Fauji Fertilizer Company LTD., Finance Department

INTERNSHIP REPORT ON
FAUJI FERTILIZER COMPANY LIMITED
MUHAMMAD AHMAD MUSTAFA

November 2nd, 2015
DEPARTMENT OF MANAGEMENT SCIENCES

COMSATS INSTITUTE OF INFORMATION TECHNOLOGY
ATTOCK
Muhammad Ahmad Mustafa
INTERNSHIP ON
FAUJI FERTILIZER COMPANY LIMITED.
MUHAMMAD AHMAD MUSTAFA

CIIT/FA12-BS(BA)-033/ATK
November 2nd, 2015
Ms. Shagufta Parveen
DEPARTMENT OF MANAGEMENT SCIENCES

COMSATS INSTITUTE OF INFORMATION TECHNOLOGY
Attock
i2
ii 3
Final Approval
It is certified that I have read project submitted by Muhammad Ahmad
Mustafa (CIIT/FA12-BS(BA)-033/ATK) and this report is of sufficient
standard to warrant its acceptance by COMSATS Institute of Information
Technology Attock Campus for BS(BA) (hons) degree.
Ms. Shagufta Parveen

Academic Supervisor Internship
_____________________
iii4
Internship Certificate
iv5
Dedication
I dedicate this report to my beloved father and my great mother. My father supports
me in every aspect of life and ignore my mistakes, this behavior of my father helps
me to become initiative. I have no words to explain my mothers care and love for me.
Her good manners and way to face complications, teach me that how to live life and
do smile in front of problems.
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Acknowledgment
All the Praise to be ALLAH, LORD of the world. I am nothing without HIS bless, HE
gives me a lot of delights without realizing that am I deserve or not. Im grateful to

HIM however I know all my thanks are not fulfil for HIS given only breath.
Many compliments for Prophet MUHAMMAD (peace be upon Him) Whose
competent praise is Quran. Im thankful to Him because of His successful teaching lead
me in my whole life and helps me to choose a right way during the drastic decisions.
Im heartily grateful to Lt Col Naghman Bin Yousaf (Retd) (HR), who consider me
eligible for this internship, Im thankful to Mr. Naeem Rashid (MF), Mr. Zubair
Murtaza (EF), Mr. M Ahsen Siddique (EF), Mr. Rehan Asgher (EF) and Mr.
Jabbar Ali Khan (DEF) for their supervision at practical forum.
Im indebted to finance assistants, to allow me to participate and interfere in their work.

Im thankful to Ms. Shagufta Parveen, whos best supervision make me able to start
this report. Her way of instructions inspire me to do my best effort as she does for us.
Im again thanking her for her help to completion of report.
Im grateful to my respected father and mother because of their care about my work
and studies, and help with their best strength.
I especially thanks to my friends who gave me time and appreciation, help me to

complete my internship.
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Executive Summary
FFC was incorporated in 1978 as a private limited company. This was a joint venture
between Fauji Foundation (a leading charitable trust in Pakistan) and Haldor Topsoe
A/S of Denmark. The initial authorized capital of the company was 813.9 Million
Rupees. The present share capital of the company stands at PKRs. 3.0 Billion.
Additionally, FFC has PKRs. 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.
Finance Department Goth Machhi has three main sections which are General
Accounting Material Accounting and Cost and Reporting. The most important section
is cost and reporting section which deals with the budget of the company. Its main
responsibility is to prepare yearly budget. Capex proposals are prepared by each
department and they submit their proposals to Cost and reporting department which
then prepares the yearly budget. The material accounting section deals with the record
of fixed assets and inventory status. It also calculates depreciation monthly of fixed
assets. General accounting is further divided into employees payments book keeping
tax suppliers and contractors payments and payroll .Employees payments include
reimbursement of medical bills CAT and company maintained car maintenance
charges. Company feel proud to trust other population of Pakistan. FFC installed many
projects beyond the boundaries of company to help others without any beneficial
interest like as Sona Schools and Hazrat Bilal Trust (hospital) etc. These services are
mostly free for poor people, but have a standard. Company has believe of maintain
success in future years because of its best ethical behavior and good quality products.
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Table of Contents
1.0
1.1
Introduction .................................................................................................. 13
Joint venture: ............................................................................................. 13
1.1.1
2.0
1.1.2
Fauji Foundation: ............................................................................... 13

Haldor Topsoe: ................................................................................... 13
Objectives of studying the organization ......................................................... 14
3.0
3.1
3.2
3.3
3.4
3.5
3.6
Organization Overview ................................................................................. 15
History: ..................................................................................................... 15
Nature of the Business: .............................................................................. 16
Vision: ...................................................................................................... 16
Mission: .................................................................................................... 17
Corporate Strategy:.................................................................................... 17
Business Volume: ...................................................................................... 17
3.6.1
FFC-01: .............................................................................................. 17
3.6.3
FFBL: ................................................................................................ 17
3.6.2
3.6.4
3.6.5
3.6.6
3.6.7
3.6.8
3.6.9
3.7
FFC-02: .............................................................................................. 17
FFC-03: .............................................................................................. 18
PMP: .................................................................................................. 18
FCCL: ................................................................................................ 18
FFCEL: .............................................................................................. 18
AKBL: ............................................................................................... 18
FFFL: ................................................................................................. 18
Product Portfolio: ...................................................................................... 19
3.7.1
Urea Fertilizer: (FFC & FFBL) .......................................................... 19
3.7.3
SOP Fertilizer: (FFC) ......................................................................... 19
3.7.2
3.7.4
DAP Fertilizer: (FFC & FFBL) .......................................................... 19
Renewable Energy: (FFCEL) ............................................................. 19
viii9
3.7.5
3.7.6
3.8
Financial Services: (AKBL) ............................................................... 20
Frozen Fruits & Vegetables: FFF (formerly Al-Hamd Foods Limited) 20
Plant-I & II Description: ............................................................................ 20
3.8.1
Plant-I: ............................................................................................... 21
3.8.3
Urea Product Quality: ......................................................................... 21
3.8.2
3.9
Plant-II: .............................................................................................. 21
SWOT Analysis: ....................................................................................... 21
3.9.1
Strengths: ........................................................................................... 21
3.9.3
Opportunities:..................................................................................... 22
3.9.2
3.9.4
3.10
Weaknesses: ....................................................................................... 22
Threats: .............................................................................................. 22
PEST Analysis: ...................................................................................... 22
3.10.1 Political/ Legal Factors: ...................................................................... 23

3.10.2 Economic Factors: .............................................................................. 23
3.10.3 Social Factors: .................................................................................... 23

4.0
3.10.4 Technological Factors: ....................................................................... 24
4.1
Organizational structure ................................................................................ 25
Main Offices: ............................................................................................ 25
4.1.1
Registered Office: .............................................................................. 25
4.1.3
Marketing Division: ........................................................................... 25
4.1.2
Plant Sites: ......................................................................................... 25
4.2
Organization Hierarchy: ............................................................................ 26
4.4
Competitive Positioning of the Organization: ............................................ 27
4.3
Comments on the Organizational Structure: ............................................... 27
4.4.1
Technology: ....................................................................................... 27
4.4.3
Certification: ...................................................................................... 27
4.4.2
Cash Sales: ......................................................................................... 27
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5.0
4.4.4
5.1
5.2
Finance Department ...................................................................................... 28
Departments Human Capital: ................................................................... 28

Departmental Organogram: ....................................................................... 29
5.2.1
5.3
6.0
6.1
Financial Position: .............................................................................. 28
Designations:...................................................................................... 29
Product Line: ............................................................................................. 30
Functions of Department: .............................................................................. 30
Cost & Reporting Section: ......................................................................... 30
6.1.1
Capital Expenditure: ........................................................................... 31
6.1.3
Types of Budget: ................................................................................ 31
6.1.2
6.1.4
6.1.5
6.1.6
6.1.7
6.2
Operational Expenditure: .................................................................... 31

Import of Asset:.................................................................................. 34
Budget Reporting: .............................................................................. 34
Deletion of Asset: ............................................................................... 35
Physical Condemnation of Asset: ....................................................... 35
General Accounting: .................................................................................. 35
6.2.1
6.2.2
Book Keeping: ................................................................................... 35

Employee Payments: .......................................................................... 36
6.3
Out Source: ............................................................................................... 37
6.4
Taxation: ................................................................................................... 38
6.3.1
Single bid Basis Payment to Chemicals Supplier: ............................... 37
6.4.1
National Tax Number Verification: .................................................... 38
6.4.3
Tax Deduction Certificate:.................................................................. 39
6.4.2
6.5
Income Tax Report: ............................................................................ 39
Finance Marketing (Distribution)............................................................... 40
6.5.1
6.5.2
Financial Documentations: ................................................................. 40

Freight Payments: ............................................................................... 41
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7.0
7.1
7.2
7.3
7.4
Financial Analysis......................................................................................... 42
Balance Sheet ............................................................................................ 43

