1. FIRM AND INDUSTRY ANALYSIS
FUNDAMENTAL ANALYSIS OF
FAUJI FERTILIZER COMPANY
Presented By:
• Bilal Khan
•M. Obaid Javed
•Sayem
•Shahbaz
•Usman Mughal
•PRESENTATED TO: Mr.Shehryar Malik

2. Company Profile
 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
TopsoeA/S of Denmark.
 The initial share capital of the company was 813.9
Million Rupees.
 The present share capital of the company stands
above Rs. 8.48 Billion.
 Additionally, FFC has more than Rs. 8.3 Billion as
long term investments which include stakes in the
subsidiaries FFBL, FFCEL and associate FCCL.

3. DuPont Analysis
ROE=Average assets x asset turnover x operating profit margin x Net
income
Average equity N.I + interest
ROE= 75.34%

4. Q1.How does a company’s recent performance
compare to that of its major
competitors, taking into account any
accounting differences across firms?

5. Current Ratio
There is no change in the current ratio as compare to last year this
clearly shows that the proportion with which current assets and current
liabilities have increased is same. But the company should increase its
current assets in the coming year to be aligned with the industry
because it is falling behind from the overall industry.
Quick Ratio:
In comparison to the industry the quick ratio is less so the company
would either need to invest in quick assets or pay off its huge amount
of tax which is the main reason FFC is below the industry.

6. GP Margin:
Company has increased its Gross profit margin from last year as
Sales has improved more than the rise in cost of sales.This ratio is
fairly well than the industry too.
Net Profit Margin:
After the taxes were paid off, the company managed to increase its
NP margin from last year & performed very well in comparison to
the industry.

7. Fixed Asset turnover
The investments in fixed assets in 2010 has caused boost in operational efficiency that in
return earned it 24% more than last year.This ratio is fairly well even in terms of industry.
So, FFC has done well in turning its investment into sales to earn better returns.
Total AssetTurnover
The same reason is applied here as well that since operational efficiency was attained in
this year, it caused high returns on the total assets invested in the business, and this also
increased significantly from last year as well.The company is surely competing well as
compared to the industry.

8. Payout Ratio:
The payout ratio has decreased due to increase in revenue reserves.
However, the company should increase its payout ratio because overall
industry is paying more dividends than FFC.

9. Debt to Equity:
This ratio is worse than last year because it can clearly be seen that
company is more inclined towards equity rather than debt, for the
reason that company is moving towards equity investments. Although
industry is more on borrowing side.

10. Q2.What are its performance expectations?

11. Earning per share
8
10
12
14
16
18
2007 2008 2009 2010
EPS
EPS
FFC’s Earnings per share was Rs. 16.25 increased by 25%.Therefore the
company is expected to a lot better in future. FFC has yet again scored an
all time highest profit of Rs 11,029 million, translating into an EPS of Rs
16.25, up by Rs 3.25 compared to last year.

12. Return On Equity
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
70.00%
80.00%
2007 2008 2009 2010
ROE
ROE
increase in the Company’s net income as a result of good
performance.Till the year end, the Company had
appropriated Rs 8,651 million of available funds, Rs 2,205
million paid as final dividend for 2009 and Rs 6,446 million
appropriated as first, second and third interim cash dividends
for 2010.

13. QUESTION 3
Does the company face major
lawsuits?

14. Contingencies
 Guarantees issued by banks on behalf of the Company.
Disputed demands for income tax and levy of
contribution toWorkers’Welfare Fund related to former
PSFL decided in favor of the Company by the Income
Tax AppellateAuthorities are currently in appeal by the
department.The Company is confident that there are
reasonable grounds for a favorable decision.
 During the year, the Company revised its income tax
returns relating to tax years 2007, 2008 and 2009 under
the provisions of the IncomeTax Ordinance, 2001.

15.  The Company takes into account the current
income tax law and decisions taken by the
taxation authorities. Instances where the
Company’s views differ from the income tax
department at the assessment stage and where
the Company considers that its view on items of
material nature is in accordance with law, the
amounts are shown as contingent liabilities.
 Claims against the Company and / or potential
exposure not acknowledged as debt.

16. QUESTION 4
Has it made unwise investments?

17.  By looking at the financial statements of
FFC, we don’t find any unwise investment
made by the company.The following table
gives a clear idea about all current healthy
investment decisions.
2007 2008 2009 2010
26,848.80 28,577.90 29,570.40 30,983.00

18. QUESTION 5
Would you recommend a
buy/sell/hold on the stock given
current stock prices? Why?

19.  We suggest “BUY” as it is showing the highest Net profit
margins in the industry consistently, while it works low on
long-term borrowing giving assurance for its long term life.
 The growth of the company is also comprehensive
supported by the healthy dividend income received from its
subsidiary FFBL having a stake of 50.8% in its ownership.
Along with that FFC’s source for raw material, Mari Gas
Plant, provide it with low gas curtailment with very less or
no 45-days shut down which gives FFC to manufacture for
less and sell for the same market prices as of its Sui network
peers.
 To add, FFC has been very consistent in paying dividends to
it’s share holders.

21. QUESTION 6
What is the company’s secret?

22.  FFC has a strong governance structure, based
on the pillars of honesty, integrity, business
ethics and morality, driven by strong sense of
responsibility to ourselves, our fellow
members and stakeholders.
 Being pro-active, FFC mitigates this risk
through balancing, production process
obsolete or modernization and replacements
carried out at all the production cost
inefficient.

23.  FFC ensure that our production plants are
state of the art and utilize latest technological
developments for cost minimization and
output optimization.

24. QUESTION 7
In a growing/declining
industry, why is the company
declining/growing?

25.  The agriculture sector of Pakistan depicted a
growth of 4.7% in 2009 as compared to 1.1%
witnessed last year.
 Consequentially, fertilizer demand
in Pakistan increased substantially as
compared to last year; urea in particular
witnessed 18% year on year growth during
the year ended 2009.

26.  Also, being major player in urea production, FFC
enjoys handsome market share in fertilizer
industry.

27. 2010 2009 2010
RATIOS FFC INDUSTRYAVG.
Receivable days 8 10 13
Inventory days 3 3 19
Company has high receivable turnover which indicate that the company
collects its dues from its customers quickly.
2010 2009 2010
RATIOS FFC INDUSTRYAVG.
Fixed Asset turnover 282% 258% 213%
Total assets turnover 110% 89% 95%
Equity Turnover 290% 276% 301%
The above calculated ratios clearly depict the company is growing with tremendous
power.The investments in fixed assets in 2010 has caused boost in operational
efficiency that in return earned it 24% more than last year.This ratio is fairly well even in
terms of industry. So, FFC has done well in turning its investment into sales to earn
better returns.

28. The end
