and proceeds received from field
     force for the sale of fertilizer
   Transfer of data to plants for shipment
   Transfer of funds to head office recording of invoices for sales ex-
     warehouses
   Receiving data from plants for direct sales
   Processing of bank Guarantees for secured credit sales
   Monitoring of unsecured credit sales to fauji sugar mills/forms
   Preparation of pricing and discount structure for various fertilizers
   Receiving data from plants for warehouse shipment
   Recording of stock movement reports
   Overall reconciliation of stock movement with intimation of head
     office
   Follow up receivables for sale through rail
   Recording of stocks receives from FFBL for sale on their behalf
   Sending the information regarding dealers balance to field force for
     recovery of receivables on various accounts




                                                                            146
Annual Business plan


Review and development of
    Historical data
    Key assumptions
    Inputs from regions


Review meeting
    SMs/RMs/Deptt.Managers
    GMM


Collation and submission to Head office, review by management, Board of directors,
approval
Budgetary control
    Circulations to cost controllers
    Quarterly budget variance reports
    Monthly revised cash flow statements
    Review of import requirements of fertilizer
   
FFC related statements/ reports
Daily / fortnightly
    Remittance status
    Sales status




                                                                                     147
Monthly
   Trial balance and related schedule
   Receivables report along with age analysis
   Revised cash flow statements
   Finance dept progress report
   Capital budget utilization statues
   Progress report of sales and w/h dispatches
   Stock report to insurance company and banks
   Bank reconciliation statements
   Tax deduction at source
   Dealer network status report
  
Quarterly
   Budgeted vs actual expenses comparison
   Performance review of marketing operations


Yearly
   Trial balance and related schedule
   Proposed capital and revenue budget
   Inputs for tax returns
   Inputs for company‘s annual reports




                                                  148
Planning Department
The planning department is the integral part of fauji fertilizer company. Senior executive
planning who is responsible to SMSM ,heads it. The department coordinate the activities
of all other departments within marketing division .Major responsibility of the
department is collection of information about competitors and analyzing their strategies.
Functions
    Coordination and development of annual business plan
    Provision of historical information to regions and senior sales managers for
       developing sales forecast
    Finalizing sales forecast with coordination related sales force
    Preparation of fertilizer data book
    Monitoring international fertilizer price trend
    Preparing Pakistan industry Urea market participation reports
    Chairman‘s report for board of directors meeting containing analysis,FFC
       performance
    And industry situation. These reports are prepared on need basis
    Preparation of Fertilizer Industry Report
    Reviewing FFC sales performance on quarterly basis
    Develop plans for training of officers
    Monthly analysis of FFC ex-plant road and rail fright analysis




                                                                                       149
Technical Department
Technical department is providing support function to sales. Company is providing
technical services all over the country free of cost. Senior technical executive who is
reporting to SMSM heads the technical department. The 14 technical officers are serving
in 14 regions all over the country in coordination with sales officers.
Mission Statement of Technical Department
‗Help the farmer optimize utilization of his resources to rejuvenate farm productivity and
increase his income‘
Objectives
    Farmer education /training
    Dissemination of latest and complete package of technology
    Promotion of balanced fertilizer use
    Focus on increasing farmers income
    Counter fertilizer misconception
    Enhancing crop yield/overall crop production
    Supplement government effort for agricultural
Functions
    Establish proper linkage sales and technical services
    Increase and faces on farm management expertise
    Professional development on personnel
    Collaborative research




                                                                                          150
Farm Advisory Services

Fauji Fertilizer Company Limited has been providing Agricultural Advisory Services to
the farming community throughout Pakistan since 1981, for increasing the agriculture
production in general and the farmers‘ economic returns in particular. Our organization in
pursuit of its national commitment and moral obligation maintains regular contact with
farmers and Agricultural Institutions to ensure constant and efficient transfer of latest
technology.

