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2014 in Numbers
The Way So Far
FFC Energy Limited achieved Tariff True-up and completed first year of commercial operations.
2014
Received first ever dividend of Rs. 544 million from Askari Bank Limited (AKBL).
Acquisition of 100% equity stake in FFF (formerly Al-Hamd Foods Limited), a pioneer Individually Quick Freeze
(IQF) fruits and vegetables project.
2013 Acquisition of 43.15% equity stake in AKBL representing the Companys first ever venture into financial sector.
Commencement of Commercial Operations by FFC Energy Limited.
2011 SAP-ERP implemented in the Company, improving business processes by reducing time lags and duplication of work.
2010 Investment in FFC Energy Limited, Pakistans first wind power electricity generation project.
De-Bottle Necking (DBN) of Plant III was executed and commissioned successfully for enhancement of capacity to
2008 125% of design i.e. 718 thousand tonnes annually.
Investment of Rs. 1.5 billion in Fauji Cement Company Limited, currently representing 6.79% equity participation.
With investment in Pakistan Maroc Phosphore, Morocco S.A., of Rs. 706 million, FFC has equity participation of
2004 12.5% in PMP.
2003 FFC obtained certification of Occupational Health & Safety Assessment Series, OHSAS-18001:1999.
2002 FFC acquired Ex-Pak Saudi Fertilizers Limited (PSFL) Urea Plant situated in Mirpur Mathelo (Plant III) with annual
capacity of 574 thousand tonnes of urea which was the largest industrial sector transaction in Pakistan at that time.
1997 With achievement of Quality Management System certification in Goth Machhi, FFC became the first fertilizer
plant in Pakistan to achieve this distinction.
Initial investment in Fauji Fertilizer Bin Qasim Limited (FFBL), a DAP and Urea manufacturing concern which
currently stands at Rs. 4.66 billion representing 49.88% equity share.
1993
Commissioning of Plant II, Goth Machhi with annual capacity of 635 thousand tonnes of Urea.
Through DBN program, the production capacity of Plant I was increased to 695 thousand tonnes per year.
1992 Listed with Islamabad Stock Exchange.
1982 Commissioning of Plant I, Goth Macchi with annual capacity of 570 thousand tonnes.
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Annual Report of Fauji Fertilizer Company Limited 2014
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Vision & Mission Statements
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.
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.
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Annual Report of Fauji Fertilizer Company Limited 2014
Core Values
the conduct of those who work around us complies with
these standards. The Companys Code of Business Ethics
and Code of Conduct will be enforced at all levels fairly and
without prejudice. At FFC we seek uncompromising integrity through each
individuals effort towards quality product for our customers,
This code to which the Company is committed in
maximizing returns to the shareholders and sizable contribution
maintaining the highest standards of conduct and ethical
to the national exchequer.
behavior is obligatory, both morally as well as legally and is
equally applicable to all the directors and employees of the Our business success is dependent on trusting relationships.
Company who all have been provided with a personal copy. Our reputation is founded on the integrity of the Companys
personnel and our commitment to the principles of:
We shall not make, recommend, or cause to be taken any Consistency in our word and deed.
action, contract, agreement, investment, expenditure or Compassion in our relationships with our employees and
transaction known or believed to be in violation of any law, the communities affected by our business.
regulation or corporate policy.
Fairness to our fellow employees, stakeholders, business
We shall not use our respective positions in employment to partners, customers and suppliers through adherence to all
force, induce, coerce, harass, intimidate, or in any manner applicable laws, regulations and policies and a high standard
influence any person, including subordinates, to provide of moral behaviour.
any favor, gift or benefit, whether financial or otherwise, to
ourselves or others.
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Management Objectives
Objective 4 Create / enter new lines of business to augment profitability and achieve
sustained economic growth
Strategy Continuously seek avenues to diversify within and outside the Fertilizer Industry
Priority High
Status An evolving process Plans for 2014 achieved
Opportunities / Threats Diversifying into a new line of business is a high cost decision both on account of initial capital outlay and
increased management expertise required. FFC, however, through its firm financial standing and experienced
management pool is in the right position to invest and diversify.
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Annual Report of Fauji Fertilizer Company Limited 2014
Significant changes in
Objectives & Strategies
FFCs business objectives and strategies are well planned and no significant changes have occurred during the year to affect
our course of action for achievement of these objectives.
Geographical Presence
Pakistan
FFC Head Office
Rawalpindi / AKBL Head Office
Islamabad FCCL Head Office
Lahore FFC Marketing Office
Sahiwal FFF Food Business
Goth Machhi FFC Urea Plant I & II Islamabad
Mirpur Mathelo FFC Urea Plant III
Jhimpir FFCEL Wind Power Project Rawalpindi
Bin Qasim FFBL DAP & Urea Plant
Morocco
Casablanca PMP Head Office Lahore
Jorf Lasfar PMP Plantsite
Sahiwal
Casablanca
Jorf Lasfar
Goth Machhi
Mirpur Mathelo
Jhimpir
Pakistan Morocco
Bin Qasim
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Company Information
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Annual Report of Fauji Fertilizer Company Limited 2014
Lt Gen Khalid Nawaz Khan Lt Gen Naeem Khalid Lodhi Mr Qaiser Javed
HI(M), Sitara-i-Esar (Retired) HI(M) (Retired) (Non-Executive Director)
(Chairman & Non-Executive Director) (Chief Executive & Managing Director)
Joined the Board on January 2, 2015. Joined the Board on March 26, 2012. Joined the Board on October 15, 1999.
He is the Managing Director of Fauji He is also Chief Executive & Managing Joined Fauji Foundation in 1976 and is
Foundation, Fauji Oil Terminal & Distribution Director of FFC Energy Limited and currently working as Director Finance. He
Company Limited and also the Chairman on Fauji Fresh n Freeze Limited and holds has the honour of being member on Board
the Boards of the following: directorship on the Boards of following: of Directors of 20 Companies, he holds the
following major positions:
Fauji Fertilizer Bin Qasim Limited Fauji Fertilizer Bin Qasim Limited
Fauji Cement Company Limited Askari Bank Limited Foundation University - Director Finance
Mari Petroleum Company Limited Dharaki Power Holdings Limited - CEO
Fauji Foods Limited
Fauji Kabirwala Power Company Limited Foundation Wind Energy I Limited -
Foundation Power Company (Daharki)
Fauji Meat Limited
Pakistan Maroc Phosphore S.A. CEO
Limited Foundation Wind Energy II (Pvt.)
Daharki Power Holding Company FFBL Power Company Limited
Limited - CEO
Fauji Akbar Portia Marine Terminals Fauji Fertilizer Bin Qasim Limited -
(Pvt.) Limited He is Chairman of Sona Welfare
Foundation (SWF), a member of the Board Director
Foundation Wind Energy - I Limited Mari Petroleum Company Limited -
Foundation Wind Energy - II (Pvt.) Limited of Governors of Foundation University,
Director
Askari Cement Limited Islamabad and Director on the Board of
Fauji Cement Company Limited -
Askari Bank Limited International Fertilizer Industry Association
Director
FFC Energy Limited (IFA) France.
Fauji Kabirwala Power Company Ltd -
Fauji Meat Limited Director
Fauji Foods Limited Was commissioned in Pakistan Army in
Fauji Oil Terminal and Distribution
Fauji Fresh n Freeze Limited 1974. During his long meritorious service in
Company Limited - Director
FFBL Power Company Limited the Army, he had been employed on various
Foundation Power Company Dharaki Ltd
prestigious command, staff and instructional
- Director
Was commissioned in the Pakistan Army in assignments including Corps Commander.
Fauji Akbar Portia Marine Terminal Ltd -
April 1975 with the coveted Sword of Honour. He is a graduate of Command and Staff
Director
He has a vast and varied experience in various College Quetta and Armed Forces War College
FFC Energy Limited - Director
command, staff and instructional assignments (National Defence University) Islamabad.
The Hub Power Company Limited -
including command of an Infantry Division
Director
and a Corps. The General also remained He holds Bachelors in Civil Engineering
Commandant of the prestigious Command Laraib Energy Limited - Director
and Masters degrees in Defence Studies and
and Staff College Quetta, in addition to having Askari Bank Ltd - Director
International Relations. He attended Financial
served on the faculties of School of Infantry, Askari Cement Limited - Director
Management Programs at the Columbia
Command & Staff College and National Fauji Fresh n Freeze Limited - Director
University USA and the INSEAD School of
Defence University. Fauji Foods Limited - Director
Business, France, a Mergers & Acquisitions
Program at the University of California, Los Fauji Meat Limited - Director
He is a graduate of Armed Forces War College FFBL Power Company Limited - Director
(National Defence University) and Command Angeles, USA and an Executive Program at
and General Staff College, Fort Leavenworth, Pakistan Institute of Management.
He is a Fellow Member of the Institute of
USA. He holds Masters Degrees in War
The General is considered an expert in the Chartered Accountants of Pakistan and the
Studies, Art and Science of Warfare and
field of strategy and has remained on faculty Institute of Taxation Management of Pakistan.
General Studies.
of National Defence University and NUST
In recognition of his meritorious services, he (Military College of Engineering). After He is a member of the Audit Committee and
has been awarded Hilal-e-Imtiaz (Military). his retirement from the Army, he remained Project Diversification Committee of FFC.
He was also conferred upon the award of
Secretary of Defence, Pakistan as well. He is
Sitara-i-Esar for his leadership role in disaster
on the advisory board of Army Green Book; a
management during the devastating 2005
prestigious publication on defence and security.
Earthquake in Azad Kashmir.
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Profile of the Board
Joined the Board on May 27, 2004. Joined the Board on September 16, 2009. Joined the Board on September 16, 2012.
Besides being Director Investment Fauji During his career he has held positions She is President TEC Education Foundation,
Foundation, he is on the Board of following as Process Engineer, Project Manager and associated with Microsoft, Pearson Vue, New
entities: Manager of the Ammonia Process Engineering Horizons and Certiport which are global
Department until 1995, when he took over training and testing organizations.
Fauji Fertilizer Bin Qasim Limited
as Manager of the Engineering Division and
Fauji Cement Company Limited
simultaneously became a Member of the Board She enabled participation of Pakistani youth in
Fauji Akbar Portia Marine Terminals
of Haldor Topsoes subsidiary in erstwhile Microsoft World Championship, California in
(Pvt.) Limited
Soviet Union, now Russia. He is currently 2014 offering great opportunities for Pakistani
Fauji Oil Terminal & Distribution
engaged as General Manager in the R&D youth to showcase their IT skills on the World
Company Limited
Division of Haldor Topsoe A/S, since 2006 Forum.
Mari Petroleum Company Limited
with the main responsibility of transferring
Askari Cement Limited
new pilot scale technologies to industrial scale Her major achievements during her illustrious
Daharki Power Holding Limited
technologies. career include the following:
Pakistan Maroc Phosphore S.A.