Profit and Loss Account ............................................................................ 45
Cash Flow Statement ................................................................................. 46
Financial Ratios:........................................................................................ 47
7.4.1
Liquidity Ratios:................................................................................. 47
7.4.3
Profitability Ratios: ............................................................................ 51
7.4.2
7.4.4
7.5
8.0
8.1
8.2
Investment / Market Ratios: ................................................................ 53
DuPont Analysis:....................................................................................... 55
Critical Analysis: .......................................................................................... 56
Analysis of Tools applied in Department: .................................................. 56
Behavior of the Company about Facilitate the Society: .............................. 56
8.2.1
Corporate Social Responsibility:......................................................... 56
8.3.1
Investors:............................................................................................ 57
8.3.3
Customers: ......................................................................................... 57
8.3
Future Prospects of the Company: ............................................................. 57
8.3.2
9.0
Activity / Turnover Ratios: ................................................................. 48
8.3.4
Employees:......................................................................................... 57
Organization:...................................................................................... 57
Conclusions .................................................................................................. 58
10.0 Recommendations ......................................................................................... 59
11.0 References: ................................................................................................... 60
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1.0 Introduction
In 1960s when the green revolution came in Pakistan and the agriculture increased, the
farmer's demand for fertilizer was also increased. In 1975 import bill of chemical
fertilizers had substantially increased, exceeded from US$ 70 million and was adversely
effect to the trade balance. This became the cause of think about investment in fertilizer
for the best future of country and good profit.
Company established in 1978 as private limited company, registered as Fauji Fertilizer

Company Limited. Company is well known in its customers by its logo SONA UREA
(The Urea of Gold). In 1993 company installed the 2nd plant at same site. Same year
FFC invested in Fauji Fertilizer Bin Qasim Limited, by holding the 50.88% equity make
it subsidiary of FFC. In 2002 FFC acquire the Pak Saudi Fertilizer Plant located in Mir
Pur Mathelo and registered it as FFC-3.
1.1
Joint venture:
Fauji Fertilizer Company LTD. was a joint venture between Fauji Foundation Pakistan
and Haldor Topsoe Denmark.
1.1.1
Fauji Foundation:
Fauji Foundation (also known as Fauji Group), is amongst the largest business
conglomerate in Pakistan which "Earns to Serve" the interests of ex-servicemen. It is
basically a Charitable Trust founded in 1954 for the welfare of the ex-servicemen and
their dependents. It is incorporated under the Charitable Endowments Act 1890.
Lt Gen Muhammad Mustafa Khan, HI (M) (Retd) is present Managing Director of Fauji
Group.
1.1.2
Haldor Topsoe:
Founded in 1940 on the brink of the Second World War, Dr. Haldor Topsoe started the
company based on a commitment to heterogeneous catalysis. The company is governed

by the notion that only through fundamental science can we continue to offer our clients
the best, and the past 60 years offer an on-going tale of improving catalysis. In 2007
Dr. Haldor Topsoe hold the 100% share of Company and he is Chairman till now.
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2.0 Objectives of studying the

organization
Higher Education Commission (HEC) has specific criteria for 4 year bachelor program
of Business Administration, one of the compulsory requirements for degree is minimum

6 week internship in any registered firm.
Fauji Fertilizer Company Ltd. is a largest chain of fertilizer plants in Pakistan. Company
follows International Standards in Management, Production, Safety and other
departments. Company achieved many International and National awards. Company
gives many facilities to its employees, as residence, medical allowances, electricity,
water, education for children, internet, parks, clubs etc.
My basic reason of taking the company for internship is that, I live in the township area
of company for 19 years and I observe that, company gives international standard of li-
to its employees and replace their thoughts with bright and high thinking. To bring
Management Systems (Q, OH&S and E) in line with the internationally recognized
Standards, FFC achieved International Standards certifications for ISO 9001:2008, ISO
14001:2004 and OHSAS 18001:2007.
Quality Management System certification at FFC-GM was first achieved in November

1997. This was an honor for FFC being the 1st Fertilizer Plant in Pakistan to achieve
this certification.
Company is using SAP as database as well as enter department integration software,

this was an opportunity for me to learn basic use of SAP.
Many tools for motivation of employees I practically experienced in FFC-GM as every

morning handshake of Executive Finance with his section, by concerning I discern that
is a way of assuring the employees timing and get them know that your officer is also
on work.
Budgeting, Outsource Management, Capitalization, Record keeping, Distribution and

Payments were the main areas of my studies during internship. Production, Protocol,
Security Management, Safety Insurance and Marketing were also part of internship plan
issued by Technical Training Center, Fauji Ferilizer Company Ltd. GM.
14
3.0 Organization Overview

3.1
History:
Fauji Fertilizer Company Limited was incorporated in 1978 with the vision of selfsufficiency in fertilizer production in the country. This was joint venture between Fauji
Foundation (a leading and oldest charitable trust in Pakistan) and Haldor Topsoe
(Denmark). Companys initial authorized capital was 813.9 Million Pakistani Rupees.
Now the present share capital of the company stands at 3.0 Billion PKRs. Moreover
FFC has almost 1.0 Billion PKRs. stakes in Fauji Fertilizer Bin Qasim Limited
(subsidiary, formally FFC-Jordan Fertilizer Company Limited).
The Company was listed on Karachi and Lahore Stock Exchanges in 1991 and on
Islamabad Stock Exchange in 1992. Company employees were also allotted shares for
motivation and promoting a sense of participation in business. According to criteria of
Karachi Stock Exchange, primarily quantum of dividend payout, Fauji Fertilizer

Company Ltd. has been placed in the list of top 25 companies of Pakistan consecutively
for twenty years since 1994, and stood first in list for consecutive four years 2010-13.
Fauji Fertilizer Company Ltd. (Plant-01) started its first commercial production in 1982
and produced its full designed capacity (570,000 metric ton per year) in very first year.
With the phenomenon of De Bottle Necking Plant-01 was refurbished to 122% of the
design capacity 695,000 tons per year in 1992. Company installed a new plant at the
same place in 1993 with designed capacity of 635,000 metric tons per year. In 1997
company honored by the Quality Management System certification in Goth Machhi,
FFC became the first fertilizer plant in Pakistan to achieve this peculiarity. In 2002
F.F.C. acquired ex Pak Saudi Fertilizers Limited (PSFL) Urea Plant situated in Mirpur
Mathelo (Plant-03) with annual capacity of 574,000 tons of urea. It was the largest
industrial sector transaction in Pakistan at that time. In 2008 De-Bottle Necking of
Plant-03 was commissioned successfully for enhancement of capacity to 125% of
design i.e. 718,000 metric tons annually.
FFC operates in all the four provinces of the country and Azad Kashmir. The marketing
area has been divided into three sales zones, 11 sales regions and 61 sales districts with
a network of over 3,000 well trained dealers. This network is spread over 1400
locations. Due to seasonality of fertilizer consumption, the company has established a
15
network of 120 field warehouses to meet its storage requirements. Company's sales
activities are well supported by planning, distribution and warehousing, advertising and
sales promotion, finance, administrative and farm agronomic services.
Company also started the mega project of FFC Energy Limited in Jhimpur, Sindh for
the best future of Pakistan. Former President of Pakistan Mr. Asif Ali Zardari
inaugurated the project on 24th Dec 2012.
Company gives many facilities to its employees. Township areas are situated at one
kilometer distance of plant sites in Goth Machhi and Mirpur Mathelo. In these areas
Company provides residence, Medical Centre, Schools, College, Parks, Staff and
Management Clubs, standard able Market, Bank branches, football cricket Grounds,
Golf course, Transport, Mosque, and Caf etc. Company facilitate its employees in
township area with many services like as Electricity, Natural Gas, Water, Internet,
Security, Safety, all electrical gadgets, ACs and Tele Phone etc. These facilities are
mostly free of cost.
Company feel proud to trust other population of Pakistan. FFC installed many projects
beyond the boundaries of company to help others without any beneficial interest like as
Sona Schools and Hazrat Bilal Trust (hospital) etc. These services are mostly free for
poor people, but have a standard.
Company has believe of maintain success in future years because of its best ethical
behavior and good quality products.
3.2
Nature of the Business:
Company was incorporated under Companies Act 1913 (Companies Ordinance 1984)
as private limited manufacturing company. The principal activity of the company is
manufacturing, purchasing and marketing of fertilizer, including investment in other

fertilizer manufacturing operations. Now company is started diversification in its
business, installed energy plant and targeted the fast moving consumer goods market.
3.3
Vision:
To be a leading national enterprise with global aspirations, effectively pursuing
multiple growth opportunities, maximizing returns to the stakeholders, remaining

socially and ethically responsible.
16
3.4
Mission:
To provide our customers with premium quality products in a safe, reliable, efficient
and environmentally sound manner, deliver exceptional services and customer support,
maximizing returns to the shareholders through core business and diversification,

providing a dynamic and challenging environment for our employees.
3.5
Corporate Strategy:
Maintaining our competitive position in the core business, we employ our brand name,
unique organizational culture, professional excellence and financial strength