The company is providing quality farm advisory services all over the country through its
5 Farm Advisory Centers and 14 Regional Technical Services Officers. Farm Advisory
Centers are located at D.I. Khan, Jhang, D.G. Khan, Mirpur Khas and Kasur. Each centre
has a team of five Agricultural Experts, providing multifarious advisory services through
crop demonstrations, field days, farmer meetings, village meetings, crop seminars, farm
visits and group discussions. All the centers are fully equipped with modern sophisticated
computerized Soil & Water Testing Laboratories and high-tech extension equipment.
Moreover, FFC has also established a micronutrient testing laboratory at Farm Advisory
Centre Jhang having Atomic Absorption Spectrophotometer and other analytical
instruments. Soil Testing is a valuable tool to propagate appropriate and balanced use of
chemical fertilizers and to identify soil problems. Soil/water samples are collected from
farmers‘ fields and analyzed in the laboratories. Fertilizer recommendations are
developed on the basis of soil analysis and recommendation reports are delivered to the
growers for proper and balanced fertilizer use. The soil/water testing and micronutrient
analysis facility is offered free of cost. Besides these five farm advisory centers, we have
14 Technical Services Officers based at 14 Regional Offices of FFC spread all over the
country extending these services in their respective areas.




                                                                                            151
To further strengthen our advisory services and facilitate our farmers, we also publish
crop, vegetable, orchard brochures, agro-grams, posters and pamphlets containing latest
information regarding production technologies of crops, and orchards grown in Pakistan.
For a stronger direct link and timely guidance of farmers, we publish a quarterly Urdu
News Letter “Zari Report” containing season specific information regarding crops,
fruits, vegetables, improved agronomic practices and articles on agricultural issues.
Following is the list of crop brochures available with us:


      Wheat                 Cotton                 Sugarcane               Rice
       Brochure               Brochure                Brochure                 Brochure

      Maize                 Potato                 Mango                   Citrus
       Brochure               Brochure                Brochure                 Brochure

      Banana                Apple                  Vegetable               Guava
       Brochure               Brochure                Brochure                 Brochure

      Oil Seed              Salt-affected
       Brochure               Soils Brochure



These brochures and Zari Report are also available in the Kashtkar Desk of our
website .

To improve the fertilizer use efficiency and to obtain optimum crop
yields, a “Fertilizer Guide Book” has also been published containing
comprehensive information on various fertilizers available in Pakistan,
their application methods and their economic use.


FFC has also adopted the pragmatic approach of telecasting crop
documentaries on PTV before the onset of sowing season of major
crops. In these documentaries all the components of crop production
are covered with sufficient elaboration. Cotton, wheat, sugarcane and
rice documentaries can be viewed in the Kashtkar Desk of our website.




                                                                                          152
We encourage our farmers to get registered on our mailing list by
sending a request in writing or through e-mail at the following
addresses to receive copies of our published material free of cost. For
any further information or agricultural advisory service, please visit
any of our nearest Farm Advisory Centers or Regional Offices closer to
you.

                       Technical Services Department

                         (Marketing Division)

                    Fauji Fertilizer Company Limited

                          Lahore Trade Centre,

                 11-Shahrah-e-Aiwan-e-Tijarat, Lahore

                         Phones: 042 – 6365119

Farm Advisory Centre                         Farm Advisory Centre

D.I. Khan                                    Jhang




Faqir Manzil, Dial Road, D.I. Khan         Near Chenab College, Chiniot
Road, Jhang

Phone: 0961 – 741701                       Phone: 0471 - 671118



Farm Advisory Centre                       Farm Advisory Centre
Kasur                                      Vehari

Faqiriay Wala, 3 – km Khudian Road,        2.5 – km, Khanewal Road,
Kasur                                      Vehari
Phone: 0492-671848, 0492-2003977           Phone: 067-3361913,
3360223




                                                                         153
Farm Advisory Centre

Mirpur Khas

162-A, Ali Farms, Gulshan-e-Hussain,
Hyderabad Road, Mirpur Khas
Phone: 0233 – 860760