Foundation Wind Energy - I Limited
He has an engineering degree in chemical Initiated Skills Development and
Foundation Wind Energy - II (Pvt.)
engineering from the Technical University Vocational Training for women
Limited
of Denmark. He has worked with Topsoe International recognition of Pakistans
Fauji Fresh n Freeze Limited
Ammonia Technologies for more than 25 Engineering Qualifications
Fauji Foods Limited
years, engaged in design and supervising, Initiated Pakistans first on Grid solar
Fauji Meat Limited
construction, commissioning and start-ups of power system
Foundation University
ammonia plants. Besides Ammonia Technology Introduced and facilitated online
FFBL Power Company Limited
he has a broad knowledge of all available testing and certification programs in
Askari Bank Limited
technologies at Topsoe. Pakistan, enabling Countrys youth to
Fauji Infraavest Foods Limited
get international qualifications and career
He is also a Board member of different public He has no involvement / engagement in other opportunities
sector universities. He has conducted various companies as CEO, Director, CFO or trustee.
academic courses on Economics, International She is Pakistans first lady mechanical engineer
Trade and Finance at reputed institutions and in addition to being the Chairperson
of higher education in Pakistan. He is also a of Pakistan Engineering Council, Pakistan
member of Pakistan Institute of Development Institute of Costs & Contracts, Women
Economics (PIDE). In Energy, she is also a Fellow member of
Institute of Engineers Pakistan. She held
He holds a Doctorate in Economics and various prestigious positions during her
has over 27 years of diversified domestic political and professional career including
as well as international experience in the membership of Senate of Pakistan, Provincial
financial sector. He has vast experience in Assembly Sindh, Karachi University Syndicate,
corporate governance, policy formulation and Board of Governors of NUST, Engineering
deployment, project appraisal, implementation, Development Board, Presidents Task Force
monitoring & evaluation, restructuring, and on Alternate Energy Options for Pakistan and
collaboration with donor agencies. Finance House Committee of Senate etc.
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Annual Report of Fauji Fertilizer Company Limited 2014
Mr Farhad Shaikh Mohammad Maj Gen Ghulam Haider Mr Khizar Hayat Khan
(Independent Director) HI(M) (Retired) (Non-Executive Director)
(Non-Executive Director)
Joined the Board on September 16, 2012. Joined the Board on March 01, 2014. Joined the Board on April 9, 2013.
He also holds directorship of: He is working as Director Welfare (Health) He is working as Additional Secretary Ministry
Din Textile Mills Limited Fauji Foundation Head Office, Rawalpindi and of Industries and Production, Government
Din Leather (Pvt.) Limited also holds directorship on the following boards: of Pakistan and is chairman governing bodies
Din Energy Limited of Pakistan Industrial Technical Assistance
FFC Energy Limited Center (PITAC). He holds directorship in the
His other engagements include: Fauji Fresh n Freeze Limited following companies:
Fauji Fertilizer Bin Qasim Limited
Chairman of Young Entrepreneurs & Mari Petroleum Company Limited Technology Up-gradation and Skill
Youth Affairs Fauji Kabirwala Power Company Limited Development Company (TUSDEC)
Vice Chairman of Law and Order Pakistan Stone Development Company
of Korangi Association of Trade and Was commissioned in Pakistan Army in April (PASDEC)
Industry 1972. He is a graduate of Command and Pakistan Industrial Development
Executive member of Burns Centre, Civil Staff College Quetta and National Defence Corporation (PIDC)
Hospital, Karachi University, Islamabad and holds a Masters Utility Stores Corporation (USC)
Degree in War Studies from Quaid-e-Azam National Productivity Corporation
His major achievements during his educational University, Islamabad. He has vast experience (NPO)
and professional career are as follows: in Inventory Control, Supply Chain
Management, Defence Procurement and He holds Masters in International Relations
KASB securities awarded Best Human Resource Management. and a Masters in Development Administration,
Performance Certificate in Equity & USA.
Research Department During his distinguished career spanning over
Fred Villaris Studios Self Defense 37 years, he held varied command, staff and
Certificate of Achievement in Canada instructional appointments. He has been on
Deans List in American University in the faculty of Command & Staff College,
Dubai Quetta, Army School of Logistics, Kuldana,
Awarded Gold Medal in recognition Murree and Ordnance School, Karachi. Besides
of outstanding work for humanity by service in various logistic installations, the
Chairman Quaid-e-Azam Gold Award General has also served in Kingdom of Saudi
Committee. Arabia as adviser on Inventory Management. In
recognition of his outstanding services, he was
He did his graduation in Finance and awarded Hilal-i-Imtiaz (Military).
Banking from American University in Dubai,
followed by an executive development course He is Chairman of Human Resources &
on Corporate Financial Management from Remuneration Committee and member of
LUMS. He has participated in various courses System & Technology Committee of FFC.
relating to corporate governance, leadership
and corporate finance management at Pakistan
Institute of Corporate Governance (PICG).
He is also a Certified Director by PICG/
International Finance Corporation.
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Profile of the Board
Maj Gen Muhammad Farooq Iqbal Brig Dr Gulfam Alam Mr Shahid Ghaffar
HI(M) (Retired) SI(M) (Retired) (Independent Director)
(Non-Executive Director) (Non-Executive Director)
Joined the Board on June 2, 2014. Originally joined the Board on August 17, Joined the Board on October 20, 2014.
2011, retired on March 01, 2014 and rejoined
He is Director Banking, Industries and on June 02, 2014. He holds directorship in the following
Trading (BI&T), Fauji Foundation. He has companies:
a diverse corporate governance exposure in Director of Planning and Development at
fertilizer, power, banking, cement and FMCG Fauji Foundation and holds directorship of the Mari Petroleum Company Limited
sectors. He holds directorship in the following following associated companies in the Fauji Bank Al Habib Limited
companies: Group:
He is presently Managing Director, National
Fauji Fertilizer Bin Qasim Limited Fauji Fertilizer Bin Qasim Limited Investment Trust Limited (NIT) where he had
Fauji Cement Company Limited Fauji Cement Company Limited also served in different capacities in the Asset
Foundation Power Company Daharki Fauji Akbar Portia Marine Terminals Management Division. He participated in the
Limited (Pvt.) Limited reconstruction of NIT during the crisis period
Daharki Power Holding Limited Mari Petroleum Company Limited i.e. 1996-1998.
Askari Cement Limited Foundation Wind Energy - I Limited
Fauji Infraavest Foods Limited Foundation Wind Energy - II (Pvt.) He has held key positions in the areas of
Limited asset management, capital market regulation
He is in charge of all wholly-owned business FFBL Power Company Limited and governance. At Securities and Exchange
projects of Fauji Foundation, adviser to Commission of Pakistan (SECP) he served
Chairman Askari Bank Limited and CEO He was commissioned in Pakistan Army as Executive Director / Commissioner and
of Fauji Infraavest Foods Limited. Served (Corps of Engineers) in 1978 and was played a vital role towards implementation
on various military command and staff employed on numerous important assignments of wide ranging reforms in the capital market
appointments and remained Director General including Director Planning and Works at and capacity building of Securities Market
of inventory control & management and Engineer-in-Chief Branch, GHQ, Deputy Division at SECP. While working as Managing
procurement in the Pakistan Army. Group Commander in Frontier Works Director / CEO of Karachi Stock Exchange he
Organization and Technical Member to introduced effective risk management measures
He is a graduate of Command & Staff College, Pakistan Commission for Indus Water. and implemented automation of share trading.
Quetta and National Defence University,
Islamabad and also holds a Masters degree in As Director Planning & Development, he He has worked as Head of Investor Relations
International Defence & Strategic Studies from is heading the Planning & Development and Corporate Representation as well as
Quaid-e-Azam University, Islamabad. portfolio of Fauji Foundation. member of Management Forum at Habib Bank
Limited (HBL) and Chief Executive Officer of
He has undergone various corporate trainings He was awarded a Doctorate in Civil HBL Asset Management Limited.
from reputed National and International Engineering (Structures) from University of
Institutes / Universities and is a fellow of Illinois at Urbana Champaign (United States He holds a Masters Degree in Business
the Chartered Institute of Logistics and of America) and has more than 25 years of Administration. He has attended several
Transportation (CILT) since 2009. diversified domestic as well as international courses on securities regulations, securities
exposure in the construction field. His working markets development and portfolio
experience can be broadly categorized into management including the prestigious
policy formulation, evaluation, planning / course conducted by Securities and Exchange
development, implementation / monitoring Commission, in Washington, DC in the
and collaboration with donor agencies. United States.
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Annual Report of Fauji Fertilizer Company Limited 2014
Joined the Board on November 5, 2014. Appointed as CFO on November 3, 2008. Appointed as Company Secretary on February
5, 2013. He is also holding the appointment of
She holds directorship of the following He joined the Company in 1981 and has Company Secretary in FFC Energy Limited.
companies: served in various capacities in the Finance
Group before being appointed as the Chief Besides various command, staff and
Sui Southern Gas Company Limited Financial Officer of the Company in 2008. instructional assignments in the Army, he has
Orix Leasing Pakistan With over 30 years of experience in various been Associate Dean at National University
International Industries positions, he plays an active role in the financial of Sciences & Technology. He also served on
Sui Northern Gas Pipelines Limited / strategic planning of the Company. the faculty of National Defense University
Islamabad, in the department of National
She is the Chairperson of State Life Insurance He is also a director on the Board of Askari Security Policy and Strategy. He had a stint
Corporation of Pakistan. General Insurance Company Limited, Chief as Director in the Defense Science and
Financial Officer of Fauji Fresh n Freeze Technology Organization.
Besides various administrative assignments Limited and has previously held the office of
at provincial and federal level, she held the CFO of FFC Energy Limited. He is an alumni of National Defense
positions of Additional Secretary Cabinet University, Quaid-e-Azam University and the
Division, DG President Secretariat, Secretary Prior to his appointment as CFO of the University of Maryland, USA. Holds Masters
Women Development and Executive Director Company, he served as Company Secretary degrees in International Relations, Defence
State Life Insurance Corporation. and Director Finance of an offshore joint & Strategic Studies and War Studies and a
venture project in Morocco (Pakistan Maroc Diploma in Corporate and Commercial Law.
She participated in Negotiation and Dispute Phosphore S.A.) from 2005 to 2008 where he He has also attended MBA workshop by
Resolution Workshop in Singapore, Executive was conferred the Wissam Alouite award by American Management Association, USA.
Leadership Development Program at John H.E. King Mohammed VI for his invaluable
F. Kennedy School of Government, Harvard services to the project. He has been regularly contributing research
University, National Management Course at papers to publications of national and
National Management College Lahore and He is a fellow Member of the Institute of international repute.
Public Sector Administration and Financial Chartered Accountants of Pakistan.
Management at Singapore.
13
Board Committees
Audit Committee
h) Consideration of major findings
of internal investigations and
Composition
Managements response thereto.
Engr. Rukhsana Zubairi Chairperson
Mr Qaiser Javed Member i) Ascertaining that the internal control
Dr Nadeem Inayat Member system including financial and
Maj Gen Muhammad Farooq Iqbal, HI(M) (Retired) Member operational controls, accounting
system and reporting structure are
Total adequate and effective.
Directors 22nd 24th 22nd 27th 15th Meetings
January April July October December Attended j) Review of the Companys statement
Engr Rukhsana Zuberi on internal control systems prior to
P P P P P 5
Mr Qaiser Javed endorsement by the Board of Directors
P P P P P 5
Dr Nadeem Inayat and internal audit reports.