diversifying in local and multinational environments through acquisitions and new
projects thus achieving synergy towards value creation for our stakeholders.
3.6
Business Volume:
Fauji Fertilizer Company is a chain of three fertilizer plants, additionally company
invested in one fertilizer plant in Karachi and took its hold. In 2010 company installed
energy plant and diversified its business. The company also acquire the food company
and a commercial bank. FFCL-01 & 02 has more than 5000 permanent employees and
2000+ daily wagers.
3.6.1
FFC-01:
FFC-01 located at Goth Machhi, SadiqAbad, is first investment of business. It is
producing 695 metric ton urea per year. Project cost was 3300 Million Pakistani
Rupees.
3.6.2
FFC-02:
For the extension of countrys progress and high demand of best fertilizer, FFC
pioneered a new plant FFC-02 in 1993 with 7215 Million PKRs at same place. It is
producing 693 metric ton urea per year.
3.6.3
FFBL:
Company also did base investment in Fauji Fertilizer Bin Qasim Limited (FFBL) in
1993. Which is currently PRs. 4.75 billion or 50.88% equity shares of FFBL.
17
3.6.4
FFC-03:
In 2002 Company overtake the ex Pak Saudi Fertilizer Plant in Mirpur Mathelo, and
merge it in FFC on 1st July 2002 as Plant-03.
3.6.5
PMP:
Company invested PRs. 706 million in Pakistan Maroc Phosphore, Morocco S.A. in
2004, now FFC has equity participation of 12.5% in PMP.
3.6.6
FCCL:
In 2008 FFC invested PRs. 1.5 billion in Fauji Cement Company Limited, currently
presenting 6.79% equity participation.
3.6.7
FFCEL:
Company started a mega project of Pakistans first wind power plant in 2010, named
Fauji Fertilizer Compamny Energy Limited. First time in Pakistan it is generating

electricity from wind in Jhampir, Sindh. It is also introducing the way of solving the
problem of energy crises in Pakistan.
3.6.8
AKBL:
In 2013 FFCL invested in Askari Bank Limited and take the majority with 50.57%
stock. Agreement between ex-owner and FFCL was signed at PKRs. 24.32 per share of
AKBL.
3.6.9
FFFL:
As the idea of Military Business (quoted by Ayesha Siddiqa Military Inc.) Milbus
FFCL acquire the Al Hamd Foods Limited (AHFL) at 100% shares with 2.5 billion
capital expenditure. The company registered identity for its new business as Fauji Fresh
n Freeze Limited.
In 2011, SAP-ERP installed in the Company, improved the business process by

reducing time lags and duplication of work.
18
3.7.1
3.7
Product Portfolio:
Urea Fertilizer: (FFC & FFBL)
Used in grain and cotton crops, at the time of last cultivation before planting. In irrigated
crops, urea can be applied dry to the soil. During summer, it is often spread just before
rain to minimize losses from vitalization process. Urea produced by FFBL is in
Granular form, being the only of its kind in Pakistan.
3.7.1.1
Industrial Use:
3.7.2
DAP Fertilizer: (FFC & FFBL)
Raw material in manufacture of plastics, adhesives and industrial feedstock.

Sona DAP is the most concentrated phosphatic fertilizer containing 46% P2O5 and 18%
Nitrogen. The solubility of DAP is more than 95%, which is highest among the
phosphatic fertilizers available in the country. Further, on account of its nitrogen

content, it temporarily increases the soil pH.
3.7.2.1
Industrial Use:
Fire retardant used in commercial firefighting products. Other uses are as metal finisher,
yeast nutrient, nicotine enhancer in cigarettes and sugar purifier.
3.7.3
SOP Fertilizer: (FFC)
SOP is an important source of Potash, a quality nutrient for production of crops
especially fruits and vegetables. FFC SOP contains 50% K2O in addition to 18%
Sulphur, which is an important nutrient especially for oil seed crops with an
ameliorating effect on salt-affected soils. Potash is an important nutrient for activation
of enzymes in the plant body and helps increase sugar and starch contents in cultivation.
Potash improves the resistance of plants against pests, diseases and stresses like water/
frost injury etc.
3.7.4
Renewable Energy: (FFCEL)
The company has been incorporated to operate a 49.5 MW wind power generation
facility and its onward supply to Pakistans National Grid (NTDC).
19
3.7.5
Financial Services: (AKBL)
Operating through a network of 321 full service / sub branches with a Wholesale Bank
Branch in the Kingdom of Bahrain, AKBL offers a wide range of banking activities
including commercial & corporate lending, trade businesses, Islamic, consumer,
agriculture & investment banking, equity trading and treasury operations. The Bank is
also engaged in the business of mutual funds and share brokerage, investment advisory
and related services through its subsidiary companies, Askari Investment Management
Limited and Askari Securities Limited.
The Bank also offers branchless banking service under the brand name Timepey. A
wide network of Timepey shops across Pakistan are fully equipped to handle day to day
needs of the customers including; money transfer, bill payment and mobile top-up etc.
3.7.6
Frozen Fruits & Vegetables: FFF (formerly Al-Hamd

Foods Limited)
Construction work on the Individually Quick Freeze (IQF) Plant of Fauji Fresh n
Freeze, is progressing as per plan with scheduled inauguration during 2015.
3.8
Plant-I & II Description:
Fauji Fertilizer Company Limiteds first two plants were my internship area. Both plant
produce Sona Urea. Human Resource, Finance, Administration, IT, Bagging, Civil
Work Office, Technical Training Center, Distribution and Marketing departments work
for both plants. However Urea, Ammonia, Control System, Prilling Tower and cooling
towers are separate for each plant.
Location:
Goth Machhi Sadiqabad
Product:
Sona Urea Fertilizer
20
3.8.1
Plant-I:
Commencement of commercial production:
June 14, 1982
Project Cost:
PKRs. 3300 Million
Production Capacity of Urea:
2015 Tons per Day
Production Capacity of Ammonia:
3.8.2
1220 Tons per Day
Plant-II:
Commencement of commercial production:
March 24, 1993
Project Cost:
PKRs. 7215 Million
Production Capacity of Urea:
1925 Tons per Day
Production Capacity of Ammonia:
1100 Tons per Day
Ammonia plant designed by:
Holder Topsoe, Denmark
Urea plant designed by:
Snamprogetti SPA, Italy
3.8.3
Urea Product Quality:
(Societ per Azioni)
Nitrogen:
46.0% (Minimum)
Biuret (C2H5N3O2):
0.9% (Maximum)
Moisture:
3.9
0.3% (Maximum)
SWOT Analysis:
The SWOT analysis is a method used to evaluate the strengths, weaknesses,
opportunities and threats of a company. It is the identification of internal and external,

favorable or unfavorable factors. Some authors credit SWOT to Albert Humphrey but,
Humphrey himself doesnt claim the creation of SWOT. FFCLs SWOT is following
according to my studies, it may also encloses other points which are not mentioned.
3.9.1
Strengths:
Solid financial position.
State of the art production facilities.
Well diversified investment portfolio.

Competent & committed human resource.
Development of new and eco-friendly formulations.
21
Well established distribution network.
Technical Competence.
3.9.2
Fertilizer products are high in demand by agriculture sector.

Brand preference.
Weaknesses:
Mature industry with clogged overall market share.
Narrow product line.
3.9.3
Reliance on depleting natural resource.

Fixed customer base.
Opportunities:
Horizontal as well as vertical diversification.
Increase in product line covering Macro and Micro nutrients.
3.9.4
Opportunity to export fertilizer.

Absence of substitute products.
Less potential for new entrants in the industry.
Threats:
Inconsistent Government policies for fertilizer industry.
Depleting natural gas reserves & gas curtailment.
Declining international fertilizer prices.
Continuous increase in raw material/fuel prices and levies (GIDC).
Excessive fertilizer imports by the Govt. and marketing at subsidized rates.
3.10 PEST Analysis:
PEST/ STEP analysis is tool of macro-economic subject, which explains the political,
economic, social and technological factors which have positive or negative effects on
the project or company. Many economists add Legal as an important ingredient in
the analysis, but modern economists consolidate legal in the political area. Fauji
Fertilizer Company Limited has a long history of business and many up and downs in
more than three decades, so some points are describe below.
22
3.10.1
Political/ Legal Factors:
Political factors includes government regulations and legal issues, defines both formal
and informal rules under company operates.
Political trends are always in favor of company. The company never give formal
participation or favor to any political government. Rules of action of the
company respect government of country and government authorities.
Pakistan highly depends on agriculture industry. To fulfill the require

production political governments give subsidy to fertilizer sector which is also
a beneficial point for the company.
The government is providing concessionary feed stock gas to fertilizer plants

for production of urea.
Because of plant site location and fertilizer industry sector, government relaxes
the company in tax deduction.
Gas prices are fixed for new investment in fertilizer sector.
3.10.2
Economic Factors:
Economic factors affect the purchasing power of potential customers and the firms cost
of capital. Economic factors play a wider role in business.
Tax relaxations has been offered in order to attract new entrants.
Benefit on import of capital goods for modernization and technology in fertilizer

industry to reduce the dependency on import of fertilizer.
Government provides subsidy on production of fertilizer, in 2009 government

provide PKRs. 27 billion to supply urea and DAP.
In 2015 government announced 341billion rupees as relief package for farmers.