                                       154
Industrial Relationship Department

The IR department in organization is formed under the IRQ 69 [industrial relation
ordination] of Punjab labor laws act and is under the approval of Management & joint
Labor Department of Punjab Govt .IR basically deals with the Labor laws implication in
an organization and has to negotiate legislatively with the CBA certified labor union at
the factory .The criterion for formation of IR department is a factory having at least 50
employees and its provisions given in the Punjab as well as GOP labor laws. The IR
department not only negotiates with the labor unions but also responsible handling with
the labor
One of the functions of IR department at FFC to tackle with all types of court problems.
There are labor courts at regional level .At present there are 24 courts in Pakistan. Any
employee who may have a complaint about the management can go to the court so IR
department representative follow the case



Major Activities
    Leave records of workers
    Appointment records
    Record of upgrading
    Annual increment record
    Vertical performance appraisal records
    Staff no allocation
    Negotiation legislatively with the union
    Follow up of all types of cases of labor court




                                                                                        155
Advertising and Sales Promotion

The major function of the advertisement and sales promotion department is to enhance
the corporate and brand image of SONA products.



Objective
    To create ,augment and maintain the demand of FFBL and FFCL products
    To enhance and sustain brand image and corporate image
    Improve company visibility in the mind of consumers
    To safe guard company logo
    To strengthen brand loyalty


Different Medias used at FFC
    Television
    Radio
    CCTV
    Print media
    Road side
    Point of purchase
Electronic Media
    Ptv
    Ptv -world
    KTN (Sindhi Language)
    GEO
    Indus T.V
    ARY-Digital




                                                                                   156
Campaigns
   Kharif campaign
   Rabi campaign



Radio
   National radio channels
   Add duration 17sec-35sec
   All around the year



CCTV
   Islamabad airport
   Multan airport
   Faisalabad airport
   Lahore railway station
   Multan railway station
   Hyderabad railway station
   Faisalabad railway station
   Daewoo coaches
   Daewoo lounges



Print Media
   National daily‘s
   Regional news paper
   International magazines
   National magazines
   Regional cultural magazines
   Add size 108 pcm(standard size of add)




                                             157
 Road side Advertisement
  Jumbo hoardings
  Bill boards
  Ware house boards
  Dealer shops boards
  Plastic whole signs



Point of Purchase
  Crop posters
  Corporate posters
  Crop booklets
  Agro grams
  Zari reports
  Buntings
  Mobiles




                           158
IT DEPARTMENT

Information Technology unit was properly setup in FFC Marketing division Lahore. IT
unit is one of the most important departments working at marketing division Lahore. The
Unit has to play a leading role in the marketing division in order to enable all the
department to perform all their functions effectively and efficiently .It enables the
management to make timely decisions.
OBJECTIVES OF IT UNITS

      To meet computing needs of all the departments of all the departments of the
       marketing divisions.
      To design and develop, efficient, effective and user friendly information systems
      To provide the maintenance services and proper updating of all these systems
      To properly cope with the security and ethical challenges related to information
       technology and information system
      To design proper feed back and control procedures toward achievement of its
       goals.


SYSTEMS DEVELOPED BY I.T UNITS

      Sales accounting system
      General accounting system
      Order processing system
      Regional information system
      Sales promotion system
      Distribution management system
      Procurement system
      Human resource system
      Medical control system
      Technical support system




                                                                                        159
Procurement Department

Procurement department at marketing is responsible for the purchases. Purchases for the
following offices are made by Lahore Marketing Division,3 zonal officies,14 regions,5
FAC,s,Finance and distribution offices at Goth Macchi ,Mirpur Mathelo distribution
office at FFBL port and head office requirements
GOALS
―To procure quality goods at the most economical and competitive rates‖