O P P P P 4
Maj Gen Muhammad P P 2 k) Instituting special projects, value for
Farooq Iqbal Appointed
money studies or other investigations
HI(M), (Retired) as member
w.e.f 18th on any matter specified by the Board
Sep, 2014
of Directors, in consultation with the
CE&MD and to consider remittance
of any matter to the external auditors
The going concern assumption,
Salient Features & Terms or to any other external body.
of Reference Any change in accounting
l) Determination of compliance with
policies and practices,
The Audit Committee is, among other relevant statutory requirements.
things, responsible for recommending to Compliance with applicable
m) Monitoring compliance with the best
the Board of Directors the appointment of accounting standards, and
practices of corporate governance and
external auditors by Companys shareholders Compliance with listing identification of significant violations
and considers any questions of resignation regulations and other statutory thereof.
or removal of external auditors, audit fees and regulatory requirements.
n) Review of Related Party transactions
and provision by external auditors of any
entered into during the year and
service to the Company in addition to audit d) Facilitating the external audit and
recommending approval of the Board
of its financial statements. In the absence discussion with external auditors
of Directors thereon.
of strong grounds to proceed otherwise, of major observations arising from
the Board of Directors acts in accordance interim and final audits and any matter o) Consideration of any other issue or
with the recommendations of the Audit that the auditors may wish to highlight matter as may be assigned by the Board
Committee in the following matters: (in the absence of Management, where of Directors.
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Annual Report of Fauji Fertilizer Company Limited 2014
15
Board Committees
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Annual Report of Fauji Fertilizer Company Limited 2014
Management Committees
Executive Committee
Composition
Lt Gen Naeem Khalid Lodhi, HI(M) (Retired), CE&MD Chairman
Syed Iqtidar Saeed, CTO Member
Syed Shahid Hussain, CFO Member
Mr Mohammad Munir Malik, GGM-MKT Member
Mr Muhammad Shuaib, GM-IA Member
Brig Dr Mukhtar Hussain SI(M) (Retired), GM-IS Member
Brig Tariq Javaid SI(M) (Retired), GM-HR Member
Mr Naveed Ahmad Khan, GM-M&O (Goth Machhi) Member
Mr Pervez Fateh, A/GM-M&O (Mirpur Mathelo) Member
Brig Sher Shah SI(M) (Retired), Company Secretary Member
Brig Sajid Nisar Khan SI(M) (Retired), CCO Member / Secretary
CSR Committee
Composition
Lt Gen Naeem Khalid Lodhi, HI(M) (Retired), CE & MD Chairman
Syed Iqtidar Saeed, CTO Member
Syed Shahid Hussain, CFO Member
Mr Muhammad Munir Malik, GGM MKT Member
Brig Sher Shah, SI(M) (Retired), Company Secretary Member
Brig Sajid Nisar Khan, SI(M) (Retired), CCO Member
Brig Munawar Hayat Khan Niazi, SI(M) (Retired), SM- CSR Member / Secretary
17
Organizational Chart
Board of
Directors
Chief Internal Chief Technical Senior Manager Group General Chief Financial Company
Auditor Officer Engineering Manager Marketing Officer Secretary
Senior Manager Senior Manager Senior Manager Senior Manager Senior Manager General Manager General Manager
Human Resource Civil Works Procurement Coordination Corporate Social Human Resource Information
Services Office Responsibility Technology
Functional reporting
Administrative reporting
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Annual Report of Fauji Fertilizer Company Limited 2014
Business Model
19
Product
Portfolio
Urea Fertilizer Potash improves the resistance of plants
against pests, diseases and stresses like water
Industrial Use
Raw material in manufacture of plastics, Financial Services
adhesives and industrial feedstock.
AKBL
Operating through a network of 321 full
DAP Fertilizer service / sub branches with a Wholesale
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Annual Report of Fauji Fertilizer Company Limited 2014
Stakeholders Engagement
21
Notice of Meeting
Notice is hereby given that the 37th NOTES: uploaded as per the regulations,
Annual General Meeting of the shall authenticate identity
1. The share transfer books of the
shareholders of Fauji Fertilizer Company by showing his/her original
Company will remain closed from
Limited will be held at FFC Head Office, Computerized National Identity
March 11, 2015 to March 17, 2015
156 The Mall, Rawalpindi on Tuesday, Card (CNIC) or original
(both days inclusive) and no request
March 17, 2015 at 1500 hours to transact passport at the time of attending
for transfer of shares will be accepted
the following business:- the Meeting.
for registration. Transfers received at
Companys Share Registrar namely
Ordinary Business (ii) Members registered on CDC
THK Associates (Pvt) Limited, 2nd
are also requested to bring their
1. Confirmation of the minutes of 36th Floor, State Life Building No. 3,
particulars, I.D. Numbers and
Annual General Meeting held on Dr. Ziauddin Ahmed Road, Karachi
account numbers in CDS.
March 14, 2014. 75530, Pakistan by the close of
business on March 10, 2015 will be
(iii) In case of corporate entity, the
2. Consideration, approval and considered in time for the purpose
Board of Directors resolution/
adoption of annual audited accounts of payment of final dividend to the
power of attorney with specimen
and the consolidated audited transferees.
signature of the nominee shall
accounts of FFC and its subsidiaries
be produced (unless it has been
alongwith Directors and Auditors 2. A member of the Company entitled
provided earlier) at the time of
Reports thereon for the year ended to attend and vote at the Meeting
Meeting.
December 31, 2014. may appoint a person/representative
as proxy to attend and vote in place
B. For appointing proxies:
3. Appointment of Auditors for the year of the member. Proxies in order to
2015 and to fix their remuneration. be effective must be received at the (i) In case of individuals, the
Companys Registered Office, 156- account holder or sub-account
The retiring Auditors M/s The Mall, Rawalpindi, Pakistan not holder and/or the person whose
A.F.Ferguson & Co, Chartered later than 48 hours before the time of securities are in group account
Accountants being eligible have holding the Meeting. A member shall and their registration detail is
offered themselves for re-appointment not be entitled to appoint more than uploaded as per the regulations,
for the year 2015. Besides this, a one proxy. shall submit the proxy form as
notice has been received from a per the above requirement.
member in terms of Section 253(2) 3. Any Individual Beneficial Owner
of the Companies Ordinance 1984, of CDC, entitled to vote at this (ii) The proxy form shall be
recommending appointment of Meeting, must bring his/her original witnessed by the person whose
M/s KPMG Taseer Hadi & Co., Computerized National Identity Card name, address and CNIC
Chartered Accountants as Auditors (CNIC) to prove identity, and in number shall be mentioned on
of the Company, in place of retiring case of proxy, a copy of shareholders the form.
Auditors at the Annual General attested CNIC must be attached with
Meeting of the Company. the proxy form. Representatives of (iii) Attested copies of CNIC or the
corporate members should bring the passport of the beneficial owners
4. Approval of Final Dividend for the usual documents required for such and the proxy shall be furnished
year ended December 31, 2014 purpose. with the proxy form.
as recommended by the Board of
Directors. CDC Account Holders will also (iv) The proxy shall produce his/
have to follow the under mentioned her original CNIC or original
5. Transact any other business with the guidelines as laid down in Circular 1 passport at the time of Meeting.
permission of the Chair. dated January 26, 2000 issued by the
Securities and Exchange Commission (v) In case of corporate entity, the
By Order of the Board of Pakistan. Board of Directors resolution/
power of attorney with specimen
A. For attending the Meeting: signature shall be submitted
(unless it has been provided
(i) In case of individuals, the
earlier) along with proxy form to
account holder or sub-account
Brig Sher Shah (Retired) the Company.
holder and/or the person, whose
Company Secretary securities are in group account
Rawalpindi and their registration details are
February 23, 2015
22
Annual Report of Fauji Fertilizer Company Limited 2014
4. Consent for Video Conference electronic format. Other members For any further assistance, the
Facility who wish to receive the Annual members may contact the Company
Report in electronic form may file or the Share Registrar at the following
As allowed by SECP vide Circular
an application as per the format phone numbers, email addresses:-
No. 10 of 2014 dated May 21, 2014,
provided on the Companys website
members can avail video conference
in compliance with the subject SRO. FFC Shares Department
facility for this Annual General
The members who have provided Telephone: +92-51-8453235
Meeting, at Lahore and Karachi
consent to receive Annual Report Email: shares@ffc.com.pk
provided the Company receives
through email can subsequently
consent from the members holding in
request a hard copy which shall be THK Associates (Pvt) Ltd
aggregate 10% or more shareholding,
provided free of cost within seven Telephone: +92-21-111-000-322
residing at above mentioned
days; however, the Company shall Email: it@thk.com.pk &
locations, atleast 10 days prior to date
continue to send hard copy to all aa@thk.com.pk
of the meeting.
other members as per practice in
vogue. The corporate shareholders having
Subject to the fulfillment of the
CDC accounts are required to
above conditions, members shall be
Members are also requested to have their National Tax Number
informed of the venue, 5 days before
intimate any change in their (NTN) updated with their respective
the date of the General Meeting
registered email addresses on a participants, whereas corporate
alongwith complete information
timely manner, to ensure effective physical shareholders should send
necessary to access the facility.
communication by the Company. a copy of their NTN certificate to
the Company or its Share Registrar
In this regard please send a duly
7. WITHHOLDING TAX ON i.e. THK Associates (Pvt) Limited,
signed request as per following
DIVIDENDS Karachi. The shareholders while
format at the registered address of the
sending NTN or NTN certificates,
Company 10 days before holding of Government of Pakistan through
as the case may be, must quote
general meeting. Finance Act, 2014 has made certain
Company name and their respective
amendments in section 150 of
folio numbers.
I/We, __________________ of the Income Tax Ordinance, 2001
______________, being a member whereby different rates are prescribed
Fauji Fertilizer Company Limited, for deduction of withholding tax
holder of _______ Ordinary Share(s) on the amount of dividend paid by
as per Registered Folio No. ______ the companies. These tax rates are as
hereby opt for video conference under:
facility at __________.
(a) For filers of income tax returns:
5. Annual Accounts of the Company for 10%
the financial year ended December (b) For non-filers of income tax
31, 2014 have been provided on the returns: 15%
Companys website i.e. www.ffc.com.pk
To enable the Company to make tax
6. Members are hereby informed that deduction on the amount of cash
pursuant to SECP SRO 787(1)/2014 dividend @ 10% instead of 15%, all
dated September 8, 2014, circulation the shareholders whose names are not
of Audited Financial Statements and entered into the Active Tax-payers
Notice of Annual General Meeting List (ATL) provided on the website
has been allowed in electronic format of FBR, despite the fact that they are
through email. filers, are advised to make sure that
their names are entered into ATL
In compliance with the above before the date for approval of the
requirements, soft copies of the cash dividend i.e. March 17, 2015
Annual Report 2014 are being otherwise tax on their cash dividend
emailed to the members having opted will be deducted @ 15% instead of
to receive such communication in 10%.
23
Financial Performance
Profitability Ratios
Gross profit ratio % 38.29 46.36 48.47 62.20 43.60 43.27
Net Profit to Sales % 22.37 27.03 28.07 40.73 24.58 24.40
EBITDA margin to sales % 35.61 42.74 44.99 63.64 41.43 41.68
Operating leverage ratio Times 1.19 1.11 3.73 4.12 1.00 1.65
Return on equity (Profit After tax) % 70.79 80.05 80.96 99.17 71.40 67.44
Return on equity (Profit Before tax) % 102.22 116.97 120.51 146.23 105.59 99.81
Return on capital employed % 64.50 68.41 70.38 88.60 57.25 49.96
Pre tax margin % 32.30 39.50 41.78 60.06 36.35 36.11
Return on assets % 20.99 29.68 34.38 40.50 25.61 22.89
Growth in EBTDA % (9.64) (4.20) (5.58) 96.27 23.91 29.29
Earning before Interest, Depreciation and Tax Rs. in Million 28,930 31,832 33,437 35,141 18,591 15,071
Earnings growth % (9.79) (3.48) (7.24) 103.92 24.93 35.20
Liquidity Ratios
Current ratio Times 0.67 0.77 1.14 1.04 0.86 0.84
Quick / Acid test ratio Times 0.59 0.66 1.01 0.93 0.73 0.66
Cash to Current liabilities Times 0.28 0.38 0.61 0.38 0.32 0.12
Cash flow from Operations to Sales Times 0.36 0.34 0.25 0.35 0.33 0.25
* Note: Breakup value with revaluation reserves does not apply as FFC has no revaluation reserves.
