CHAPTER 1

1.1 Introduction:
Fauji Fertilizer Company Limited (FFC) is a Pakistani chemical company which produces
chemical fertilizer. It was established by the Fauji Foundation which holds a controlling interest.
FFC produces or markets various fertilizers which include Urea, DAP, SOP (Sulphate of Potash),
MOP ( Muriate of Potash), Boron (Di-Sodium Tetra Borate Decahydrate) and Zinc (Zinc Sulfate
Mono-hydrate).

1.1.1 History:

Fauji Fertilizer Company Limited (FFC) was incorporated in 1978 as a joint venture between
Fauji Foundation, a charitable trust incorporated under The Charitable Endowments Act, 1890
and Haldor Topsoe A/S of Denmark. The Company began its operations with an annual
production capacity of 570,000 metric tons and today it is the largest producer of urea in
Pakistan with an aggregate production capacity of over 2 million tons per annum. FFC has
supplied 54 million tons to the farming community since its inception.

FFC in 2019 became the first Company to win the first placement in PSX Top 25 Companies
Award for tenth (10th) consecutive time. The international community has conferred various
other recognitions upon the Company; FFC is a member of United National Global Compact,
considered a renowned member of the International Fertilizer Industry Association (IFA) and
Arab Fertilizer Association (AFA).

Nationally FFC is consistently been ranked amongst the best companies of Pakistan for over two
decades, with accolades in financial reporting, philanthropy and good governance amongst other
areas. This is a testament to the skill, ingenuity and exemplary competence of the management in
reflecting high standards of transparency, accountability and good governance.

In pursuit of our vision for growth the Company invested in setting-up Pakistan’s first and only
DAP and granular urea complex: Fauji Fertilizer Bin Qasim Limited (FFBL), in which the
Company currently holds a stake of 49.88%.

Our well-recognized ‘Sona’ brand which means gold thus signifying the value of our product to
the farming community of the Country, FFC combined with FFBL, commands a market share of
51% in urea and 51% in DAP in 2020.

FFC holds a diverse investment portfolio comprising Fertilizer (FFBL), Renewable Energy
(FFCEL), Cement (FCCL), Food (FFF), Technical Services (Olive) and Banking (Askari).

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1.1.2 Product and Services:

 Fertilizers
 Farm Advisory Services
 Technical Services
 IT Services

1.1.2.1 Fertilizers:

Fertilizers are food for plants: they provide nutrients for plants to grow and thrive. A mineral
plant nutrient is an element which is essential or beneficial for plant growth and development or
for the quality attributes of the harvested product of a given plant species grown in its natural or
cultivated environment.

1.1.2.2 Farm Advisory Services:

Fauji Fertilizer Company Limited has been providing farm advisory services to the farming
community throughout Pakistan since 1981, for increasing the agriculture production in general
and the farmers’ income in particular. Our organization in pursuit of its national commitment and
moral obligation maintains regular contact with farmers and Agricultural Institutions to ensure
efficient transfer of modern agricultural technology in an effective way. Following are the
advisory services provided by FFC:

I. Soil Testing
II. Water Testing
III. Plant Tissues Analysis
IV. Farmer Education

1.1.2.3 Technical Services:

Fauji Fertilizer Company Limited services are now available for the Chemical Process Industry
based upon its dedicated team of engineering specialists with rich experience. We provide
services in following areas:

1. Inspection and Reliability Assessment

2. Mechanical Maintenance (Stationary and Rotary)
3. Electrical Maintenance
4. Instrument Maintenance
5. Safety Management
6. Turnaround(Lump Sum)
7. Plant Consultancy
8. Laboratory Testing
9. Technical Training

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1.1.2.4 IT Services:

With a market full of disruptions, new business models, business software products, and
technologies coming every now and then, you need to focus on innovations to stay relevant,
engaged and ahead of the digital curve. Going digital with our meticulous software development
services, can help you unleash your vision in this smarter, connected world with our open,
independent technologies that are best-in-class. Accelerate and simplify your digital
transformation – with us – by connecting applications, data and devices without compromising
your existing investments. Following are the IT Services provided by FFC:

1. Information Security
2. Software Testing and Q/A Services
3. Cloud Infrastructure Services
4. SAP S/4 HANA
5. Trainings
6. Software Development Services
7. SAP Consulting Services

1.1.3 Performance:

FFC has been recognized by Pakistan Stock Exchange (PSX) as first amongst Top 25 Companies
consecutively for 10 years attributed to its Compliance of Code of Corporate Governance,
Company Performance and Efficient Management.