FUNCTIONS

         Quality, Economical and timely procurement of items /spares for marketing
          division and plants ensuring complete backup support /after sales services.
         Price enquiry of different items to estimate the price so that the budgeted amount
          may be endorsed on the PR before initiation
         Disposal of obsolete /surplus/scrap material
         Continuous updating of reliable vendors list for both plants and marketing
          division
PROCEDURES INVOLVED IN PROCUREMENT STEPS

        Raising of purchase request
        Approval of PR
        Request for quotation
        Bid opening
        Comparative statement
        Placement of order
        Delivery receipt of goods
        Verification of bills against orders
        Final payment




                                                                                         160
REGIONAL OFFICE LAHORE

The regional office Lahore is a front line department. It is actually involved with direct
sales of fertilizer and interacting with dealers. The regional manager, regional TSO and
the sales officer Lahore district are working with assistance of stock members .For three
days
Tuesday –Thursday the officers are on field visits and for rest 2 working days they
perform their office work. The districts included in Lahore region :
LAHORE                                          COMPETITORS

Gujranwala                                     DCL


Sheikhupura                                    Engro


M.B.Din                                        NFML


Rawalpindi                                     Jaffer Brothers


Sialkot                                       Ali Akbar groups


Hafizabad                                       PVT importers


Activities
Monitoring product wise /district wise achievement with respect to targets
Monitoring current market situation with respect to fertilizer industry
Monitoring competitors activities in detail
Managing warehouses, their sales and closing stocks
Appointing and terminating dealers as regard to their performance, literate goal is to have
a strong dealer network
Checking sales performance of all the products and calculating percentage achievements
with respect to that month and in comparison with cumulative previous months.



                                                                                         161
SALES NORTH ZONE
Fauji Fertilizer company has divided Pakistan into three zones North, South and Central
.These zones are further divided into fourteen regions and further districts. The allocation
of districts is different from civil districts. There are five regions in North zone
      Lahore
      Faisalabad
      Sahiwal
      Peshwar
      D.I.Khan
   FFC North zone competition

      DCL
      Engro
      Private importers
   Functions of North zone

      Conduction sale forecast for regions include in North zone
      Monitoring sales allocation as per decided ratios
      Monitoring daily sales
      Studying competitors price structure
      Co-coordinating regions included in North zone
      Managing sales force of North zone
      Checking and inventory
      Coordination wit top management
      Ensuring availability controlling warehouses
      Monitoring of product
      Monitoring and keeping record of turnover of productivity
      Providing product on secure credit
      Preparing market participation reports



                                                                                        162
Challenges
             Equitable distribution in short supply situation
             Cost control
             Competition
             Brand image


Strategies
                Quality operations/ethical selling
                Rationalization of warehousing capacities
                Judicious utilization of secured credit sales
                Improvement in dealer network
                Emphasis on customer service effective utilization of technical
                   services
                      Human resources development



                          Administration Department


Administration department is involved with conducting the administration function of the
fauji fertilizers of the marketing division


Functions

Provision and maintenance of transport i.e. Cars, Jeeps and Poor vehicles
Ensure availability of utilities like gas, electricity, telephone, E-mail, and Photocopy
facility.
Under take protocol duties. i.e. reception, transport, and ticketing etc. For company
gussets and officers
Ensure the implementation of company policies and rules


                                                                                           163
Provision of uniform to entitle staff (Qasids, Chowkidars, electricians and drivers)
Ensure proper maintenance of the office premises and guesthouses
Take disciplinary action under the rules where necessary
Disposal of unusable assets of company
Managing three major types of transport system related to marketing division;
      Company maintained
      Company assisted cars/Jeep
      Pool transport




Transport holding

Holding of marketing division transport is as under
Company assigned cars                                  23
Company assisted cars                                  91
Company maintained cars                                63                   Total=177




                                                                                        164
Ware Housing
The ware housing department is involved in completing the formality For hiring
And dehiring of warehouses (on need basis) , appointment of handling contractors, watch
and ward contractors. The record of inventories is maintained and physical inspection of
the warehouse and product are carried out to ensure safety and security. This department
works in collaboration with distribution department.