24
Annual Report of Fauji Fertilizer Company Limited 2014
Rs. in Million
2014 2013 2012 2011 2010 2009
Others
Market capitalization (Rs. in Million) 148,992 142,413 149,002 126,810 85,396 69,838
Numbers of shares issued (Million) 1,272 1,272 1,272 848 679 679
Contribution to National Exchequer (Rs. in Million) 45,027 43,534 43,189 28,081 14,647 13,634
Savings through Import Substitution (Million US$ ) 833 969 1,061 1,126 756 679
25
Financial Performance
Quantitative Data
Designed Capacity
Plant I - Goth Machhi KT 695 695 695 695 695 695
Plant II - Goth Machhi KT 635 635 635 635 635 635
Plant III - Mirpur Mathelo KT 718 718 718 718 718 718
Total Designed Capacity KT 2,048 2,048 2,048 2,048 2,048 2,048
Plant wise Production - Sona Urea
Plant I - Goth Machhi KT 816 775 799 842 867 807
Plant II - Goth Machhi KT 804 803 772 782 807 847
Plant III - Mirpur Mathelo KT 783 830 834 772 811 810
Total Production - Sona Urea KT 2,403 2,408 2,405 2,396 2,485 2,464
Capacity Utilization
Plant I - Goth Machhi % 117 112 115 121 125 116
Plant II - Goth Machhi % 127 126 122 123 127 133
Plant III - Mirpur Mathelo % 109 116 116 108 113 113
Total Capacity Utilization % 117 118 117 117 121 120
Sona Urea - Sales KT 2,371 2,409 2,399 2,406 2,482 2,464
Imported Fertilizer - Sales KT 140 81 74 10 87 41
26
Annual Report of Fauji Fertilizer Company Limited 2014
Assets
from Rs. 14.20 billion in 2011 to Rs. 12.43 recorded an increase of Rs. 20.97 billion
billion in 2013 because of profitability since 2009, mainly on account of increase
decline, but increased subsequently by 4% in short term investments, under Company
in 2014 to Rs. 12.95 billion because of
Non-current Assets policy for placement of surplus funds in
higher retention. Non-current assets of the Company term deposits for generation of incremental
including property, plant and equipment, income.
Non-current Liabilities intangible assets and long term investments,
depicted a steady growth over the past 6
Total non-current liabilities comprising of
long term loans, deferred taxation and long
years. Property, plant and equipment valued Profit and Loss
at Rs. 20 billion registered an increase of
term portion of compensated leave absences, Revenue & Cost of sales
Rs. 6.1 billion since 2009 primarily because
have remained fairly constant during the
of procurement of plant and machinery, Sales revenue registered a compounded
past 6 years. Long term loans reduced by
catalysts and other fixed assets in addition to annual growth of 18% over the 6 years, on
Rs. 1.78 billion during the year on account
construction of office buildings. account of higher fertilizer sales and increase
of repayment, while deferred liabilities
in selling prices because of inflation and rise
increased by 12% compared to 2013. Long
in raw material costs. The Company earned
term financing has been utilized for asset
27
Six year analysis of Financial Position &
Performance
record revenue of Rs. 81.24 billion in 2014, were the main factors for the consistent 0.94 times was in line with the historical 6
an improvement of 9% from 2013, while decrease in net cash used for financing year average of the Company but recorded
cost of sales increased by 26% from last year activities over the 6 years. a decrease of 0.16 times as compared with
to Rs. 50.14 billion in 2014 and has more 2013.
than doubled since 2009 mainly of account
of increase in raw material cost, manpower
Ratio Analysis Investment / Market ratios
cost and general inflation.
Profitability Ratios As a result of decline in profits, the
Companys earnings per share was recorded
Gross Profit Rise in cost of sales owing to increased
at Rs. 14.28 per share. Price to earnings
raw material cost and GIDC resulted in a
Gross profitability has almost doubled over ratio however improved by 1.13 times as
reduction in gross and net profit margins for
the last 6 years with the Company reporting compared to 2013 as the market price of
2014, depicting a decrease of 8% and 5%
a gross profit of Rs. 31.10 billion for 2014. Companys share rose from Rs. 111.96 at
respectively from last year. Consequently,
The profitability was however 10% lower the close of 2013 to Rs. 117.11 for the year
return on equity (post tax) and capital
than last year, on account of higher cost ended December 31, 2014.
employed were also lower by 9% and 4%
of production, resulting in a gross profit
respectively in comparison with 2013.
margin of 38% compared with 46% last Dividend payout ratio for 2014 was
Excluding exceptional performances in
year. recorded at 95.57% against an average of
2011 and 2012, profitability ratios of the
97% for the 6 years, to maintain a steady
Company were in concurrence with overall
Distribution Cost & Operating stream of income for the shareholders.
performance during the 6 years.
Profit Consequently, the Company recorded a
total cash dividend per share of Rs. 13.65
Distribution costs represented an average of Operating performance /
for the year.
8% of the Companys sales revenue over the Liquidity
last six years. The rise in distribution costs
by 4% in 2014 compared with last year led
Current ratio for 2014 depicted a minimal Capital Structure Ratios
decrease of 0.10 times as compared with
to a reduction in operating profits by 13%. Financial leverage ratio of 0.62 times for
2013 due to increase in trade creditors,
2014 is consistent with the average for the
while cash to current liabilities and cash
past 6 years. Debt to equity ratio improved
Cash Flows flow from operations / sales witnessed
an increase of 0.04 times and 0.06 times
to 9:91 indicating the lowest amount of long
term debt in the last 6 years. Companys
Cash and cash equivalents as at December respectively (excluding 2011 & 2012) over
interest cover ratio doubled to 32 times
31, 2014 were recorded at Rs. 15.28 the historic average of 6 years.
in comparison with 15 times in 2009 as a
billion in comparison with Rs. 13.01 result of lower finance cost to profitability
billion for 2013, with an increase of 17% Activity / Turnover ratios
ratio.
from last year and recorded an overall Inventory turnover days were in line with
improvement over the past 6 years. past trends at 2 days, while debtor turnover
Tax and interest payments for the year days improved in comparison with last
were comparable with the trends for the year and were consistent with the historic
previous years and the growth pattern average of 3 days over the past 6 years
of the Company. Further investment in (excluding 2011 & 2012). Number of
FFF, incremental investment in FFCEL days in payables stood at 124 days due to
and acquisition of equity stake in AKBL non-payment of GIDC under various Court
during the previous years constitute the decisions, however, number of days without
main factors for increase in cash outflow considering GIDC payable remained at 3
from investing activities, whereas dividend days against average of 6 days over last six
payments and repayment of long term loans years. Total asset turnover ratio recorded at
28
Annual Report of Fauji Fertilizer Company Limited 2014
SWOT Analysis
S
Strengths
Solid financial position
State of the art production facilities
Fertilizer products are high in demand by agriculture sector
Development of new and eco-friendly formulations
Competent & committed human resource
Well diversified investment portfolio
Brand preference
Well established distribution network
Technical Competence
W
O
Weaknesses Opportunities
Mature industry with clogged overall market share Horizontal as well as vertical diversification
Reliance on depleting natural resource Increase in product line covering Macro and Micro nutrients
Fixed customer base Less potential for new entrants in the industry
Narrow product line Absence of substitute products
Opportunity to export fertilizer
T
Threats
Inconsistent Government policies for fertilizer industry
Depleting natural gas reserves & gas curtailment
Excessive fertilizer imports by the Govt. and marketing at
subsidized rates
Continuous increase in raw material/fuel prices and levies
(GIDC)
Declining international fertilizer prices
29
Horizontal Analysis -
Balance Sheet
Rs. in Million
2014 14 Vs. 13 2013 13 Vs. 12 2012 12 Vs. 11 2011 11 Vs. 10 2010 10 Vs. 09 2009 09 Vs. 08
Rs % Rs % Rs % Rs % Rs % Rs %
ASSETS
NON - CURRENT ASSETS
Property, plant & equipment 20,094 8.95 18,444 3.51 17,819 4.50 17,051 7.01 15,934 13.86 13,994 9.92
Intangible assets 1,611 (2.48) 1,652 (1.61) 1,679 7.01 1,569 - 1,569 - 1,569 -
Log term investments 28,135 36.17 20,662 117.22 9,512 9.85 8,659 10.03 7,870 1.84 7,728 (0.22)
Long term Loans & advances 823 11.22 740 5.56 701 15.68 606 33.19 455 34.62 338 107.36
Long term deposits & prepayments 16 433.33 3 (40.00) 5 (44.44) 9 - 9 50.00 6 200.00
50,679 22.12 41,501 39.66 29,716 6.53 27,894 7.96 25,837 9.32 23,635 6.42
CURRENT ASSETS
Stores, spares and loose tools 3,315 2.16 3,245 4.71 3,099 26.64 2,447 0.29 2,440 (18.59) 2,997 (1.22)
Stock in trade 982 225.17 302 (31.67) 442 (30.61) 637 200.47 212 47.22 144 (44.19)
Trade debts 822 17.26 701 (80.59) 3,611 4,050.57 87 (75.70) 358 39.30 257 (48.19)
Loans and advances 1,059 14.98 921 35.84 678 56.94 432 28.57 336 158.46 130 (5.11)
Deposits and prepayments 26 (44.68) 47 30.56 36 (34.55) 55 10.00 50 31.58 38 (64.49)
Other receivables 1,072 35.70 790 34.13 589 (33.97) 892 44.34 618 (15.80) 734 (40.47)
Short term investments 27,433 44.69 18,960 1.12 18,750 (13.97) 21,794 81.31 12,020 77.60 6,768 92.71
Cash and bank balances 1,174 (13.80) 1,362 (63.67) 3,749 189.72 1,294 8.83 1,189 (69.11) 3,849 312.98
35,883 36.29 26,328 (14.94) 30,954 12.00 27,638 60.47 17,223 15.46 14,917 53.64
TOTAL ASSETS 86,562 27.62 67,829 11.80 60,670 9.25 55,532 28.96 43,060 11.69 38,552 20.78
2014
2013
2012
2011
2010
2009
0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
30
Annual Report of Fauji Fertilizer Company Limited 2014
Vertical Analysis -
Balance Sheet
Rs. in Million
2014 2013 2012 2011 2010 2009
Rs % Rs % Rs % Rs % Rs % Rs %
ASSETS
NON - CURRENT ASSETS
Property, plant & equipment 20,094 23.21 18,444 27.19 17,819 29.37 17,051 30.69 15,934 37.00 13,994 36.30
Intangible assets 1,611 1.86 1,652 2.44 1,679 2.77 1,569 2.83 1,569 3.64 1,569 4.07
Log term investments 28,135 32.50 20,662 30.46 9,512 15.68 8,659 15.59 7,870 18.28 7,728 20.04
Long term Loans & advances 823 0.95 740 1.09 701 1.16 606 1.09 455 1.06 338 0.88