The Company enabled savings of precious foreign exchange for the Country of around USD 1.29
billion besides contributing towards food security and improved farm economics.

FFC ensured availability of indigenous Urea at a very affordable rate of around Rs 1,770 per bag
as compared to International prices as high as Rs 11,000 per bag.

Agricultural sector posted a growth of 2.8% on account of positive momentum in farm

economics in the shape of affordable agri. inputs and favorable weather conditions etc.

Our farmers are not just the custodians of our National Food Security but the backbone of our
economy as well. We have always considered them at the core of our business strategies and a
significant stakeholder that ensures our sustainable success. With the increasing inflation rates
around the world, prices of essential commodities have sky-rocketed.

Despite this increase, the Company, demonstrating resilience in adversity, stood by its farmers
and ensured the supply of urea fertilizer at about six times lower prices compared to the world
market. Delivering affordable inputs not only boosted the growth rate but also improved the farm
economics. Our CSR and FACE projects continue to play a pivotal role reflecting the essence of
our motto “When Farmers Succeed, We Succeed.”

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Following are the tables and graphs that shows company’s performance:

Farm Economics

SONA Urea Production

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Fertilizer Off take and Turnover

Industry Urea Sales

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 Urea Market Share

Key Performance Indicators

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 Net Profit

1.1.3.1 Awards:

 First Runner up in SAFA best presented annual report award

 First Runner up in ICMAP/ICAP best corporate report award
 Company of the year in RCCI International achievement award
 Largest Tex payer – Manufacturing Sector in RCCI First Tex payer Recognition award
 Corporate Excellence Award in MAP Award

1.1.4 Corporate Social Responsibility:

Corporate Social Responsibility is a vital and withstanding element of FFC Business Operations.
The company takes pride in the fact that we stand as the pioneer of sustainable and responsible
business practices in Pakistan, as our first CSR program i.e Capacity Building of Farmers (Agri
Services) was launched in 1982.

On the onset, moving through the decades the company has diversified and magnified its CSR
portfolio, turning it into a crucial and centric part of business strategy. With our commitment to
sustainable business operations, responsible business practices and fulfilling our obligation
towards our community, FFC as standard contributes 1% of our profit before tax to Corporate
Social Responsibility initiatives.

Being member of UN Global Compact in 2010, an Internationally recognized forum holding

credentials; our mandate, vision and goal is aligned with international thrust towards a
sustainable and prosperous tomorrow, through business acting and behaving ethically and

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responsibly. We hold commitment to implement and embed the universal principles of human
rights, labor standards, environmental protection, anti-corruption etc defining the UN 17
Sustainable Development Goals as core to our practices and interventions.

Our journey of challenges and rewarding years of collaborations, joint ventures, partnerships
with Government bodies, community representatives, local and International NPO’s and other
renowned institutions are all aimed at integrated interest of all stakeholders involved.

1.1.4.1 SONA Welfare Foundation:

Sona Welfare Foundation is the official implementing partner of FFC. Our fields of intervention
are diversified and extensive programs are conducted in liaison with our partners. Our areas of
intervention include but not limited to the following;

► Provision of education

► Development of health care facilities

► Environmental preservation

► Community support and uplift

► Disaster relief and rehabilitation

► Development of partnerships with reputable social organizations

► Promotion of sports in the Country

► Energy conservation

1.1.5 Core Values:

The organization’s beliefs and principles articulate the desired culture of the organization. These
standards describe how employees and the organization are expected to behave internally and
externally. They serve as the basis for decision-making and influence actions in everyday
situations.

1.1.5.1 Honesty:

Honesty in communicating within the Company and with our business partners, suppliers and
customers, while at the same time protecting the Company’s confidential information and trade
secrets.

1.1.5.2 Excellence:

Excellence should be in high - quality products and services to our customers.