Functions of warehousing department
      Coordinating of warehouse department with regions regarding warehouse
       selection, training of supervisors, planning capacity of warehouses
      To conduct inspections of the warehouses on planned and surprise basis
      Each warehouse is inspected around 17 time a year.
      Warehousing department is considered with processing of
                                 o Lease agreements
                                 o Watch and ward agreements
                                 o Handling agreements
                                 o Watch and ward bills




               Conduct the training of warehouse supervisors.
               Preparing the operational , capital and revenue budgets on yearly basis.
               Formulating warehouse plans.
               Preparing weekly capacity reports.




                                                                                      165
Zone wise Warehouses and capacity



Zone             Regions            Warehouses   Capacity MT
North            5                  63           136700
Central          5                  53           119400
South            4                  49           78400
Total            14                 165          334500




Type of Warehouses


   Strategic Warehouses
   Permanent warehouses
   Temporary warehouses
   Purely temporary warehouses




                                                           166
                            SWOT Analysis
Strengths

      FFC is the market leader in the fertilizer having 60% of the market share.

      FFC is using a single brand name SONA for its products like SONA urea,
         SONA DAP helping farmers to remember the name.

           Company being the market leader sets standards for the industry

      FFC devotes considerable time and efforts to promote awareness regarding
         good farmers techniques and methods among growers community

      The company continues to enhance the facility of providing farmers free farm
         advisory services through farm advisory centres. Currently company is having
         5 FACs all over the country.

      FFC peruses an innovative education oriented advertising policy utilizing
         electronic/ print media and road side advertisement

      FFC is only fertilizer company in the industry conducting seminars on core
         agricultural issues. Inviting local and foreign luminaries

      In 2004 FFC had record urea production of 2174000 tons from all the plants

      Company is having strong dealer network all over country that helps in proper
         availability even in far-flung areas.

      FFC has developed a well [planned network of 170 field warehouses to ensure
         that fertilizers is available to the farmers uninterrupted

      Company has employed well-trained, disciplined and motivated workforce to
         facilitate to achieve desire targets




                                                                                    167
     Company is fully automated having the extensive information systems for the
       plant site as well as the marketing division

     FFC is offering best package of salaries to its employees comparable with any
       multinational organization

     FFC is among one of the top taxpayers in country

     FFC is introducing Farmer Friendly Culture

     SONA being the farmers first choice

     ISO certification

     Countrywide location of plants

     It has product range

     FFC is experienced in production and marketing of product.


Weakness

     Size of the company is very large which produces administrative problems.

     The promotion of the management employees is made after the period of three
       years.

     Sales force has to face a tough time when moved to far- flung areas equally in
       other provinces.

     Transfers are made after the period of three years , which cause the lack of
       performance of policies.

     The high differences between the salary packages of the executives and the
       employees.

     The ideas from the bottom are not welcomed; for the most part orders are
       assigned from higher authorities.

     Lengthy organizational hierarchy.




                                                                                     168
   The insufficiency of technical sales orders.

   Non- availability transport during peak season.

   Dumping of fertilizer by the dealers.


Opportunities

   Having a strong financial position company can start production of the new
     product line.

   Adding some new unit can enhance the production capacity of the plants.

   Company is in a position to set up a new plant in the country.

   FFC can participate in the acquisition of their companies being privatized by
     the government.

   If FFC decides for the export of Urea it can earn much better revenues.

   Being an agriculture country and due to increasing awareness about the
     balanced use of fertilizer, demand for the fertilizer will increase.

   Company can start over sea investment like that one of PAKISTAN MARCO
     PHOSPHORSE-SA.

   The increasing governmental support for meeting the demand pf fertilizer in
     the country.

   FFC can export Urea to Afghanistan and other neighbouring countries.

   Availability of natural gas from Iran can helping setting up a new Urea plant
     in that vicinity and thus meeting the demand of Urea in the country at cheap
     rates.