Long term deposits & prepayments 16 0.02 3 0.00 5 0.01 9 0.02 9 0.02 6 0.02
50,679 58.55 41,501 61.19 29,716 48.98 27,894 50.23 25,837 60.00 23,635 61.31
CURRENT ASSETS
Stores, spares and loose tools 3,315 3.83 3,245 4.78 3,099 5.11 2,447 4.41 2,440 5.67 2,997 7.77
Stock in trade 982 1.13 302 0.45 442 0.73 637 1.15 212 0.49 144 0.37
Trade debts 822 0.95 701 1.03 3,611 5.95 87 0.15 358 0.83 257 0.67
Loans and advances 1,059 1.22 921 1.36 678 1.12 432 0.78 336 0.78 130 0.34
Deposits and prepayments 26 0.03 47 0.07 36 0.06 55 0.10 50 0.12 38 0.10
Other receivables 1,072 1.24 790 1.16 589 0.97 892 1.60 618 1.44 734 1.90
Short term investments 27,433 31.69 18,960 27.95 18,750 30.90 21,794 39.25 12,020 27.91 6,768 17.56
Cash and bank balances 1,174 1.36 1,362 2.01 3,749 6.18 1,294 2.33 1,189 2.76 3,849 9.98
35,883 41.45 26,328 38.82 30,954 51.02 27,638 49.77 17,223 40.00 14,917 38.69
TOTAL ASSETS 86,562 100.00 67,829 100.00 60,670 100.00 55,532 100.00 43,060 100.00 38,552 100.00
2014
2013
2012
2011
2010
2009
0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
31
Horizontal and Vertical Analysis -
Profit and Loss Account
Horizontal Analysis
Rs. in Million
2014 14 Vs. 13 2013 13 Vs. 12 2012 12 Vs. 11 2011 11 Vs. 10 2010 10 Vs. 09 2009 09 Vs. 08
Rs % Rs % Rs % Rs % Rs % Rs %
Sales 81,240 9.07 74,481 0.21 74,323 34.59 55,221 23.06 44,874 24.09 36,163 18.21
Cost of Sales 50,137 25.50 39,949 4.31 38,300 83.50 20,872 (17.53) 25,310 23.37 20,515 12.50
Gross profit 31,103 (9.93) 34,532 (4.14) 36,023 4.87 34,349 75.57 19,564 25.03 15,648 26.62
Distribution cost 6,431 4.28 6,167 11.04 5,554 27.04 4,372 10.85 3,944 24.22 3,175 18.96
24,672 (13.02) 28,365 (6.91) 30,469 1.64 29,977 91.91 15,620 25.23 12,473 28.73
Finance cost 849 12.30 756 (24.32) 999 27.10 786 (27.69) 1,087 15.03 945 35.97
Other expenses 2,303 (9.97) 2,558 (4.77) 2,686 1.17 2,655 92.95 1,376 8.18 1,272 41.96
21,520 (14.10) 25,051 (6.47) 26,784 0.93 26,536 101.69 13,157 28.29 10,256 26.65
Other income 4,721 8.08 4,368 2.34 4,268 (35.63) 6,630 110.28 3,153 12.57 2,801 44.16
Net profit before taxation 26,241 (10.80) 29,419 (5.26) 31,052 (6.37) 33,166 103.35 16,310 24.91 13,057 30.04
Provision for taxation 8,070 (13.08) 9,284 (8.91) 10,192 (4.52) 10,674 102.12 5,281 24.73 4,234 20.42
Net profit after taxation 18,171 (9.75) 20,135 (3.48) 20,860 (7.26) 22,492 103.94 11,029 25.00 8,823 35.22
Vertical Analysis
Rs. in Million
2014 2013 2012 2011 2010 2009
Rs % Rs % Rs % Rs % Rs % Rs %
Sales 81,240 100.00 74,481 100.00 74,323 100.00 55,221 100.00 44,874 100.00 36,163 100.00
Cost of Sales 50,137 61.71 39,949 53.64 38,300 51.53 20,872 37.80 25,310 56.40 20,515 56.73
Gross profit 31,103 38.29 34,532 46.36 36,023 48.47 34,349 62.20 19,564 43.60 15,648 43.27
Distribution cost 6,431 7.92 6,167 8.28 5,554 7.47 4,372 7.92 3,944 8.79 3,175 8.78
24,672 30.37 28,365 38.08 30,469 41.00 29,977 54.29 15,620 34.81 12,473 34.49
Finance cost 849 1.05 756 1.02 999 1.34 786 1.42 1,087 2.42 945 2.61
Other expenses 2,303 2.83 2,558 3.43 2,686 3.61 2,655 4.81 1,376 3.07 1,272 3.52
21,520 26.49 25,051 33.63 26,784 36.04 26,536 48.05 13,157 29.32 10,256 28.36
Other income 4,721 5.81 4,368 5.86 4,268 5.74 6,630 12.01 3,153 7.03 2,801 7.75
Net profit before taxation 26,241 32.30 29,419 39.50 31,052 41.78 33,166 60.06 16,310 36.35 13,057 36.11
Provision for taxation 8,070 9.93 9,284 12.46 10,192 13.71 10,674 19.33 5,281 11.77 4,234 11.71
Net profit after taxation 18,171 22.37 20,135 27.03 20,860 28.07 22,492 40.73 11,029 24.58 8,823 24.40
2014
2013
2012
2011
2010
2009
0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
32
Annual Report of Fauji Fertilizer Company Limited 2014
2014
2013
2012
2011
2010
2009
0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
30,000
20,000
10,000
(10,000)
(20,000)
(30,000)
33
Quarterly Analysis
Quarter Production Sales, Revenues & Operating costs Profit Net assets
(cost of sales and distribution
Income costs)
Sales
24% 25% 25% 26%
Revenue &
Income 22% 23% 23% 32%
Operating
Cost 20% 23% 23% 33%
34
Annual Report of Fauji Fertilizer Company Limited 2014
Quarter Production Sales, Revenues & Operating costs Profit Net assets
(cost of sales and
Income distribution costs)
35
Directors Report
Directors Report
Chairmans Review
Characteristics
of endeavoring in
innovative technologies
and forging ahead
with unparalleled
determination have
Lt Gen Khalid Nawaz Khan
HI (M), Sitara-i-Esar (Retired)
Chairman
36
Annual Report of Fauji Fertilizer Company Limited 2014
I feel privileged to assume responsibilities as Chairman of FFCs Board of Directors post retirement
of Lt Gen Muhammad Mustafa Khan HI(M) (Retired), whose contributions led to immense progress
and growth of the Company.
I am very pleased to inform that the Company has attained all its major targets for the year 2014 in
terms of profitability, diversification and good governance besides maintaining the stakeholders trust
in our product quality and business practices.
Post divestment of 1% equity share of FFBL, the status of FFBL and AKBL has now changed to
associated entities of FFC. The Board is confident that the Companys stream of income from these
organizations shall remain fairly consistent with the earlier trends.
The shareholders would be pleased to note that besides immense contribution to the national economy
including agricultural sector and import substitution, FFC extends significant support to the National
Exchequer by way of taxes / levies, and in recognition, the Company has been awarded the fifth
highest taxpayer position. The total contribution for the year 2014 amounts to over Rs. 45 billion,
which is more than twice the amount of net earnings for the period.
Based on strong Company performance with net earnings of Rs. 18.17 billion, the Board is pleased to
announce final dividend of Rs. 3.50 per share, aggregating to annual payout of around 96%, including
interim distributions of Rs. 10.15 per share.
Rawalpindi
January 30, 2015
37
Directors Report
Directors Report
Despite numerous
economic impediments,
the Company remained
focused on optimizing
shareholders return
while looking for new
Lt Gen Naeem Khalid Lodhi
HI (M) (Retired)
Chief Executive & Managing Director
growth horizons.
38
Annual Report of Fauji Fertilizer Company Limited 2014
On behalf of the Management of the Company and on my own behalf, I welcome Lt Gen Khalid
Nawaz Khan HI(M) (Retired) as the new Chairman of FFC Board of Directors.
I am pleased to report net earnings of Rs. 18.17 billion with per share earnings of Rs. 14.28,
marginally down from last year because of higher gas cost (GIDC), negatively impacting the margins
for the period owing to substantial absorption of the incremental costs by the Company.
We are however confident that as a result of our expansion strategies and measures taken for increased
production, operational efficiencies, besides economizing on costs, the revenues are Insha Allah likely
to increase over the years.
FFC Energy Limited attained first full year of successful operations in May 2014 and has further been
able to achieve Tariff True-up, impacting positively on the future cashflows and profitability of the
Company. The project operated at 97% of average availability factor and has to date supplied around
265 GWh of electricity to the national grid valued at over Rs. 4.20 billion. Construction work on the
Individually Quick Freeze (IQF) Plant of Fauji Fresh n Freeze Limited, is progressing as per plan with
scheduled inauguration during March 2015.
The Company is evaluating the proposal for installation of Coal Fired Boilers to conserve gas, being
used for power generation, which can then be utilized for increased production, impacting positively
on the net earnings.
As a part of our diversification strategy, we are also exploring the potential of coal mining in the Thar
Coal area. In this regard, the Company has received encouraging response from the Government of
Sindh for initial allocation of a coal block in the Thar area. Further decision on the project shall be
taken after detailed technical, geographical & commercial evaluation and feasibility studies.
Based on persistent FFC efforts, Pakistan has been allocated permanent representation on the Board of
Directors of International Fertilizer Industry Association (IFA), with FFC CE&MD being appointed
as a Director from South Asia. FFC has also been conferred with Taxpayers Privilege and Honour
Card in recognition of Companys tax compliant culture and significant contributions to the National
Exchequer.
Rawalpindi
January 30, 2015
39
Directors Report
Financial Review
Macro-economic
Overview
Pakistans economy witnessed broad
based economic development
in 2014 with GDP progression
accelerating to 4.1% compared with
3.7% in 2013, which was also the
highest during the last six years.
The growth momentum was mainly
supported by industrial and services
sectors of the economy.
Agriculture Sector
Agriculture is a key sector of the economy as it is the main
source of livelihood for the rural population, in addition
to providing raw materials to main industrial units besides
its significant contribution towards export earnings of Money and Credit
the Country. The sector accounts for 21% of GDP and In order to deal with the balance of payment position and stabilize
absorbs around 44% of the Countrys work force. the inflationary outlook, the State Bank of Pakistan had tightened its
monetary policy during November 2013 when it increased the discount
The performance of this sector in the outgoing fiscal year rate to 10%. However, on account of shrinking budget deficits and
remained moderate, recording a growth of 2.1% compared contained government borrowing the discount rate was reduced to 9.5%
with 2.9% last year due to a drop in crop production in November 2014.
owing to poor weather conditions.
Inflation
Fiscal Development
Inflation was recorded at an average of 7.2% during 2014, a decline of
Pakistans fiscal deficit reduced to 3.2% against 4.7% in 0.5% from last year. Reaching a high of 9.2% in April 2014 as a result
2013 on account of reforms initiated for improvement of of increasing food prices due to demand supply gap and rising imported
the tax system in addition to enhancement of the tax to food prices due to increase in global market. However, appreciation of
GDP ratio by broadening the tax base. the Pak Rupee and reduction in fuel prices reduced inflation to 4.3% by
December 2014.