Ban on export of fertilizer also imposed, so that economic stability would be
gain.
3.10.3
Social Factors:
Social norms and regulations which may hurt the business revenue, or prohibit the way
of business. By focusing the other side it helps the business to create goodwill and
market share.
23
FFCL as a fertilizer industry has first social duty is to properly discharge its
Company inaugurated many schools in villages of Punjab and Sindh, which are
waste materials.
providing to free but standard education. It build the emotional relationship of

the company with its customers.
Company sponsors the district level sports tournaments, it markets the company
among dealers.
The company has been placed in the list of top 25 companies of Pakistan
consecutively for twenty years since 1994, and stood first in list for consecutive
four years 2010-13.
Urea manufacturing site got ISO 9000:2000, ISO 14001:2004, OHSAS

18001:1999 & ISO 14000 certification.
3.10.4
Technological Factors:
Technology uses in operations and its impact on business is included in this section.
Now a days no any company can compete in market without updating itself, but the
successful company is that which is getting position first in installation of new
technology and updates of operations.
Computer Aided Design and Manufacturing system is used in the company.
De-Bottle Necking (DBN) is done on existing plants, which optimize its

production capacity and cost of production.
Company installed SAP system to integrate the operations among whole

enterprise.
FFC has its own electricity production system, which fulfill the requirement of
plants as well as township.
Company is planning to convert plant on coal energy from methane gas.
24
4.0 Organizational structure

4.1
4.1.1
Registered Office:
4.1.2
Plant Sites:
Main Offices:
156 The Mall, Rawalpindi Cantt, Pakistan

Tel: 92-51-111-332-111, 92-51-8450001
Fax: 92-51-8459925
E-mail: ffcrwp@ffc.com.pk
Goth Machhi, Sadiqabad
(Distt: Rahim Yar Khan), Pakistan
Tel: 92-68-5786420-9 Fax: 92-68-5786401

Mirpur Mathelo
(Distt: Ghotki), Pakistan
Tel: 92-723-661500-09 Fax: 92-723-661462
4.1.3
Marketing Division:
Lahore Trade Centre, 11 Shahrah-e-Aiwan-e-Tijarat,
Lahore, Pakistan
Tel: 92-42-36369137-40 Fax: 92-42-36366324

Karachi Office
B-35, KDA Scheme No. 1,

Karachi, Pakistan
Tel: 92-21-34390115-16 Fax: 92-21-34390117, 34390122
25
4.2
Functional reporting
Organization Hierarchy:
Board of
Directors
Administrative reporting
HR &
Remuneration
Committee
Audit
Committee
System &
Technology
Committee
Project
Diversification
Committee
Chief Executive &

Managing Director
Chief
Internal
Auditor
Chief
Technical
Officer
Plant GM
S M HR
Services
Senior
Manager
Engineering
Chief
Financial
Officer
Plant MM
S M Civil
Works
Manager
Corporate
Communication
Group GM
Marketing
SMP
Senior Manager
Administration
Company
Secretary
Manager
Finance
S M CO
S M CSR
Manager Legal
and Labor
Affairs
GM HR
GM IT
Executive
Finance
26
4.3
Comments on the Organizational Structure:
Fauji Fertilizer Company Limited has sensible organizational structure. Having the
abilities of both towering and flat structures of management. Each subsection of
department has directly connected to an officer, which build connection of worker with
management. The company installed the seat of general manager of every department,
which directly engaged with Chief Executive and Managing Director of company. CEMD has thru connection with Board of Directors.
Every officer is accountable to its head and head has to submit his file to chief
executive, who is accountable among BoDs.
4.4
Competitive Positioning of the Organization:
FFCL has many competitive edge on its competitors as technology, cash sales,
distribution network, international training contracts, workshops, ISO certifications,
OHSAS certification, high standard living facilities, personal power generation, human
capital, best security system, communication network and TTC etc.
4.4.1
Technology:
The company has wholly computerized manufacturing and bagging section. Entire
plant can operate from Main Control Room (MCR). The company first time introduced
the SAP integrated system in fertilizer industry Pakistan. Company has international
standard prilling tower of 100 feet, which help to produced ever best fertilizer at least
moisture level.
4.4.2
Cash Sales:
One of the competitive edges of the company is its cash sales. Company has contracted
distributers, who pay the cash in minimum credit period; almost near to cash sales.
FFCLs sales are largely cash based, which gives the margin to effectively utilize
available cash resources to fulfill Companys working capital requirements, and hence
minimize external funding requirements resulting in reduced finance cost.
4.4.3
Certification:
To bring Management Systems (Q, OH&S and E) in line with the internationally
recognized Standards, FFC achieved International Standards certifications for ISO
9001:2008, ISO 14001:2004 and OHSAS 18001:2007.
27
Quality Management System certification at FFC-GM was first achieved in November

1997. This was an honor for FFC being the 1st Fertilizer Plant in Pakistan to achieve
this certification.
4.4.4
Financial Position:
The main competitive edge at the table of investors, FFCL has been listed in top 25
companies of Pakistan consecutively for twenty years since 1994. Company achieved
consecutive four first position awards for the years 2010-13. This positioning is done
by Karachi Stock Exchange on the criteria of primarily quantum of dividend payout. It
build the prominent interest of investor for FFCL and noticeable contribution to
Pakistan economy growth.
5.0 Finance Department
FFCL Finance Department has two main divisions, the company has a department at
the plant location and its leading part is operating in Sona Tower, Rawalpindi. Finance
Department at plant site has jobs concerning with manufacturing and operating
dealings. Departments main targets are to state the trail balance, budgeting and
capitalization of assets. Other financial statements are generated in Head Office (HO),
remunerations, finalizing the new project transactions, finalizing of budget and other
large amount payments are also treat by HO.
5.1
Departments Human Capital:
Finance Department FFCL-GM comprises approximately 45 employees including

officers. Department is directed by Finance Manager (01) designation with
specification of certification of Charted Accounting and good experience. Under the
direction of FM department lead by Executive Finance (04) with same certification of
CA or ACCA. Deputy Executive Finance leads the sections under department, this job
required Master in Business Administration and prefers Master of Finance or

Accounting studies with good experience in industry. Every staff member has
specialization in his section.
28
5.2
Departmental Organogram:
Chief Financial
Officer (HO)
Finance
Department-GM
Cost &
Reporting
General
Accounting
Out Source
Marketing
(Distribution)
Budgeting
Book
Keeping
Contractors
Payments
Documentation
Insurance &
Imports
Employees
Payments
Suppliers
Payments
Freight
Payments
5.2.1
Financial
Designations:
Manager Finance
GM
Executive
Finance
Chief
Supervisor
Deputy Executive
Finance
Assistant
Finance
29
5.3
Product Line:
FFCL-GM Finance Departments job description is stated below.
Capital Expenditure Budgeting (CAPEX).

Operating Expenditure Budgeting (OPEX).
Insurance of each asset and job.
Imports dealing.
Statement of Trail Balance.
Employees Payments (Medical, Residential and other allowances).
Contractor Payments (Daily Jobs).
Supplier Payments (Government and Private Companies).
Statement of WSA and Invoices to distributers.
6.0 Functions of Department:
Finance Department works in different sections as mentioned in its organogram. There

are four main sections of department.
Cost and Reporting
Out Source
General Accounting
Marketing (Distribution)
6.1
Cost & Reporting Section:
The Cost and Reporting section deals with the budget of the company and reporting. It
prepares the budget plan yearly wise and then the budget is sent to the head office for
approval. There are two types of expenditures.
Capital Expenditures.
Operational Expenditures.
30
6.1.1
Capital Expenditure:
The expenditures for the purchase of any fixed assets are called as capital expenditure.
It includes the following:
6.1.2
Increasing the capital

Expenditure for attaining rights
Purchase of fixed asset
Development expenditures
Improvement of fixed assets
Increasing the earning capacity
Operational Expenditure:
The expenditures done for daily operations of the company are called operational
expenditures. For example payment of salaries, telephone bills, and stationary bills,
non-fixed jobs etc.
6.1.3
Types of Budget:
The cost and reporting section prepares budgets for both types of expenditures. The
budgets are:
CAPEX Budget.
OPEX Budget.
6.1.3.1
CAPEX Budget:
The CAPEX budget as the name signifies is prepared for the capital expenditures. This
budget makes on SAP software. Following are the steps for preparation of the CAPEX
budget.
6.1.3.1.1
Issuance of Circular:
Finance Goth Machhi issues a circular before end of June, inviting the capital
expenditure proposal for the next calendar year. The departments submit proposal by
15 August. These proposals should be comprehensive and should include the following:
Project Title
31
Department / Section
Working Capital Requirement
Approximate Time of Project Initiation

Justification
Cost Break Down (CBD)
Quotations from Vendors

Pay Back
6.1.3.1.2
Complaints and Approvals:
Finance department prepares a list of projects received from various departments. A
capital expenditure proposal meeting is called in last week of August by General
Manager Manufacturing and Operation (GM-M&O) to decide the opportunities of each

proposal. The list of proposed new projects for the next year is finalized in this meeting.
The Manager Finance consolidates the list of proposals for GM (M&O)s signatures
and submits one copy to Head Office and GM (T&O). After review of General Manager
Finance and GM (T&O) the proposal is sent back to the GM (M&O) for further review.
The revised proposal is discussed in management review meeting in start of September.