                                                                              169
Threats

      Natural gas

      Farmer‘s liquidity

      Weather conditions

      Future fertilizer demand

      Availability of raw material

      WTO challenges

      Fertilizer supply in remote areas.

      Dumping of under priced imported urea in local markets

      Inconsistent governmental policies

      Importing urea due to rising demand

      Changing fertilizer prices

      Difficult     coexistence    between   public   and   private   fertilizer
          producer/importer

      Lack of education in grower community

      New competitors in the industry

      Long of gas supplies

      No availability of railway wagons

      Unbalanced use of fertilizer

      Phenomenal increase in the prices of basic feedstock‘s




                                                                            170
                 Internal Factor Evaluation (IFE) Matrix
KEY INTERNAL FACTORS
Internal Strengths                                Weights   Rating   Weighted Score

1. Larger fertilizer Producer                       .05       3           . 15
2. Highest Market share                             .04       4           . 16
3. Growing Sales                                    .10       3           .30
4. Countrywide location of plants                   .05       4           .20
5. Goodwill in market                               .05       3           .15
6. Strong Financial Position                        .03       3           .09
7. Corporate Culture                                .05       3           .15
8. Strong Distribution Channel                      .03       4           .12
9. Wider Product line                               .09       4           .36
10. ISO Certification                               .10       3           .30
Internal Weaknesses
1. Dumping of the fertilizer by dealers             .04       1           .04
2. Insuffiency of technical sales officers          .04       2           .08
3 The administrative problems due to large size     .03       2           .06
of the company
4. Centralized authority                            .05       1           .05
5. Non availability of transport during peak        .05       2           .10
season
6. Low advertising campaigns                        .10       1           .10
7. Sales force has to face tough time in remote     .03       2           .06
areas
8. Very frequent transfers                          .04       2           .08
9. Lengthy hierarchy                                .03       2           .06
TOTAL                                                                     2.61

0.0 = Not Important     1.0= Important
1 = Major Weakness 2 = Minor Weakness
3 = Minor Strength      4 = Major Strength


                                                                                 171
              External Factors Evaluation (EFE) Matrix
KEY EXTERNAL FACTORS
External Opportunities                        Weights          Rating     Weighted Score
   1. Adding some new units can increase       .08               4             .32
       the production capacity of the plants
   2. having strong financial position         .07               3               .21
       company can introduce new products
   3. the increasing govt support for meeting  .05               2               .10
       the fertilizer demand in country
   4. Opening new marketing office in          .05               3               .15
       foreign countries to improve the
       marketing campaign
   5. Advertising in international media and   .06               3               .18
       magazines to increase the market share
   6. Increasing sales by implementing the     .04               1               .04
       credit policy strategies
   7. WTO in 2005 (no quota Restriction)       .10               3               .30
       more chances of export
   8. Strong demand of products in future      .05               2               .10
   9. Increasing the customer satisfaction by  .03               3               .09
       improving the quality of products
   10. Availability of gas from Iran can       .05               3               .15
       increase the production of plants
External Threats
   1. Natural gas prices                           .10           3               .30
   2. Domestic Competition, entry of new           .05           4               .20
       and well financed organization in
       fertilizer sector
   3. Farmers liquidity                            .03           3               .09
   4. Per unit cost in increasing, reduction in    .06           2               .12
       profits
   5. Instable political situation in country      .03           2               .06
   6. WTO challenges                               .03           2               .06
   7. Availability of raw material                 .02           2               .04
   8. Weak economic structure of Pakistan          .03           2               .06
   9. Weather conditions                           .05           3               .15
   10. Increase in prices of raw material          .02           1               .02
TOTAL                                                                           2.74
0.0 = Not Important   1.0= Important
1 = Poor Response     2 = Average Response 3 = Above Average         4 = Superior Response