Investments
Total investments classified into Fixed and Private Currency Appreciation
were recorded at 14% of GDP, down from 14.6% last The Pakistani Rupee recorded an appreciation of about 4.5% against
year whereas total Foreign Direct Investments (FDI) the US Dollar during 2014 owing to reduction in international oil
rose to US $ 4.40 billion during 2014, about three times prices, increase in Foreign Direct Investment and extended fund
the size of US $ 1.58 billion FDI during 2013. facility of US $ 6.6 billion by the IMF against US $ 1.6 billion in
2013.
40
Annual Report of Fauji Fertilizer Company Limited 2014
90
30 35,000
80
30,000
70
25,000
60
20
50 20,000
40
15,000
30 10
10,000
20
5,000
10
0 0 0
2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014
41
Directors Report
Financial Review
Liquidity Position
Analysis
Companys working capital comprises of
Short term investments and Cash & bank
balances which stood at an aggregate of Rs.
28.61 billion at the close of 2014, with an
improvement of Rs. 8.28 billion over last
year, mainly because of placement of surplus
funds in term deposits for generation of
incremental income for the Company.
Liquidity
and Treasury
addition to net valuation gain of around Rs.
293 million on available for sale investments
Increase of 9% in property, plant &
equipment mainly includes procurement of Management
which is required to be reported in the plant and machinery including catalysts for
Strategy to overcome
Statement of Comprehensive Income. Plant III at Mirpur Mathelo, acquisition of
Companys net worth thus stood at Rs. 25.7 land for office buildings in addition to other
liquidity problems
billion as at December 31, 2014, 2% higher fixed assets. FFC maintains a strong liquidity position
than 2013 with a breakup value of through an effective liquidity management
Rs. 20.18 per share. Long term loans and advances witnessed system to ensure availability of sufficient
increase of 11% to Rs. 823 million from last working capital besides identification and
Retention of GIDC remittances under year on account of additional disbursements mitigation of cashflow risks. Further, the
Court rulings was the main cause for the of loans to Company employees during the Company has implemented an efficient
increase in trade payables to Rs. 37.90 year, under their terms of employment. Treasury Management System for generation
billion in 2014, compared with Rs. 21.85 of incremental cashflows and revenues for
billion last year. Trade debts showed a 17% increase to Rs. the Company.
822 million, whereas stock in trade stood
Contingencies include a penalty of Rs. at Rs. 982 million at the close of the year, The main working capital requirements
5.5 billion imposed by the Competition primarily representing unsold urea stock of of the Company are managed through
Commission of Pakistan (CCP) in 2013 on around 37 thousand tonnes, which however internal liquidity generation sources
grounds of alleged unreasonable increase in was also liquidated in January 2015. comprising of sales revenues and dividend
urea prices during 2011, whereas the factors receipts in addition to investment income,
including production shortfall due to gas The Companys asset base thus recorded an with minimal recourse to external means
curtailment, delayed imports and other increase of Rs. 18.73 billion to Rs. 86.56 of financing. Sales revenue receipts are
market dynamics, were ignored by CCP. billion compared to last year, primarily due managed through optimized control of
The Company has filed an appeal before to an increase in long term investments in customer credit, in addition to securing
the Competition Appellate Tribunal and is financial instruments, additional equity advance customer orders. Regular
confident of a favourable decision. injection in Fauji Fresh n Freeze and forecasting of cash flows is also carried out
retention of GIDC funds, invested in short to maintain an optimum working capital
Financial commitments of the Company term profitable investments. cycle.
stood at an aggregate of Rs. 6.5 billion
at the close of 2014 in respect of equity Liquidity generation from dividends is
investments, purchase of goods and services attributable to Companys portfolio of
and capital expenditure. Details of these equity investments comprising of FFBL,
commitments are disclosed in the relevant FCCL, PMP and AKBL.
notes to the financial statements.
42
Annual Report of Fauji Fertilizer Company Limited 2014
Treasury Management Maintenance of a fairly diversified billion to Rs. 27.43 billion, resulting in net
portfolio to earn maximum returns, surplus liquidity of Rs. 3.87 billion.
FFC maintains a dynamic and flexible
remaining within prudent levels of
portfolio of investments to augment
exposure Cash flow projections for the future also
profitability and increase shareholders
indicate availability of sufficient funding
return, through placement of cash surpluses Investment options may include short
for timely retirement of long term debt,
in money market and government securities, / long term placements, with high
in addition to generation of incremental
in compliance with applicable statutory credit rated institutions
income / liquidity through efficient
requirements. The placement of funds is arranged with placement of surplus funds, for sustained
target maturity dates to ensure availability Company profitability.
Treasury Management System comprises of sufficient liquidity for working capital /
of the following objectives / tools while investment requirements, besides generation
remaining within acceptable level of risk and
exposure:
of incremental income. DuPont Analysis
Periodic evaluation of planned Repayment of debts and Net profit margin of the Company decreased
revenues from sales / investment recovery of losses to 22% during the year as compared to
income and comparison with the 27% in 2013 as a result of increase in raw
The Company carried a minimal long term
timing and quantum of working material cost and GIDC. Asset turnover and
financing balance of Rs. 2.50 billion at the
capital requirements ownership ratio reduced to 0.94 and 9.6%
close of 2014, down by Rs. 1.80 billion
Identification of cash surpluses for respectively in 2014 owing to an increase
compared to last year as no additional funds
investment in suitable opportunities were borrowed on long term basis during in the asset base of the Company, primarily
offering optimal returns while the year. on account of an increase in long term
providing preservation of invested investments.Consequently, the Company
capital Short term borrowings were recorded at reported a return on equity of 71% in 2014
Rs. 11.60 billion, representing an increase compared to 80% last year.
Matching of maturity dates of
of Rs. 4.60 billion from last year, whereas
investments with working capital /
short term investments increased by Rs. 8.47
other funding requirements
DuPont Analysis
2014 2013
Sales 81,240
Tax burden 31% 32%
Interest burden 3% 3%
EBIT margin 33% 41%
Net 18,171
Asset turnover 0.94 1.1
Profit Total
Leverage 70% 63% 63,069
Return on Equity 71% 80% Net profit Cost
22%
Margin
Return on
21% Sales 81,240
Assets
Current 35,883
Assets Assets
0.94
turnover
Return on Total 86,562
71% Assets Non-current
Equity 50,679
Assets
Owners 25,670
Equity Current 53,818
Ownership Total Liabilites
29.6% 60,892
Ratio Liabilites
Total 86,562
Non-current
7,074
Assets Liabilites
Owners 25,670
Equity
43
Directors Report
Financial Review
Cash and cash equivalents at year
Leverage & Liquidity Ratios Inventory, Debtors end
and Creditors Turnover (days)
1.2
The Company recorded a net increase in
50 12
cash and cash equivalents of Rs. 2.3 billion
10
during 2014 with a balance of Rs. 15.28
40
1.0 billion, as compared to a net decrease
8 recorded in cash and cash equivalents last
Debt / Equity & Interest Cover
30 year.
Current & quick ratio
0.8 6
20 Financing Arrangements
4
0.6
The Company carries an efficient liquidity
10
2
management system with minimal reliance
on external financing, to minimize financing
0 0.4 0
costs.
2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014
44
Annual Report of Fauji Fertilizer Company Limited 2014
companies at the close of 2014. Total capital Net earnings of Rs. 18.17 billion were
Market Capitalization & listed on the exchange rose to Rs. 1,168 recorded by the Company during the year,
Market Price billion, 3% higher than last year. against which, an aggregate of Rs. 12.91
160
billion were distributed on account of three
140
As at December 31, 2014, market interim dividends, while no transfers were
capitalization of FFCs shares stood at carried out to the general reserves.
120
Rs. 149 billion, up by 5% from last year.
100
Trading at an average of Rs. 113.80 per The Company carried net reserves of Rs.
share, market price experienced major 12.95 billion as at the close of the year in
80
fluctuations between the highest of Rs. the form of Reserves and un-appropriated
60
125.92 per share to the lowest of Rs. profit as shown in Appropriations table
106.51 per share. Trading in FFCs equity below.
40
during the year however declined to 287
million shares, a substantial drop of 29% as
Sensitivity
20
compared to last year.
0
Analysis
2009 2010 2011 2012 2013 2014
Profit
continues to be the major shareholder with affect performance and profitability and
44.35% equity holding. therefore alter annual results.
Capitalization
Million share
The Company is listed on all the three Final Dividend 2013 (5,089) 4.00
stock exchanges of Pakistan including the Net Profit 2014 18,171 14.28
Karachi Stock Exchange (KSE) which is Other Comprehensive Income 350
the Countrys largest and most liquid stock Available for Appropriation 25,861
exchange, offering an orderly and reliable
market place for its investors. Appropriations
First Interim Dividend 2014 (3,817) 3.00
As at December 31, 2014, KSE had a Second Interim Dividend 2014 (4,326) 3.40
market capitalization of Rs. 7,381 billion, Third Interim Dividend 2014 (4,771) 3.75
with an increase of 126% over 2010.
Closing Reserves 12,947
45
Directors Report
Financial Review
Key Sensitivities The Company however remains committed operate in different sectors and are subject to
towards efficiency enhancements in addition different sensitivities than FFC.
Urea production & cost of sales
to cost cuts for mitigating these risks and
Despite efficient plant operations, sensitivities. In order to maintain the Other income
urea production has been exposed to operating efficiency, regular inspection and
Income on deposits with banks and
consistent gas curtailment, resulting in maintenance is carried out at all plants to
other financial institutions rely on the
production losses. In addition, maintenance reduce production downtime.
Companys competence to efficiently
turnarounds above planned levels can also
generate funds in excess of working capital
significantly impact production and the The un-judicious diversion of FFC gas quota
Company profitability. / other requirements, in addition to their
of 34 MMSCF previously allocated to the
deployment in profitable options. However,
power sector, to another fertilizer company
Looking ahead, depleting gas reserves pose any return on deposits and investments
by the Government, is an added factor
a major risk to sustained production and are subject to interest / policy rates and
behind declining Company margins.
profitability. market conditions, which are beyond the
Sales volume & prices Companys control.
Cost of production continues to escalate due
Sales volume is defined by plant production, Finance cost
to incremental GIDC levy each year, part of
fertilizer demand and environmental
which had to be absorbed by the Company Long and short term borrowings and the
conditions in addition to excessive fertilizer
during the previous years owing to market resultant finance costs have a significant
imports.
conditions. impact on the Companys profitability.
Sensitivity Analysis Although selling prices are determined Although margins on loans are negotiated
internally, these may be significantly by the management, the KIBOR / interest
Sales Volume (+/- 1%)
impacted by competitor prices, market rate fluctuations are subject to market &
NPAT (Rs. M) EPS (Rs) conditions, international market trends, economic conditions and are thus beyond
233 0.18 subsidies on imported fertilizer and lately, the Companys control.