Then all the agreed proposals are submitted to Head Office for Board of Directors
review. After their approval Head Office forward approved list of proposals to Finance
Department.
6.1.3.1.3
Distribution of Approved Plan:
After receiving CAPEX plan from Head Office, the Finance Department distributes
approved plans to cost controller.
6.1.3.1.4
Request for Authorization to Incur Capital Expenditure

(RAICE):
Concerned sections submit a RAICE to finance for final appropriation of funds and
Purchase Requisition (PR) for physical purchasing process. These document also
include the justification, drawings and sketches and vendor quotation. RAICE for
projects included in approved CAPEX plan bearing cost up to One million (PkRs) shall
be submitted to GM-M&O for approval. All RAICE above one million shall be
forwarded to CED (Central Engineering Department)-Rawalpindi and to Finance Head
Office. The plans bearing cost above one million is sent through GM-M&O to
Managing Director for approval after local finance review. The RAICE number is
32
affixed after approval of RAICE by management. This whole process is done in hours,
with the use of SAP.
6.1.3.1.5
Accounting Procedure of RIACE:
All payments relating to RAICE are debited to capital work in progress account
(CWIP). All issues of material from Material Warehouse and expenses on imports
against RAICE are also debited to the capital work in progress account. This account is
updated on monthly basis and a statement is prepared which reflects the monthly
expenditure incurred. When a project is completed, a certificate is received named
RAICE Completion certificate. On the receipt of this certificate the work in progress
accounts capitalized. After capitalization of asset, letter send to holder department with
codes of asset and request them to write the code physically on item and inform back
to the Finance Department.
6.1.3.1.6
CAPEX Reporting:
The purpose of this report is to communication the progress of CAPEX projects to cost
controllers and to management on quarterly basis. The scope involves reviewing and in
corporation data given by cost controllers and as per books of accounts in CAPEX
reports files maintained on computers and issuing various reports for analysis and
control purposes.
6.1.3.2
OPEX Budget:
The OPEX budget is prepared for the Operational expenditure of the company. The cost
and reporting section of the Finance Department issues a letter to all cost controllers to
submit budget proposals by 15 August for collating overall plant budget by the due
date. These proposals are also knows as Budget Inputs. Finance department in order
to facilitate cost controllers in developing budgetary proposals also sends work sheets
of the respective cost centers showing actual data for the previous years. The guidelines
of the Head office for developing the proposals are also enclosed. They are advised not
to inflate their proposals by arbitrary additions to cover inflation as it will be taken care
by the cost and reporting while finalization the overall budget plan. Any variance
exceeding 10% of the historical trend in all charge accounts should be properly
justified. The budgetary inputs should be completed in all respects including all detailed
supporting computations, justifications and basic assumptions used. OPEX is made on
Budget Planning and Consolidation software (BPC).
33
6.1.3.2.1
Appropriation Request (AR):
Proper request for expense is initiated from concern department. ARs should has
attachments of:
Justification
Quotations from vendor
Cost Break Down

Pay Back
ARs are reviewed by concern Finance Manager before related Department Manager
approval.
6.1.4
Import of Asset:
Purchase Requisition (PR) is initiated by concern department with the attachments of

quotations of vendors and Bidding Committee approval.
Purchase Order (PO) generated with the specifications of purchase item and its
estimated price.
Letter of Credit is important document in purchase of any item from foreign, bank
guarantee the purchaser. Askari Bank Ltd. is official guarantor of FFC Ltd.
Each item and full travel is insured by Marine Insurance Agencies. At Karachi port,
FFC Ltd. custom agents (Time Agencies, Faiz and Sons) take custom clearance from
Custom Duty Pakistan.
RM office Karachi physically inspect all purchased items and send them to concern
warehouse.
Warehouse inspect the items and send receiving note.

Finance Department debit the account named Goods Received but Not Yet Invoiced
and start the process of payments and capitalization.
6.1.5
Budget Reporting:
Both budgets reports are automated generate by SAP. All the end of each quarter
expense wise budget variance report is prepared which shows the difference between
the budgeted amount and the actual expense incurred. Any variance up to 10% is
acceptable but when this exceeds the maximum limit, a letter is issued to that particular
34
cost controller and is asked for the reasons of the variance. They submit a justification
letter to the Finance Department, letter supporting computations, justifications and

basic assumptions used. The cost and reporting section then send this letter to the Head
Office.
6.1.6
Deletion of Asset:
Company use straight line depreciation method for depreciation of fixed assets. Lives
of assets are published by CED Head Office.
After completion of life of asset, Condemnation Board Proceedings are initiated from
capital asset holder department, Condemnation Board, four members approved this
document with their hard signatures. Soft form of document sends to Managing
Director H.O. for final approval and order. If asset replacement required, new RIACE
also attached with CBP.
Operational items are deleted by submission of Equipment Deletion Note with the hard
approval of concern department Manager and soft approval from Managing Director.
6.1.7
Physical Condemnation of Asset:
Physical items are exhibit to employees and register tenders and proposed to CSR for
donation. Interested employees submit their bids in hard form to Finance Department,
higher bidder is awarded for purchase. Item which are not take place in two auctions
are send to Scrap Department for dispose-off.
6.2
General Accounting:
Company thru general accounting in following main subsections.
6.2.1
Bookkeeping
Employee Payments
Book Keeping:
It is one of the important section of general accounting. Trial balance is made in FFC
GM. Income statement and Balance sheets are made in Head Office Rawalpindi. It is
the last stage. Its main task to keep a record of all transactions. Book-keeping is done
in SAP and manual system.
35
6.2.2
Employee Payments:
Different type of benefit to employees are deal in this section. It comprises all the
payments made to the employees for their claims. Employees are reimbursed for
followings:
Medical Bills
Telephone Bills
Company Assisted Travel

Company Maintained Car Fuel and Service Charges
6.2.2.1
Medical Bills:
According to the company policy all permanent employees, their wife and children are
facilitated by free medical service. For reimbursement of medical bills payment order
with attachment of following documents should be submitted to Finance department.
Referral of Doctor
Consultancy Fee Receipt
Medicine Bills
The Finance Department sends this payment order to the Chief Medical Officer (CMO)
of Medical Centre. After Chief Medical Officers approval the payment order is sent to
the Human Resource Department which checks the employee status and send it to
Finance Department. Department posts it to general ledger through software built in

SAP. A Bank Payment Voucher (BPV) is made for the payment and through cheque
amount is credited to the account number of the respective employees and transfer
information slip is send to employee for information.
6.2.2.2
Company Assisted Travel:
According to company policy 9 CAT are given only to the management employees of
the company and 4 CAT are given to their children for education purpose only. It is
1000 km with return travel facilitation.
6.2.2.2.1
Official Ta/Da Visit:
Employees are sent abroad for official purpose and they are given official daily
allowance and out of pocket allowance for the duration of their visits. The allowance is
36
according to company policy which is made according to the designation of the

employees and importance of course.
6.2.2.3
Telephone Bills:
The company facilitates the telephone bill facility to some employees. Their phone bill
scan be reimbursed to a certain limit as according to the company policy.
Reimbursement also includes their mobile-phone bills.
6.2.2.4
Recoveries:
Recoveries are also done through the salaries of the employees. Following deductions
are made through employee payroll.
Amenity Transport Bill
School Fees of Children
Management Club Bill
6.3
Out Source:
Contracts are only given to company approved contractors. For any contract a Purchase
Request (PR) is made by the concerned department and send to the Finance Department
for the approval of budget. If the PR is within the suggested budget then it is forward
to Planning Department. Department requests the contractors for quotations. A
Comparative Statement is made and the contractor who has the lowest bid is issued the
contract.
6.3.1
Single bid Basis Payment to Chemicals Supplier:
Payments are also made to those suppliers who supply gas, petrol, diesel and urea bags.
For the payment following documents are required:
Supplier Tax Certification
Purchase order
Material receiving report from warehouse

Contractors Original Invoice
The quantity mentioned on the invoice and Material Receiving Reports (MRR) are
checked and the unit rate is verified by the Purchase Order (PO). After verification a
37
Payment Summary attached with these documents is signed by the Finance Officer
(OS). Then a Bank Payment Voucher is made and a cheque is issued of approved
amount is credited to the account of the supplier.
6.4
Taxation:
Company pays taxes as per Government Tax Scheme. These rates of tax are withheld
on payment to a permanent establishment (PE) of a non-resident on account of sale of
goods, rendering of services and execution of contracts, have been proposed to be
enhanced from July-2015 as FBR new tax scheme. Commissioner is empowered to

issue exemption or reduction in rate certificate to a PE of non-resident. Current applied
rates by the Company are following.
Tax rates from 1st-July-2015 00:01

Company
Filer
Sale of Goods
4%
Transport services
2%
Services
Execution of contract
NonFiler
Other than
Company
Filer
NonFiler
6%
4.50%
6.50%
2%
2%
2%
8%
12%
7%
10%
10%
7.50%
15%
10%
Tax withholding rates for Resident and Non-Resident are almost same which are
imposed by the Government of Pakistan.
FFC-GM, Finance Department, section of Out Source (OS) deals with tax withholdings
and their payments.
6.4.1
National Tax Number Verification:
FFC added the tax verification of dealing companies in job description of the
concerning designation in Payment Section. Verification of National Tax Number

(NTN) and certification of returns of different dealing companies is confirmed through
Federal Board of Revenue Online Verification and Certification System. Entering of
NTN on website of FBR gives the basic details of company and individual, more detail
shows the status of returns filing. So it is compulsory to put right NTN number on
38
invoices. However the company always explains in each contract and agreement with
other companies that the company will not consider any invoice without attachment of
Income Tax Invoice (ITI).
6.4.2
Income Tax Report:
A report is being generated for explanations and record of those companies as well as
for their withholding taxes, payments of which have been made after the tax deduction.
It encloses the followings.
Serial Number
Section No of Income Tax Ordinance
Nature of Payment (JO number)
under which tax has been deducted

Amount of Tax Deducted
6.4.2.1
Name, Address and NTN
Tax Rate at which it
(Company or Individual)
collected and deducted
Amount of Tax Deposit