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1.1.5.3 Consistency:

Consistency should be in our words and deeds.

1.1.5.4 Compassion:

Compassion should be in our relationships with our employees and the communities affected by
our business.

1.1.5.5 Fairness:

Fairness to our fellow employees, stakeholders, business partners, customers and suppliers
through adherence to all applicable laws, regulations and policies and a high standard of moral
behavior.

1.1.5.6 Reputation:

Reputation is built /perceived as a valuable asset and the consciousness of our reputation prevails
in our words and deeds.

1.1.5.7 Teamwork:

Teamwork is to synergize for achieving strategic objectives.

1.1.5.8 Innovation:

Innovation is very important to create value and sustain competitive advantage.

1.2 Challenges:

Following are the two main types of challenges faced by FFC:

1.2.1 Strategic Challenge:

Depleting natural gas reserves and need for alternate resources.

1.2.2 Operational Challenges:

 Rising Interest Rate , fuel prices and inflationary pressures

 Discharge of GIDC liability would pressurize working capital of the Company
 Continued delay in subsidy receivable and long outstanding GST refunds impacting
working capital
 Business expenditure and input GST disallowances by FBR resulting in cost escalation

In my opinion, these are the most critical issues faced by FFC because these directly affects the
performance of the company.

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1.3 Approach To Resolve The Challenge:

FFC is facing natural gas shortage. To tackle this issue in the long run, Fauji fertilizer Company
Limited (FFC) should go for different alternates including coal. The company should start
working on a compression plant project with MARI(from where FFC get natural gas) in order to
expand the reserve life of the Mari field, which is expected to take 2 years to the commission.

In case of Emergency, FFC would then shift towards RLNG for their production needs.

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 CHAPTER 02
EXTERNAL ANALYSIS
2.1 Environment, Industry, and, Extended Five Forces:
These factors are not within the control of management of business but still affects the business
up to large extends. These factors are almost uncontrollable. The organization has to fit into this
environment to survive in this competitive scenario. These factors of macro environment also
affects the factors within the organization i.e. factors of micro environment.

2.1.1 What elements in the macro-environment will significantly affect the organization’s
performance?

There are many factors in the macro-environment that will affect the decisions of the managers
of any organization in this whole world. Tax changes, new laws, trade barriers, demographic
change and government policy, political changes are all examples of macro change. To analyze
these factors we can categorize them using the PESTEL model.

2.1.1.1 PESTEL Analysis:

A PESTEL analysis is an acronym for a tool used to identify the macro (external) forces facing
an organization. The letters stand for Political, Economic, Social, Technological, Environmental
and Legal.

 Political Factors:
These determine the extent to which government and government policy may impact on
an organization or a specific industry. This would include political policy and stability as
well as trade, fiscal and taxation policies too.
 Economic Factors:
An economic factor has a direct impact on the economy and its performance, which in
turn directly impacts on the organization and its profitability. Factors include interest
rates, employment or unemployment rates, raw material costs and foreign exchange rates.
 Social Factors:
The focus here is on the social environment and identifying emerging trends. This helps a
marketer to further understand consumer needs and wants in a social setting. Factors
include changing family demographics, education levels, cultural trends, attitude changes
and changes in lifestyles.
 Technological Factors:
Technological factors consider the rate of technological innovation and development that
could affect a market or industry. Factors could include changes in digital or mobile
technology, automation, research and development. There is often a tendency to focus on
developments only in digital technology, but consideration must also be given to new
methods of distribution, manufacturing and logistics.

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  Environmental Factors:
Environmental factors are those that are influenced of the surrounding environment and
the impact of ecological aspects. With the rise in importance of CSR (Corporate
Sustainability Responsibility) and sustainability, this element is becoming more central to
how organizations need to conduct their business. Factors include climate, recycling
procedures, carbon footprint, waste disposal and sustainability.
 Legal Factors:

An organization must understand what is legal and allowed within the territories they
operate in. They also must be aware of any change in legislation and the impact this may
have on business operations. Factors include employment legislation, consumer law,
healthy and safety, international as well as trade regulation and restrictions.
Advantages:

 It can provide an advance warning of potential threats and opportunities

 It encourages businesses to consider the external environment in which they operate
 The analysis can help organizations understand external trends

Disadvantages:

 Many researchers argued that simplicity of the model that it is a simple list which is not
sufficient and comprehensive
 The most significant disadvantage of the model is it is only based on an assessment of the
external environment

2.1.2 Has the organization been dealing with these factor seffectively?

The year 2020-21 was a difficult period due to the unfortunate outbreak of the COVID-19
pandemic across the globe. At Fauji Fertilizer, our goal through this strenuous period was
continuing our journey of excellence, no matter the form of adversity that we are faced with.

