Directors’ Review
For the Nine Months Period Ended 30 September 2010
Operational Highlights
The Board of Directors is pleased to present a brief overview of the operational and financial performance of
the Company for the nine months period ended 30 September 2010.
The overall performance of the plants remained satisfactory during the period. Production of DAP at 476
thousand tonnes was higher by 27% against the corresponding period, whereas Ammonia production at 338
thousand tonnes and Urea production at 400 thousand tonnes were less by 2% and 11% respectively, against
the corresponding period owing to the gas curtailment of fertilizer plants by Government of Pakistan (GOP).
Initially this curtailment was for a period of three months from May to July which, however, has further been
extended to 31 October 2010.
Marketing Highlights
Urea
The Urea sales of 4,166 thousand tonnes during January to September 2010 are 10% lower than 4,645
thousand tonnes sales during the same period of 2009. Heavy rains in August followed by unprecedented
floods throughout the country resulted in very low sales in August & September which resulted in Urea
inventory of 809 thousand tonnes at end September compared with 208 thousand tonnes last year.
During the period July to September 2010 Urea market remained oversupplied. Throughout this period
GOP also continued its policy of selling imported Urea through National Fertilizer Marketing Limited and
Urea imports of 886 thousand tonnes were made in this period which were high in excess of the domestic
requirement.
The Urea opening inventory of 238 thousand tonnes at the start of 2010 was 70% higher than 140 thousand
tonnes opening inventory of 2009. During January to September 2010 Urea production is at 3,841 thousand
tonnes, which is 3% higher as compared to 3,739 thousand tonnes production during the same period of
2009. Higher Urea production is mainly due to startup of Fatima Fertilizer Plant. Excluding Fatima Fertilizer,
production during this period was lower by 3% as compared to the same period of last year because of gas
curtailment to the fertilizer plants.
DAP
Industry DAP market continuously declined during 2010 after a very healthy offtake during the year 2009. The
DAP sales of 665 thousand tonnes by the Industry during January to September 2010 registered a decline of
42% over 1,147 thousand tonnes sales during the corresponding period. DAP offtake of 246 thousand tonnes
during July to September is 46% lower as compared to 641 thousand tonnes sales during the same quarter of
2009. Domestic DAP prices went up by 43% from Rs. 1,760/- per bag ex-Karachi in July 2009 to Rs. 2,510/per bag ex-Karachi at the end of September 2010 and this had a negative impact on DAP use by the farmers.
However, the domestic DAP sales picked up during the month of September due to the approaching DAP
application time, rising trend in the international market and likely imposition of ‘Reformed GST’.
DAP inventory of 74 thousand tonnes at the beginning of the year 2010 was 78% lower than the 339 thousand
tonnes opening inventory of 2009. DAP production during the nine months period was 476 thousand tonnes
which is 27% higher than 376 thousand tonnes production of the corresponding period. DAP imports were
545 thousand tonnes during the period against 589 thousand tonnes imports of the same period last year. As
a result DAP inventory at the end of September 2010 stands at 422 thousand tonnes which is 167% higher
as compared to 158 thousand tonnes closing inventory of September 2009.
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Fauji Fertilizer Bin Qasim Limited
FFBL Sales Performance
FFBL Sona Urea (G) sales during January to September 2010 were 373 thousand tonnes showing an
achievement of 88% against the target. These sales were 15% lower as compared to the sales of 441 thousand
tonnes for the same period of 2009. Sona DAP sales during January to September 2010 were 320 thousand
tonnes showing an achievement of 114% against the target. These sales were 40% lower as compared to 537
thousand tonnes sales of the same period of 2009.
During January to September 2010 FFBL share in Urea and DAP market is estimated at 8.9% and 48.1%
respectively.
Financial Highlights
Company’s financial results have shown a marked improvement during the nine month period of 2010 as
compared to the corresponding period with gross profit of Rs 6.7 billion at 30 September 2010. Further,
owing to better liquidity position, the Company resorted to less utilization of working capital lines bringing 39%
decline in Company’s finance cost during the period by Rs 468 million i.e. Rs 720 million at 30 September 2010
against Rs 1,188 million in the corresponding period. Similarly, due to better treasury management on available
funds, other income surged substantially to Rs 821 million at 30 September 2010 against Rs 13 million in the
corresponding period. This mainly comprises income on bank deposits and mutual funds amounting to Rs 637
million in conjunction with share of profit of PMP amounting Rs 158 million for the period October 2009 – June
2010.
Net profit after tax, as a result of the above stood at Rs 2,931 million at 30 September 2010, higher by 62%
against corresponding period profit of Rs 1,805 million. Resultantly, Company achieved earnings per share
(EPS) of Rs 3.14 for nine months period at 30 September 2010 against an EPS of Rs 1.93 in the corresponding
period.
Pakistan Maroc Phosphore, SA (PMP)
The overall plant performance remained satisfactory during the period under review. Improved international
selling price of phosphoric acid, stable phos rock price and sustained plant operations remained the main
factors to keep PMP in profits during nine months period from October 2009 to June 2010. The management
expects PMP to close year 2010 in positive, provided the above factors remain same for second half of year
2010.
Future Outlook
Lower than expected off-takes especially in the third quarter due to unprecedented floods throughout the country
has resulted in the high inventory situation, in particular to Urea, at September end. Further, the continuous
increase in DAP prices internationally, may result in increase in price of DAP in the country, in coming days.
The consequence of the above factors can also be seen as lower than expected off-takes in the fourth quarter
as well. In addition, the government also needs to address the issue of ongoing gas curtailment for fertilizer
companies by adhering to its commitment of restoring full gas supply to fertilizer plants at the earliest.
Since the Rabi season 2010-11 is about to start in the country, favorable weather and adequate financial
support by GOP to farmers both in form of providing subsidized inputs and adequate wheat support price shall
bring favorable impact both for the country and the industry.
For and on behalf of the Board
21 October 2010
Lt Gen Hamid Rab Nawaz, HI(M), (Retd)
Chairman
Fauji Fertilizer Bin Qasim Limited
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