Date of Deposit
Section 2nd of Report:
It includes all the companies, payments and tax deductions of which are pending yet.
The reasons of pending tax deduction is explained in this report. Payment of companies
which hold Tax Exemption Certificate by commissioner are free from withhold tax
deductions.
6.4.3
Tax Deduction Certificate:
Tax Deduction Certificate is issued by the Payment Section to the concerned company.
There are two types of certificate; one for suppliers and one for services. It covers the
following aspects.
Company Name
Section under which tax has been

deducted
Amount deposited in the particular

bank
Name address and NTN of FFC
National Tax Number
Total amount on which tax was

deducted
Period of tax deduction
Signature of the authorized Finance

Officer
39
Region / District
Financial Instruments
Sale Point
Rate of Product
Supply Point
Sold to Party
Credit Days (CR)

Authorized
(FFCL)
Customer Signatures
6.5
and
Quantity of Product
Price of Product
Delivery Mode
Payment Mode
Order Number
Finance Marketing (Distribution)
Distribution Department of FFC LTD. GM is backbone of the companys business.
Distribution Dep. make it possible to provide products in allover Pakistan, however a

section of Finance Department Marketing deals with financial aspects of distribution.
Distribution Department divides Pakistan in three zones; South Zone, Center Zone and
North Zone. Each zone is divided into regions/ districts, large districts are more divided
into sale points (dealers). Department contracts with haulage contractors to deliver
products to dealers or warehouses at sale points. Company has more than 5000 dealers
and 165 plus warehouses in Pakistan. Warehouses amount vary as according to

requirement.
Finance Marketing section basically assist the Distribution Department, and has two
main duties; one is to prepare Finance Documentation and other is Freight Payment.
Finance Marketing Section is administratively directed by Deputy Finance Manager

(GM) and has to report to FFC Marketing Office Lahore.
6.5.1
Financial Documentations:
Dealers order their demand to Marketing Group Lahore, a Sale Order is generated
against each demand and send to Finance Marketing-GM. Sale Order contains the
following data:
On behalf of Sale Order, Invoices and Advices are documented by Finance Marketing
Section (GM) respectively for dealers and warehouses. Invoices and Advices has detail
about shipment place, party, product, mode, date and quantity (in bags and tons).
Invoices has financial information irrespective of Advices.
40
Three copies of each Invoice and Advice is printed and signed by Bagging Section
(GM), Gate Copy is collected at FFCL (GM) boundary gate at the time of dispatch from
the company and send back to Finance Marketing Section for record. Second Customer
Copy is given to customer. Other Acknowledgement Copy (AC) signed by registered
dealer or warehouse administrator is provided to return haulage contractor.
Haulage contractor gives the Acknowledgment Copy with his remaining payment
invoice and Sales Tax Invoice for discharge of remaining freight payment.
Distribution Department (GM) receives Acknowledgment Copy, after the elucidation

of AC. Distribution Manager (GM) signs the letter to Freight Payment Section of
Finance Marketing Section (GM) for clearing of payments.
Financial Documentation Section (GM) generates Daily Shipment Report and sends it
to Senior Executive Finance Sale Accounting Lahore.
6.5.2
Freight Payments:
Distribution Department (GM) provides the certification to each invoice of contractor

and forwards it to the Freight Payment Section. Section checks all the financial aspects
of invoice and records it in Order Processing System (OPS) and SAP. All payments are
auto-generated in SAP by recording them, and forwarded to Finance Department (GM)

for physical payment.
Freight Payment Section generates Freight Payment Summary in OPS and Journal
Voucher in SAP against each invoice. These documents are physically signed by four
authorities.
41
7.0 Financial Analysis
Financial Analysis is used to evaluate whether an entity is solvent, stable, liquid, or

profitable enough to be invested in. Financial analyst will often focus on the income
statement, balance sheet, and cash flow statement of the company for analysis. One key
area of financial analysis involves extrapolating the company's past performance into
an estimate of the company's future performance.
Input Data:
Balance Sheet, Profit and Loss Account,

Cash-flow Statement
Years:
2014, 2013, 2012, 2011
Analysis Types:
Ratio Analysis
DuPont Analysis
42
7.1
Balance Sheet
As at December 31, 2014

2014
Equity & Liability

Equity
2013
2012
(Rupees, 000)
2011
Share Capital
12,722,382 12,722,382 12,722,382
8,481,588
Revenue reserves
12,483,585 12,258,373 12,877,129
14,029,206
Capital reserves
Surplus on re-measurement of
investments available for sale
Non - Current Liabilities
Long term borrowings

Deferred liabilities
Current Liabilities
160,000
160,000
160,000
303,564
10,508
7,695
2,500,000
4,280,000
3,870,000
2,703,750
7,074,028
8,358,369
7,785,259
6,326,810
25,669,531 25,151,263 25,767,206
4,574,028
4,078,369
3,915,259
160,000
10,258
22,681,052
3,623,060
Trade and other payables
37,904,434 21,854,125 16,125,589
Short term borrowings
11,602,443
7,000,000
4,990,000
8,735,650
1,780,000
1,460,000
1,433,750
1,615,655
53,818,103 34,319,438 27,117,186
26,523,054
86,561,662 67,829,070 60,669,651
55,530,916
Interest and mark-up accrued

Current portion of long term
borrowings
Taxation
Total Equity And Liabilities
30,117
2,501,109
22,098
3,983,215
24,921
4,542,926
12,329,687
79,826
3,762,236
43
2014
Non - Current Assets
2013
2012
(Rupees, 000)
2011
Property, plant, equipment
20,093,898 18,444,188 17,818,755 17,050,951
Long term investments
28,134,520 20,662,532
Intangible assets
Long term loans, advances

Long term deposits,
prepayment
Current Assets
Stores, spares and loose tools

Stock in trade
Trade debts
1,611,204
1,651,592
1,678,639
1,569,234
823,188
740,408
700,786
605,883
15,624
2,654
5,111
9,370
3,314,823
3,244,645
3,098,938
2,447,452
822,460
700,541
3,611,476
86,669
37,225
35,670
981,750
1,058,754
Other receivables
1,072,461
1,173,767
Short term investments
Cash and bank balances
Total Assets
8,659,073
50,678,434 41,501,374 29,715,156 27,894,511
Loans and advances
Deposits and prepayments
9,511,865
26,376
301,957
921,460
442,139
636,923
677,977
431,582
799,922
588,667
891,673
1,361,651
3,748,632
1,293,774
53,852
27,432,837 18,960,295 18,750,996 21,794,480

35,883,228 26,327,696 30,954,495 27,636,405
86,561,662 67,829,070 60,669,651 55,530,916
44
7.2
Profit and Loss Account
For the year ended December 31, 2014

2014
Sales
Cost of sales
Gross Profit
Distribution cost
Finance cost
Other expenses
Other income
Net Profit Before

Taxation
Provision for taxation

Net Profit After
Taxation
2013
2012
(Rupees, 000)
2011
81,240,187
74,480,611
74,322,612
55,221,168
31,103,438
34,532,039
36,022,484
34,349,409
(50,136,749) (39,948,572)
38,300,128
20,871,759
(6,431,667)
(6,167,280)
(5,553,529)
(4,372,151)
(848,940)
(756,215)
(999,457)
(785,825)
24,671,771
28,364,759
30,468,955
29,977,258
(2,302,937)
(2,557,937)
(2,685,236)
(2,654,881)
4,720,866
4,367,941
4,267,852
6,629,501
21,519,894
25,050,607
26,784,262
26,240,760
29,418,548
(8,070,000)
(9,284,000) (10,191,987) (10,674,000)
18,170,760
20,134,548
31,052,114
26,536,552
20,860,127
33,166,053
22,492,053
45
7.3
Cash Flow Statement
For the year ended December 31, 2014

2014
2013
Cash Flows From Operating Activities
2012
(Rupees, 000)
Earnings from operation
39,191,657
Income tax paid
(9,349,085) (9,754,711)
Finance cost paid
Net cash by operations
(753,024)
29,089,548
Cash Flows From Investing Activities

Fixed capital expenditure
Disposal of property,
plant, equipment
Interest received
Sale of shares in FFBL

Investment in AKBL
Investment in FFC EL
2011
35,783,891
28,935,912
33,121,687
(759,038)
(1,054,362)
25,270,142
18,646,253
21,879,692
(2,269,802)
(2,314,033)
(3,478,894) (2,295,269)
(843,967)
(9,235,297) (10,398,028)
45,286
49,583
28,489
14,123
1,283,293
1,242,488
1,276,269
1,480,703
- (10,461,921)
375,139
(138,250)
(850,000)
(800,000)
Other investment - net
(8,083,631)
919,406
3,719,657
(3,230,683)
Net cash in investing

activities
(7,730,488) (8,683,421)
4,719,380
(7,858)
3,000,000
500,000
Investment in FFFL
Dividends received
(450,000)
2,578,319
Cash Flows From Financing Activities

Long term financing outlays
- repayments
Dividends paid
(585,500)
2,586,042
1,950,000
(1,460,000) (1,513,750)
2,814,767
(2,015,655)
4,842,032
(1,759,405)
(17,582,658) (20,677,553) (17,749,717) (14,774,032)
Net cash financing activities (19,042,658) (20,241,303) (16,765,372) (16,033,437)