Selling Price (+/- 1%) Average selling price of fertilizer bag during
NPAT (Rs. M)
467
EPS (Rs)
0.37
2014 remained depressed with only a minor
increase from last year because of market
Relationship
forces, adding further pressure on Company
between the
alongwith their levels of exposure and The Companys wind power project FFC Looking forward, the supply of gas to
mitigating strategies and opportunities Energy Limited has attained True-up of our competitors at concessionary rates, in
have been discussed in the Risk and its electricity supply Tariff, resulting in addition to increase in gas costs, continue
Opportunity Report section. improved project revenues, and incremental to pose profitability risks to the Company.
future earnings for the Company. Further, declining international urea prices
With the exception of price gains in 2011 also pose a risk to future margins. The
impacting positively on net earnings of the Construction work on the Individually Company is however fully geared to mitigate
Company, and the inverse / negative impact Quick Freeze (IQF) Plant of Fauji Fresh n these sensitivities to ensure sustained
of GIDC on profitability during 2013 Freeze Limited (formerly Al-Hamd Foods Company profitability.
and 2014, the Company has maintained a Limited), is progressing as per plan with
steady growth momentum, expanding into scheduled inauguration during 2015. Non-financial Measures
core competencies in addition to significant
The Company has identified the following
diversification initiatives into the financial In October, 2014 FFC signed a Consortium
areas as key non-financial performance
sector, food business, power generation and Agreement with internationally reputed
measures:
lately in 2014, in offshore fertilizer projects. partners for setting up of an offshore
fertilizer project in Tanzania, which shall Stakeholders engagement
Sustained returns to the shareholders, allow potential for export of fertilizer to Relationship with customers and
consolidation of diversification projects neighbouring landlocked countries, the business partners
including incremental receipts, successful Middle East and South Asia. Employee satisfaction
operations of FFC Energy Limited, and Maintenance of product quality for
maintenance of good governance practices Financial Measures fulfillment of buyer needs
are testaments to FFCs performance and Responsibilities towards the society
An estimation of various factors and
achievements over the years. Healthy and safe environment
variables were used to project targets for
Transparency, accountability and good
2014. Most of these parameters are outside
Incremental dividend income from FCCL governance
the control of the Company while others
and commencement of dividend stream
can either be monitored or their impact can
from AKBL, with the first ever dividend Responsibility for implementation has
be alleviated to a possible extent.
receipt of Rs. 544 million during the year been delegated to the management, with
2014, support the managements assessments continuous monitoring and control by the
Fluctuations in currency, government
of target achievement. Board.
regulation in the form of taxes, duties and
levies, price of raw materials, gas diversions
Prospects of the and curtailments etc. are all external factors Cost Accounting
affecting the Companys cost of production.
Entity including Record and
Thorough evaluation and effective
targets for implementation has been carried out during Audit
the year to achieve set goals and targets. This
Financial and is evident from the fact that despite major In compliance with the provisions of
Companies (Audit of Cost Accounts)
Non-Financial
gas curtailment during the year, sustained
production levels were achieved and Rules, 1998, the Company has established
a system for maintenance of Cost
Measures operating targets were met.
Accounting Records. The specified Cost
Fertilizer selling prices registered only a Accounting Statements, the Report and
Prospects of the Entity other information for the financial year
marginal increase from last year, whereas
Efficiency improvements, costs gas costs depicted a significant increase ended December 31, 2013 were submitted
economization, incremental dividend resulting in decline in Company profitability to the Securities and Exchange Commission
income and planned diversification by 10% compared to last year. However, of Pakistan (SECP) and the Registrar,
projects provide sufficient support to the the Companys diversification initiatives alongwith the Cost Auditors Report
managements projection of sustained enabled the Company to earn a net profit thereon, within the stipulated timeframe.
profitability and return to the shareholders. of Rs. 18.17 billion despite adverse market
conditions.
47
Directors Report
Financial Review
Syed Shahid Hussain (CFO) receiving MAP Award 2013 Mr Farhad Sheikh Mohammad (Director) receiving Best Corporate & Sustainability
Report Award 2013
The Cost Auditors are required to be Pakistan (ICAP) and the Institute of Cost and social & environmental footprints.
different from the Auditors of financial and Management Accountants of Pakistan The Company has further been presented
statements of the Company and the Board (ICMAP). with the Socially Responsible Investing
of Directors has re-appointed BDO Ebrahim Award at the CSR Awards 2015 by the
& Company, Chartered Accountants, as The awards represent FFCs commitment National Forum of Environment and Health
Cost Auditors of the Company for the towards promotion of transparency, (NFEH).
financial year ended December 31, 2014, accountability and good governance
under approval and in compliance with the practices. Rawalpindi Chamber of
criteria specified by the SECP including Commerce & Industry (RCCI)
relevant experience and availability of Platinum Award
sufficient qualified staff. KSE Top Companies 2013 In 2014, FFC was also awarded the RCCI
Karachi Stock Exchange acknowledged Platinum Award for being the leading
Best Presented Report placement in the top companies list. Management Association of
Awards 2013 Pakistan (MAP) Awards
The achievement was conferred on the basis
The Annual Report of the Company for 2013 is accredited with another achievement
of FFC performance with regard to the top
the year 2013 was awarded the top position for FFC as being the top Company in terms
KSE companies criteria in terms of dividend
in the Manufacturing Sector, for the Best of Management and Corporate Governance
payout, capital efficiency, profitability, free-
Presented Annual Report competition by practices, in the Chemical Industry Sector
float of shares, and compliance with listing
the South Asian Federation of Accountants by the Management Association of Pakistan
regulations, in addition to transparency and
(SAFA), in addition to being awarded (MAP).
investor relations.
a Certificate of Merit for Corporate
Governance Disclosures. Information Security
Sustainability Report Award
Leadership (ISLA) Award
The Annual Report for 2013 was also FFCs Sustainability Report for the year
The Company has additionally achieved
adjudged amongst the best reports in the 2013, prepared in consultation with
the prestigious Information Security
Fertilizer and Chemical sector, in the Best the Global Reporting Initiative (GRI-
Achievement (ISLA) Award for Asia Pacific,
Presented Accounts Award competition Holland), was awarded the second prize in
presented in recognition of pioneering
for 2013 by the Joint Committee of the the Sustainability Report Category by the
information security culture at FFC by the
Institute of Chartered Accountants of ICAP / ICMAP, in terms of transparency
International Information Systems Security
Certification Consortium (ISC)2.
48
Annual Report of Fauji Fertilizer Company Limited 2014
Group Shareholding
(%)
FFF
AKBL
FFCEL
PMP
FCCL
FFBL
FFC
0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Segmental 4,500
4,000
100 50,000
Review of 3,500
80 40,000
Business
3,000
2,500 60 30,000
Performance 2,000
1,500
40 20,000
1,000
Group sales revenue for 2014 was recorded 20 10,000
in 2013, higher by 46% mainly because of FFBL Dividend Rate of Return Group Net Profit Group Gross Profit
(Rs. million) (%)
gain accrued on account of discontinued
operations of FFBL. FFBLs performance has
been excluded from the consolidated results and is listed on the Karachi, Lahore and ordinary shares to Fauji Foundation at the
post the change in the companys status Islamabad Stock Exchanges. prevailing market price. FFC now holds
from subsidiary to an associated entity of 465.89 million shares of FFBL, representing
FFC, consequent to disposed of 1% FFBL FFBL has a modern Granular Urea and 49.88% of FFBLs equity.
equity by the Company. Di-Ammonium Phosphate (DAP) fertilizer
manufacturing complex located in Bin FFBL recorded net earnings of Rs. 4.0 billion,
Brief analysis of each Group companys Qasim, Karachi. Principal objective of the 31% lower than last year, representing an
performance is presented below: company is manufacturing, purchasing earnings per share of Rs. 4.30. During the year,
and marketing of fertilizers with a current FFBL produced 213 thousand tonnes of Sona
Fauji Fertilizer Bin Qasim design capacity of 551 thousand tonnes of Urea (Granular) and 702 thousand tonnes of
Limited (FFBL) Urea and 650 thousand tonnes of DAP per DAP which were marketed by FFC Marketing
FFBL was incorporated as FFC-Jordan annum. FFBL is the sole producer of DAP Group on behalf of FFBL, earning Rs. 49.45
Fertilizer Company Limited in 1993 and in Pakistan. billion as sales revenue for FFBL.
subsequent to restructuring in 2003 was
renamed as Fauji Fertilizer Bin Qasim In October 2014, FFC sold 1% equity
Limited. FFBL is a public limited company stake in FFBL aggregating to 9.34 million
49
Directors Report
Financial Review
Dividend receipts of Rs. 1.89 billion by FFC metric tons. FFC holds Rs. 1.5 billion stake The company achieved sales revenue of
from FFBL during 2014 were 20% lower in FCCL, which amounts to 6.79% of Rs. 2.76 billion during the year, including
than last year because of reduced FFBL FCCLs equity. the differential between the Reference and
earnings during the period. True-up tariffs for electricity supplied to-
During the quarter ended September 30, date, whereas net earnings stood at Rs. 735
Meeting of the Board of Directors of FFBL 2014, the first quarter of FCCLs fiscal year million. Trade receivables of the company
was held on January 30, 2014, in which a 2014-15, the company earned a net profit stood at Rs. 1.4 billion at year end.
final cash dividend of Rs. 2.25 per share i.e. of Rs. 602 million as compared to Rs. 582
22.5% was declared. Total FFBL payout for million in the same period of last year and Askari Bank Limited (AKBL)
the year thus stands at Rs. 4.00 per share i.e. capacity utilization improved to 68% as
AKBL was incorporated in 1991 as a
93.02%. compared to 67% in the corresponding
public limited company and is listed on
period of the previous year. Local dispatches
Pakistan Maroc Phosphore the Karachi, Lahore and Islamabad Stock
increased by 5.4% while exports declined
Exchanges. AKBL is a scheduled commercial
S.A., (PMP) Morocco by 11% as compared to the same quarter of
bank and is principally engaged in the
PMP is a joint venture between FFC last year.
business of banking with 321 branches
(shareholding of 12.5%), Fauji Foundation including a Wholesale Bank Branch in the
(12.5%), FFBL (25%) and the Moroccan FFC earned dividend income of Rs. 141
Kingdom of Bahrain. FFC has a 43.15%
state owned Officie Cherifien Des million from Fauji Cement during the year
stake in the bank with a total investment of
Phosphates (50%). 2014.
Rs. 10.46 billion
PMP was incorporated in Morocco in 2004 FFC Energy Limited (FFCEL)
In view of reduction in FFCs equity stake in
with the principal activity to manufacture FFCEL is an unlisted public limited FFBL, the status of AKBL has also changed
and market phosphoric acid, fertilizer and company incorporated in 2009 and is from an indirect subsidiary to an associated
other related products in Morocco and presently a wholly owned subsidiary of concern of FFC.
internationally. FFC. The company was incorporated for
the purpose of implementing a project As per the financial statements for the
PMP has a production capacity of 375 comprising establishment and operation period ended September 30, 2014, AKBL
thousand tonnes of industrial phosphoric of a 49.5 MW wind power generation reported per share earnings for the nine
acid, a substantial portion of which is facility and its onward supply to National months period at Rs. 2.47 against last years
supplied to FFBL as raw material for Transmission & Dispatch Company loss per share of Rs. 3.13.
production of DAP fertilizer with any (NTDC).
excess sold in the international market. FFC AKBL had a total asset base of Rs. 409
invested Rs. 706 million in the Company In 2014, FFCEL completed its first year of billion as of September 30, 2014, rising
and has earned Rs. 43 million in terms of commercial operations. The project operated from Rs. 395 billion as at December 31,
dividend since the date of investment. at 97% of average availability factor and 2013, while gross advances rose to Rs. 195
has to-date billed around 265 GWh of billion. Non-performing loans improved
Fauji Cement Company electricity to the national grid valued at over by 5.5% during the nine months; from Rs.