In 2022, due to political unrest in the country , FFC face many problems but the company has
demonstrated resilience in this period of uncertainty and despite the challenges, has continued
the uninterrupted supply of our quality fertilizer to the farming communities all over the
Country.

2.2 Fertilizer Sector:

The fertilizer industry is an essential contributor towards the agriculture sector of Pakistan’s
economy. The industry is significant as it plays a vital role in ensuring the country’s food
security .The industry is dominated by five Companies, which occupy ~95% of the market share.
There are 4 players listed on the Pakistan Stock Exchange (PSX). These companies belong to the
three Big Names of the Corporate Sector, FaujiGroup, Engro Group and Fatima Group.

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Fertilizer sector contributes ~4.4% to the large-scale manufacturing (LSM) sector of Pakistan
and ~0.9% to the overall GDP.Due to agriculture sector’s immense economic significance, the
government has set out relief and subsidy programs, which lead to sustained demand for
fertilizers.Agricultural output, credit disbursement of agricultural sector, government policies,
rainfall and soil health are few of the main demand drivers for fertilizer Industry.

2.2.1 Supply and OFF Take:

Pakistan’s annual fertilizer production was recorded at ~8mln tons in CY20 (~8.1mln tons in
CY19 –a decline of ~1%).Annual fertilizer off take was recorded at ~9.9mln tons in FY20, a
growth of ~5% YOY. Urea accounts for ~75% of the country’s fertilizer production. DAP
contributes 8 –10 % of the country’s fertilizer production because all Sector players, except
FFBL, are involved in import of DAP.

Other fertilizers, such as CAN, NPK, NP, SSP collectively account for 15 –20 % of the country’s
fertilizer production. On the off take front, urea accounted for almost ~61% of the country’s total
fertilizer off take in CY20 followed by DAP (~24%).

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2.2.2 Response of FFC Towards Industry Trends:

Fauji Group leads the market with a share of ~48% in the country’s urea off take. During
9MCY20.•Meanwhile, the market shares of Fauji Group (including Fauji Fertilizer Company
(FFC) and Fauji Fertilizer Bin Qasim Limited (FFBL)), and Fatima Group (Fatima, Fatimafert &
Pak Arab) remained intact at ~48% and ~13%, respectively.

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2.3 Competitors:

Following are the two main competitors of Fauji Fertilizer Company:

 Engro Fertilizer Company:

Engro Fertilizers Limited is a subsidiary of Engro Corporation and, a trusted name for
every farmer in Pakistan. It is traded on the stock market under the name ‘EFERT'.
The primary business segments of the company are:
Fertilizers (urea, phosphatic fertilizers).
Specialty fertilizers
Crop sciences; and agri services (including its premier flagship brand of logistic services
i.e., engro logistics).
 Fatima Fertilizer Company:
Fatima Fertilizer Company Limited is the first and the only green field project which has
materialized under the 2001 Fertilizer Policy of the Government of Pakistan, aiming to
encourage investors in this field, in view of growing demand of fertilizer in the Country.
The Fatima Fertilizer Company Limited was incorporated on December 24, 2003, as a
joint venture between two major business groups in Pakistan namely, Fatima Group and
Arif Habib Group.
The fertilizer complex is a fully integrated production facility, capable of producing two
intermediate products, i.e., Ammonia and Nitric Acid and four final products which are
Urea, Calcium Ammonium Nitrate (CAN), Nitro Phosphate (NP) and Nitrogen
Phosphorous Potassium (NPK) at Sadiqabad, Rahim Yar Khan.

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.

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