Net cash, cash equivalents
Opening cash, cash

equivalents
Effect of exchange rate
Closing cash, cash

equivalent
2,316,402 (3,654,582)
6,600,261
5,838,397
13,012,602
16,571,069
9,963,247
6,423,264
15,281,142
13,012,602
16,571,069
12,285,554
(47,862)
96,115
7,561
23,893
46
7.4
Financial Ratios:
Financial ratios has very important role with the point of view of investors (creditors
and shareholders). Financial ratios are combination of following types of ratios.
Liquidity Ratios
Profitability Ratios
Activity / Turnover Ratios
7.4.1
Investment / Market Ratios
Liquidity Ratios:
These ratios explains the ability of companys ability to pay off its short-terms liabilities
or obligations. In general the higher the value of these ratios indicate the larger margin
of safety that the company holds to cover short term obligations or debts.
Liquidity Ratios includes:
1. Current Ratio
2. Quick Ratio
Ratios
Current
Ratio
Quick Ratio
7.4.1.1
Formulas
2014
2013
2012
2011
Current Assets / Current Liabilities
0.67
0.77
1.14
1.04
0.59
0.66
1.01
0.93
(current assets - inventory) / current
Current Ratio:
liabilities
Current Ratio analysis shows that the company is continuously increasing its liabilities.
These liabilities may be because of new projects started by company in stated years.
1.04
1.14
2011
2012
0.77
0.67
2013
2014
Current Ratio
47
7.4.1.2
Quick Ratio:
Quick Ratio of company is indicating that the company is not efficient in conversion of
its assets (account receivables) into cash. In comparison of previous years company
made more efficient cash conversion cycle in 2012.
1.04
1.01
2011
2012
Quick Ratio
0.66
0.59
2013
2014
Current ratio for 2014 depicted a minimal decrease of 0.10 times as compared with
2013 due to increase in trade creditors, while cash to current liabilities and cash flow
from operations / sales witnessed an increase of 0.04 times and 0.06 times respectively
(excluding 2011 & 2012) over the historic average of 6 years.
7.4.2
Activity / Turnover Ratios:
These Accounting Ratios determine the Cash Conversion Cycle (CCC) and Operating
Cycle of company. These ratios explains the ability of firm to manage the inventory,
payables, receivable and assets. These ratios take great part in investors decisions.
Following ratios are consider as Activity / Turnover Ratios.
Activity Ratio
Inventory
Turnover
Average
Collection Period
Average Payment
Period
Total Asset
Turnover
Debt to Equity
Ratio
Formulas
CGS/Inventory
2014
148
2013
188
2012 2011
152 162
Accounts receivable/ sales per

day
Accounts payable/ purchases per
day
Sales / Total assets
3
days
3
days
0.94
11
days
3
days
1.10
9
1
days day
6
11
days days
1.23 0.99
Total debt / Total Equity
0.10
0.18
0.15 0.35
48
7.4.2.1
Inventory Turnover:
Higher the Cost of Goods Sold (CGS) higher the Inventory Turnover Ratio. This ratio
show that how many time inventory turns into sale during the year. Companys ratio
explains that in 2013 company was more efficient in sale of goods than 2014. In the
period ended 31st Dec 2014 Company had large stock of inventory, and less amount of
CGS.
7.4.2.2
162
152
2011
2012
188
148
2013
2014
Inventory Turnover
Average Collection Period:
Average collection periods of company shows that company was more efficient in
conversion of account receivable into cash in the period of 2011. However overall
companys graph indication that company is more than enough efficient in collection
of A/R. It also shows that company has not much account receivables or less sales.
11
9
1
2011
2012
2013
Average Collection Period
2014
49
7.4.2.3
Average Payment Period:
Companys performance in paying account payables is satisfied. Short term liabilities
should must pay out in their maturity life. Company is paying the debt in very short
time, company may be get benefit from credit period. Long payment period minimize
the financing cost.
11
2011
7.4.2.4
2012
2013
2014
Average Payment Period
Total Asset Turnover:
Ratio of 2012 is high than 2011, 2013 and 2014, which indicates that in 2012 efficient
production done. Graph is indicating that sales are going down against assets, or assets
and sales increasing ratio is not equal. Assets are growing more rapidly than sales.
0.99
2011
1.23
2012
1.1
2013
Total Asset Turnover
0.94
2014
50
7.4.2.5
Debt to Equity Ratio:
Debt Ratio basically explains that how much leverage contribute in companys assets.
Which is used to gain a general idea as to the amount of leverage being used by a
company. Higher the Debt ratio shows means the company is highly depending on debt.
Generally the less percentage of Debt Ratio is preferred. Graph of ratio shows that the
company is performing well with its financing activities. Companys ability to pay debt
is increasing by the years.
0.35
2011
0.15
0.18
2012
2013
Debt to Equity Ratio
0.1
2014
Activity Ratio Analysis shows that Inventory turnover days were in line with past trends
at 2 days, while debtor turnover days improved in comparison with last year and were
consistent with the historic average of 3 days over the past 6 years (excluding 2011 &
2012). Number of days in payables stood at 124 days due to non-payment of GIDC
under various Court decisions, however, number of days without considering GIDC
payable remained at 3 days against average of 6 days over last six years. Total asset
turnover ratio recorded at 0.94 times was in line with the historical 6 year average of
the Company but recorded a decrease of 0.16 times as compared with 2013.
7.4.3
Profitability Ratios:
A class of financial ratios that are used to evaluate a firm's aptitude to generate earnings
as compared to its expenditures and other pertinent costs incurred during a specific
period of time. Most of these ratios, having a higher value relative to a competitor's
ratio or the same ratio from a last period is indicative that the companys performance
is well. Profitability ratios are the most popular metrics used in financial analysis.
Profitability Ratios contains;
1. Gross Profit Ratio
2. Operating Profit Margin
3. Net Profit Margin
51
Profitability ratio
Formulas
Gross Profit Ratio
Gross Profit / Net sales
2014 2013
%
%
2012
%
2011
%
38.3
46.4
Operating profit Margin Operating profit / Net sales 35.6
42.7
45.0
63.6
27.0
28.1
40.7
Net Profit Margin
7.4.3.1
Net Income / Net sales
22.4
48.5
62.2
Gross Profit Ratio:
This ratio shows the companys profit on sale. The companys gross profit is declining
by the years, which shows that cost of production is increasing or profit margin is
decreased.
62.20%
2011
7.4.3.2
48.50%
46.40%
2012
2013
Gross Profit Ratio
38.30%
2014
Operating Profit Margin:
Graph of companys Operating Profit Margin shows that after deduction of
expenditures 2014 has less profit than previous years. It may be because of increasing
distributing or administration expenses.
63.60%
2011
45.00%
42.70%
35.60%
2012
2013
2014
Operating Profit Margin
52
7.4.3.3
Net Profit Margin:
Ratio of Net Profit Margin indicating that company has decreasing net profit on its
sales. It may be because of increased in cost of raw material, expenses or less profit
margin, as operating profit margin is also decreasing.
40.70%
2011
28.10%
27.00%
22.40%
2012
2013
2014
Net Profit Margin
Rise in cost of sales owing to increased raw material cost and GIDC resulted in a
reduction in gross and net profit margins for 2014, depicting a decrease of 8% and 5%
respectively from last year. Consequently, return on equity (post tax) and capital
employed were also lower by 9% and 4% respectively in comparison with 2013.
Excluding exceptional performances in 2011 and 2012, profitability ratios of the

Company were in concurrence with overall performance during the 6 years.
7.4.4
Investment / Market Ratios:
Investors forecast the return before investing in any company. Investment or Market
Ratios are combination of ratios indicating the performance of the company in stock
market. Well known investment ratios are EPS and ROE.
Investment or
Market Ratios
Formulas
Earnings per
Earning available of common
Return on
Earning available of common
share
Equity
stock/ No of share
stock / Stockholders' equity
2014
2013
2012
2011
0.14
0.15
0.16
0.17
0.71
0.80
0.80
0.97
53
7.4.4.1
Earnings per share:
Companys earnings per share is satisfactory, but the trend is leading towards down.
Which shows that company is decreasing dividend payout ratio. Company should
consider the point that investor can take it negatively. To maintain its position in KSE
company has to maintain and increase this ratio.
7.4.4.2
0.17
0.16
0.15
0.14
2011
2012
2013
2014
Earning per Share
Return on Equity:
ROE of 2011 indicating that with the investment of shareholders is generating more
return than forward years. ROE is comparatively going down by the years, it has also
negative image on market. Compairing with industry, company is performing well.
0.97
2011
0.8
0.8
0.71
2012
2013
2014
Return on Equity
As a result of decline in profits, the Companys earnings per share was recorded at Rs.
14.28 per share. Price to earnings ratio however improved by 1.13 times as compared
to 2013 as the market price of Companys share rose from Rs. 111.96 at the close of
2013 to Rs. 117.11 for the year ended December 31, 2014. Dividend payout ratio for
2014 was recorded at 95.57% against an average of 97% for the 6 years, to maintain a
steady stream of income for the shareholders. Consequently, the Company recorded a
total cash dividend per share of Rs. 13.65 for the year.
54
7.5
DuPont Analysis
DuPont Analysis:
Tax burden
Interest burden
2011
3%
3%
3%
2%
31%
32%
33%
32%
41%
43%
61%
Leverage
70%
63%
57%
59%
Sales
81,240
Non-current
Sales
81,240
Total Assets
86,562
Assets 50,679
Liabilities 53,818
71%
18,171
Current Assets
35,883
0.94
1.1
80%
1.22
79.86%
0.99
97.5%
Net Profit
Total Cost
63,069
Liabilities 7,074
2012
33%
Return on Equity
Non-current
2013
EBIT margin
Asset turnover
Current
2014
Total Liabilities
60,892
Owners Equity
25,670
Net profit
Margin 22%
Assets turnover
0.94
Owners Equity
25,670
Total Assets
Return on
Assets 21%
Return on
Equity 71%
Ownership
Ratio 29.6%
86,562
Net profit margin of the Company decreased to 22% during the year as compared to
27% in 2013 as a result of increase in raw material cost and Gas Infrastructure
Development Cess (GIDC). Asset turnover and ownership ratio reduced to 0.94 and
9.6% respectively in 2014 owing to an increase in the asset base of the Company,
primarily on account of an increase in long term investments. Consequently, the