                                                                                       172
                                Competitive Profile Matrix

         Critical                FFC                       Engro                       NFC
Sr.
         Success
 #                      Weight Rating Score Weight Rating Score Weight Rating Score
         Factors
      Customer
1                        .20        3       .60     .20        3       .60      .20       2       .40
      Loyalty
2     Market share       .10        4       .40     .10        3       .30      .10       3       .30
      Price
3                        .10        3       .30     .10        3       .30      .10       3       .30
      Competitiveness
4     Management         .10        4       .40     .10        4       .40      .10       2       .20
      Financial
5                        .15        4       .60     .15        3       .45      .15       2       .30
      Position
6     Advertising        .10        3       .30     .10        4       .40      .10       2       .20
      Global
7                        .20        4       .80     .20        1       .20      .20       2       .40
      Expansion
8     Product Quality    .05        3       .15     .05        2       .10      .05       2       .10

      Total                                3.55                       2.75                        2.50


               The Rating values as follows:
                     1= major weakness, 2= minor weakness, 3= minor strength, 4= major
       strength


       Interpretations

       The Competitive Profile Matrix (CPM) identifies the firm‘s major competitors and its
       particular strengths and weaknesses in relation to the sample firm‘s strategic position.

        From the CPM provided above we see that loyalty and the global expansion are the most
       important critical success factors as indicated by a weight of 0.20 the quality of FFC
       product is superior as it has a rating of 4; customer‘s loyalty is very high.




                                                                                           173
                                  SPACE MATRIX
                                                            Rating   Total   Average

    Financial Strength (FS)
       1. Net Income                                         +3
       2. Leverage Ratios                                    +3
       3. Liquidity Position                                 +2
       4. Return on Equity                                   +2      +10      +2.5
    Industry Strength (IS)
       1. Pakistan largest producer of fertilizer            +3
       2. Increased Demand of products                       +2
       3. Quality products                                   +2
       4. Bigger market share                                +2       +9     +2.25
    Environmental Stability (ES)
       1. High Inflation Rate                                -4
       2. Political stability                                -3
       3. Demand Variability                                 -2
       4. Barriers to Entry in New Markets                   -3
       5. Competition                                        -3      -15       -3
    Competitive Advantage (CA)
       1. Highest production                                 -1
       2. Technological Advancement                          -2
       3. Control over Suppliers and Distributor             -2
       4. Customer Loyalty                                   -2       -7     -1.75


Conclusion
      FS Average = +2.50         IS Average =       +2.25
      CA Average = -1.75         ES Average =       -3.00
      Directional Vector Coordinates: x-axis: (CA: IS) -1.75 + (+2.25) = +0.50
                                      Y-axis: (FS: ES) 2.50 + (-3.00) = -0.50




                                                                                       174
     (+0.50, - 0.50)




                       FS
                            IS
CA




                       ES




                                 175
The Internal – External Factor (IEF) Matrix:

                                            IFE Total weighted Score



                                     4.0         3.0                2.0               1.0
                               4.0                       2.61
    EFE Total Weighted Score




                               3.0

                                     2.74

                               2.0



                               1.0




Interpretations

The Internal – External matrix is based on the key dimensions of: the IFE total
weighted scores on the x – axis and the EFE total weighted scores on the y – axis. It
can then be divided into 3 major regions that have different strategy implications.

In the above matrix it can be seen that both the Products in the sections relating to
Grow and Build. Thus intensive strategies (market penetration, market development
and product development) or integrative strategies (backward integration, forward and
horizontal integration) can be most favorable.




                                                                                        176
The Grand Strategy Matrix:

                                       Rapid Market Growth



                                 II                       I
                                                         FFC
     Weak Competitive Position




                                                                                Strong Competitive Position
                                 III                         IV




                                        Slow Market Growth



Since FFC has rapid market growth and strong competitive position so it lies in 1st
Quadrant of GS matrix .



So it must follow the following strategies
     Market development
     Market penetration
     Product development

Since FFC have also excessive resources

    Forward integration
    Horizontal integration




                                                                                                              177

				
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