Company reported a return on equity of 71% in 2014 compared to 80% last year.
55
8.0 Critical Analysis of the
Theoretical Concepts Related

8.1
To Practical Experiences
Analysis of Tools applied in Department:
FFCL Finance Department apply the basic double entry accounting system.
Bookkeeping is done under General Acceptable Accounting Principle (GAAP), like

General Voucher to Trail Balance is done in Goth Machhi and other statements (IS, BS,
SCE, etc.) are generated in Head Office(HO) Sona Tower.
Mostly documentations are done same as I learned in University. Company using

System Administrative Program (SAP) for full administration. This program integrate
companys business and make it possible to direct connection with every office
required. Hard paper is near to finish for approval letter use, software allow the
subordinate to forward the request to officer for soft approval.
Preparation of every statement is done by software, however its operating method is

compulsory to learn before use.
8.2
Behavior of the Company about Facilitate the Society:
FFCL is committed to act responsibly towards the community and environment for
mutual benefit as FFC believes that the success of the Company emanates from the
development of the community. FFCLs Social and Environmental practices have been
elaborated in the section relating to Corporate Social Responsibility.
8.2.1
Corporate Social Responsibility:
The company is highly committed with its CSRs with the believe that success of
company is depend on image of company in the society. Following points the company
is considering in its CSRs.
Community investment &
Business ethics & anti-corruption
Corporate Social Responsibility
Energy conservation
welfare schemes
measures
Industrial relations
56
Contribution to National
Consumer protection measures
Environmental protection
National cause donations
Exchequer
measures Occupational health &
Employment of special persons
safety
Rural development programs
8.3
Future Prospects of the Company:
In todays era of technological dominance and extreme competition, sustained /

continued business operations is critical and the Company has undertaken effective
measures to enhance the resilience and endurance capacities of its business and
operations, against disruptions / calamities.
External as well as internal stake holders from all critical departments of the Company
have been engaged in the system for identification and mitigation of critical activities,
in addition to the following objectives.
8.3.1
Investors:
Business Continuity Planning (BCP) shows to investors that company take its business
seriously and prepare to maintain productivity regardless of difficulty.
8.3.2
Employees:
8.3.3
Customers:
Instils employee satisfaction about the Companys concerns related to their safety.
Inculcates confidence of customers in business by ensuring them that required measures
are in place to continue business and fulfill Companys commitment with them in case
of any unforeseen disaster.
8.3.4
Organization:
A Business Continuity plan helps protect the Companys image, brand and reputation.
57
9.0 Conclusions
Fertilizer industry occupies an important place in Pakistans economy. Pakistanis

basically an agrarian economy. Fertilizer is one of the key inputs used in agricultural
production and is thereby the backbone of agriculture. Agriculture contributes to 23%of
the countrys GDP and accounts for approximately 42% of employment and is the
largest source of foreign exchange earnings by serving as the base sector of the
countrys major industries like textiles.
Fauji Fertilizer Company Limited (FFC) is the largest fertilizer manufacturer in the
country with a designed production capacity of 1,887 thousand tons of urea (including
the production capacity of Pak Saudi Fertilizer. With the commencement of commercial
production in June 1982, the company started marketing of its own urea under the brand
name "Sona". The company markets not only Sona urea and DAP but also imported
nitrogenous, phosphatic, potassic fertilizers and micronutrients. When FFC came into
the market with its production in June 1982, the other manufacturers. The Government
of Pakistan deregulated the trade and prices of nitrogenous fertilizers in 1986. FFC met
the challenge by capturing the desired market share of urea and in the process, enhanced
the image of its brand name, which has now become the number one brand in the
country.
Company announced dividend of PKRs. 13.65 per share for the year 2014. In KSE
ranking company is placing in top 25 companies of Pakistan from twenty years. In

addition the company stood first for consecutive four years since 2010-13.
So we can conclude to say that Fauji Fertilizer Company is the asset of our country
because it serves as a major source of earning foreign exchange for the country. An
agri-based country like Pakistan needs such a resource from where the farmers can get
best quality urea for their crops an FFC has served this need very well. That is the reason
the government supports FFC in a very good manner.
FFC believes in selling a program rather than just a product. For this the company has
adopted a customer oriented strategy, marketing quality products backed up by efficient

and effective support services with emphasis on developing the market through
practical and innovative farmer education.
58
10.0
Recommendations
Having a strong financial position company can start production of the new
Adding some new unit can enhance the production capacity of the plants.
product line.
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 PAKISTANMARCO
PHOSPHORSE-SA.
The increasing governmental support for meeting the demand of fertilizer in the
country.
FFC can export Urea to Afghanistan and other neighboring 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.
Company should start manufacturing of its bag, it self. It will decrease its cost
of bagging, which ultimately increase the profit margin.
59
11.0
References:
Annual Report. (2014). Goth Machhi: Fauji Fertilizer Company.
Hussain, D. (2015, February 23). Top 25 Companies. Dawn News.
Policy Guidelines. (2015). In Implementation of Semester System in Higher

Education Institutions of Pakistan. Islamabad: Higher Education Commission,
Islamabad, Pakistan.
60

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INTERNSHIP REPORT ON

FAUJI FERTILIZER COMPANY LIMITED

MUHAMMAD AHMAD MUSTAFA

DEPARTMENT OF MANAGEMENT SCIENCES

Muhammad Ahmad Mustafa

FAUJI FERTILIZER COMPANY LIMITED.

MUHAMMAD AHMAD MUSTAFA

Ms. Shagufta Parveen

DEPARTMENT OF MANAGEMENT SCIENCES

Muhammad Ahmad Mustafa

Ms. Shagufta Parveen

Muhammad Ahmad Mustafa

Muhammad Ahmad Mustafa

Muhammad Ahmad Mustafa

gives me a lot of delights without realizing that am I deserve or not. Im grateful to

Many compliments for Prophet MUHAMMAD (peace be upon Him) Whose

Im indebted to finance assistants, to allow me to participate and interfere in their work.

I especially thanks to my friends who gave me time and appreciation, help me to

Muhammad Ahmad Mustafa

Muhammad Ahmad Mustafa

Joint venture: ............................................................................................. 13

Fauji Foundation: ............................................................................... 13

Objectives of studying the organization ......................................................... 14

Organization Overview ................................................................................. 15

Business Volume: ...................................................................................... 17

Product Portfolio: ...................................................................................... 19

Urea Fertilizer: (FFC & FFBL) .......................................................... 19

SOP Fertilizer: (FFC) ......................................................................... 19

DAP Fertilizer: (FFC & FFBL) .......................................................... 19

Renewable Energy: (FFCEL) ............................................................. 19

Muhammad Ahmad Mustafa

Financial Services: (AKBL) ............................................................... 20

Frozen Fruits & Vegetables: FFF (formerly Al-Hamd Foods Limited) 20

Plant-I & II Description: ............................................................................ 20

Urea Product Quality: ......................................................................... 21

SWOT Analysis: ....................................................................................... 21

PEST Analysis: ...................................................................................... 22

3.10.1 Political/ Legal Factors: ...................................................................... 23

3.10.3 Social Factors: .................................................................................... 23

3.10.4 Technological Factors: ....................................................................... 24

Organizational structure ................................................................................ 25

Main Offices: ............................................................................................ 25

Registered Office: .............................................................................. 25

Marketing Division: ........................................................................... 25

Plant Sites: ......................................................................................... 25

Organization Hierarchy: ............................................................................ 26

Competitive Positioning of the Organization: ............................................ 27

Comments on the Organizational Structure: ............................................... 27

Cash Sales: ......................................................................................... 27

Muhammad Ahmad Mustafa

Finance Department ...................................................................................... 28

Departments Human Capital: ................................................................... 28

Financial Position: .............................................................................. 28

Product Line: ............................................................................................. 30

Functions of Department: .............................................................................. 30

Cost & Reporting Section: ......................................................................... 30

Capital Expenditure: ........................................................................... 31

Types of Budget: ................................................................................ 31

Operational Expenditure: .................................................................... 31

Deletion of Asset: ............................................................................... 35

Physical Condemnation of Asset: ....................................................... 35

General Accounting: .................................................................................. 35

Book Keeping: ................................................................................... 35

Out Source: ............................................................................................... 37

Single bid Basis Payment to Chemicals Supplier: ............................... 37

National Tax Number Verification: .................................................... 38