Limited (FCCL) Rs. 4.2 billion. 33.1 billion at December 31, 2013 to Rs.
FCCL is a public listed company 31.3 billion at September 30, 2014.
incorporated in 1992 and is listed on the The companys petition for Tariff True-up
Karachi, Lahore and Islamabad Stock was approved during the year, enabling The year 2014 also marks the first ever
Exchanges. Principal activity of the company FFCEL to invoice the tariff provided under dividend receipt of Rs. 544 million from
is manufacturing and sale of ordinary the Energy Purchase Agreement, as opposed AKBL by the Company.
Portland cement. The companys plant is to claiming the value of energy supplied on
located at Jhang Bahtar, District Attock with the basis of Reference Tariff previously.
a current installed capacity of 3.43 million
50
Annual Report of Fauji Fertilizer Company Limited 2014
90
80
70
AKBL
60 10.46 B
FFF FFF
50 0.59 B 0.45 B
0
1982 1992 1993 2002 2003 2006 2008 2009 2010 2011 2012 2013 2014
51
Directors Report
Financial Review
Operational risks market sentiments, speculative activities, financial and regulatory compliance
supply and demand of securities and risks.
These are risks associated with operational
liquidity in the market. The Company The Human Resource &
and administrative procedures, such as
incurs financial liabilities to manage its Remuneration Committee focuses
workforce turnover, supply chain disruption,
market risk. All such activities are carried on risks in its area of oversight,
IT system shutdowns, changes in Board
out with the approval of the Board. including assessment of compensation
structure or control failures.
programs to ensure they do not
Liquidity risk
Commercial risks escalate corporate risk, in addition
Liquidity risk is the risk that the Company to succession planning with a view
These risks emanate from the commercial
will not be able to meet its financial to ensure availability of talented
substance of an organization. Cut down
obligations as they fall due. functionaries in each area of critical
in an entitys market share, product
Company operations.
price regulation or a new constitutional
The Companys approach to managing The System & Technology Committee
amendment posing adverse threat to the
liquidity is to ensure, as far as possible, that reviews the need for technological
organizations profitability and commercial
it will always have sufficient liquidity to upgradation in various processes to
viability are a few examples of this risk.
meet its liabilities when due, under both reduce the risk of obsolescence and
normal and stressed conditions, without inefficiency in plant operations.
Financial risks
incurring unacceptable losses or risking
Financial risks are divided in the following The Project Diversification Committee
damage to the Companys reputation. The
categories: focuses on exploring new avenues
Company uses different methods to assist
for expansion and risk portfolio
in monitoring cash flow requirements and
Credit risk diversification.
optimizing its cash return on investments.
Credit risk is the risk of financial loss to
II. Policies & Procedures
a company if a customer or counterparty Typically the Company ensures that it has
Board and its committees have adopted a
to a financial instrument fails to meet sufficient cash on demand, including lines
set of policies and procedures, to promote
their contractual obligations, and arises of credit, to meet expected operational
a culture of ethics and values and delegate
principally from investments, loans and expenses for a reasonable period, including
the authority to senior management for
advances, deposits, trade debts, other the servicing of financial obligation; this
implementation of approved policies and
receivables, short term investments and bank excludes the potential impact of extreme
procedures.
circumstances that cannot reasonably be
balances.
predicted, such as natural disasters.
III. Control Activities
We limit our exposure to credit risk by Senior management assess the risks and
investing only in liquid securities and only
Plans and strategies for
place appropriate controls to mitigate these
with counterparties that have high credit
mitigating these risks and
risks.
potential opportunities
ratings. Management actively monitors
credit ratings and given that the Company IV. Performance Management
has invested in securities with high credit Risk Governance A continuous cycle of monitoring
ratings only, management does not expect The roles and responsibilities at various performance of the implemented
any counterparty to fail in meeting its levels of our risk management program are controls has been established to identify
obligations. outlined in our risk governance structure. weaknesses and devising strategic plans for
improvement, which has enabled aversion of
Market risk I. Board and Committees majority of performance risks.
The Board oversees the risk management
Market risk is the risk that value of financial
process primarily through its committees: V. Internal Audit
instruments may fluctuate as a result of
Provides independent & objective
changes in market interest rates or the The Audit Committee monitors
evaluations and reports directly to Audit
market price due to change in credit rating the Companys risk management
Committee on the effectiveness of
of the issuer or the instrument, change in process quarterly, or more frequently
governance, risk management and control
if required, focusing primarily on
processes.
52
Annual Report of Fauji Fertilizer Company Limited 2014
Mitigating Strategies
Moderate Decline in international price of urea, forcing a local price fall. Maintaining healthy margins through cost
minimization and output optimization strategies.
Strategic risk
Low Over-diversification leading to inadequate management
Investing through a thorough diligence process
expertise for managing investments.
critically viewing worst case scenarios of return on
Low Investing in companies that yield insufficient returns, tying up investment, taking account of management expertise
shareholders funds and impacting profitability. and where required, bringing on board experts of the
respective sectors.
Commercial risk
Low Strong market competition lowering demand for FFCs FFC combined with FFBL currently holds 46% urea
product. market share, and continuous efforts are made to
sustain production and maintain our market share.
Low Outdated farming techniques employed by farmers leading to Provision of farm advisory services and establishment
poor crop health and declining per hectare output. of soil & water testing laboratories, micro-nutrient
and plant tissue analysis laboratories.
Low Variations in commodity prices of agricultural products Ensuring provision of locally manufactured fertilizer
negatively affecting liquidity of customers. at competitive rates lower than internationally
prevailing market rates.
High Increasing production and distribution costs affecting pass Increasing levies on raw material and escalating
through ability of the Company. pressure on fertilizer pricing by the Government
cannot be controlled by the Company. FFC however
is committed to improving operational efficiencies
and cost optimization to mitigate this risk to the
maximum extent possible.
Moderate Supplies and untimely influx of urea imported by TCP. These variables are outside management control.
Operational risk
Low Turnover of trained employees at critical positions may render FFC has a detailed succession plan and a culture of
the operations incapacitated. employee training and development, continuously
promoting and rotating employees within the
departments. Formal work procedures and work
instructions are also in place to provide guidance
regarding any process undertaken by a new employee.
High Gas reserves depletion. Investing in alternate sources of raw material and
power through coal fired boilers and multiple fuel
co-generation, in addition to diversified business
portfolio.
53
Directors Report
Financial Review
Risk Level Risk description Mitigating strategy
Operational risk
Low IT security risk. State of the art IT controls are in place to prevent
unauthorized access to confidential information.
Regular IT audits and trainings are conducted to
monitor and minimize the risk of breaches, errors or
other irregularities.
Low Climatic uncertainties including floods, water scarcity and FFC has established a disaster recovery plan that is
drought. implemented at all locations and the staff is fully
equipped to quickly recover from a natural disaster.
Low Risk of major accidents impacting employees, records and Implementation of strict and standardized operating
property. procedures, employee trainings, operational discipline
and regular safety audits.
Financial risk
Moderate Rise in KIBOR rates inflating the borrowing costs. A prepayment option, which can be exercised upon
any adverse movement in the underlying interest
rates, hedges the Company against this risk.
Low Default by customers and banks in payments to FFC. Most of our sales are either against cash or advance,
providing adequate cover against this risk. For credit
sales, credit limits have been assigned to customers,
backed by bank guarantees. Risk of default by banks
has been mitigated by diversification of placements
among A ranked banks and financial institutions.
Low Insufficient cash available to pay liabilities resulting in a Cash management system at FFC is proactive and
liquidity problem. adequate funds are kept available for any unforeseen
situation. Committed credit lines from banks are also
available to bridge a liquidity gap, if any.
Low Fluctuations in foreign currency rates. FFCs foreign currency exchange rate risk is limited
to foreign currency investments and bank balances
bearing interest. Any fluctuation in exchange rates
would be mitigated to some extent by resultant
change in interest rates.
Compliance risk
Low Modifications in the legal framework by regulatory bodies. Rigorous checks on latest updates in regulatory
framework are carried out to prevent any breach of
law. Trainings are conducted to keep the employees
abreast of all latest developments in law and
regulation.
54
Annual Report of Fauji Fertilizer Company Limited 2014
The Board powers include approvals for Materiality levels are reviewed periodically
Materiality approach adopted
capital expenditure, disposal of fixed assets, and appropriately updated.
by the Management annual business plans, policy formulation,
Subsequent
In general, matters are considered to be risk management, human resource
material if, individually or in aggregate, management, donations, matters relating
they are expected to significantly affect
the performance and profitability of the
to health, safety and the environment, and
other matters required by law, or internal Events
Company. policies.
The Board of Directors in its meeting held
on January 30, 2015 is pleased to announce
Powers of the Board of Directors and the Determination of materiality levels,
a final cash dividend of Rs. 3.50 per share
Management of the Company have been other than those provided under the
i.e. 35% for the year ended 2014, taking the
defined with special reference to, and in
total payout for the year to Rs. 13.65 per
share i.e. 95.57%.
55
Directors Report
Operational Performance
turnaround of Plant-III, Major Projects the planned Plant turnaround in April 2015.
Plant I & II
urea bags, FFC has commissioned price tag
Gas Turbine Control System printing system at all three Plants.
Upgrade
Goth Machhi Plant Security at Plantsite Goth
Gas turbine, TG-701 obsolete control
Operational performance of both Plants at Machhi
system is being replaced with a modern
Goth Machhi was satisfactory during 2014.
control system, commissioning of which is Security at Plantsite has been enhanced and
Sona urea production of 1,620 thousand
expected in 2015. upgraded through State of the Art security
tonnes was recorded at an operating
devices and cameras installation, which are
efficiency of 122% of designed capacity, 3%
being monitored round the clock through a
higher than the output for last year.
Central Control Room.
56
Annual Report of Fauji Fertilizer Company Limited 2014
2,450
During year 2014, Mirpur Mathelo Plant
120 250
achieved the highest annual production 2,400
recorded, slightly lower than the last year, 2,250 116 150
150
2400
Following major jobs were completed during 1,000 44
the Plant turnaround: 100 2380
42
Replacement of two waste heat boilers 50 2360
Installation of high efficiency vane unit Major Projects Urea bags loader
57
Directors Report
Market Overview
tonne (Ex-China) at the start of 2014 to US FFBL DAP output stood at 702 thousand 50
$ 480 FOB per tonne by end of October tonnes whereas DAP imports witnessed
2014, highest of the year, closing at US $ an increase to 993 thousand tonnes, 14% 48
50% 49%
470 FOB per tonne by December 2014. higher than last year as a result of rise in
domestic demand. DAP off-take of 1,710 46
Global demand was adequately met in 2014, thousand tonnes recorded an increase of
owing to increased production. On average, 3% over 2013 while closing DAP inventory
44 45% 46%
the world fertilizer industry operated at 78% stood at 131 thousand tonnes.
of installed capacity.
42
40
Sona Urea DAP
2013 2014
58
Annual Report of Fauji Fertilizer Company Limited 2014
59
Directors Report
Human Capital
The Company has formulated a firm Fair value of plan assets of the Companys
succession plan which includes performance funded gratuity and funded pension 0
Defined benefit Fair Value of
obligation (present value) Plan Assets
evaluation and appropriate training schemes stood at Rs. 1.85 billion and Rs.
2013 2014
requirements for development of potential 2.55 billion respectively at the close of 2014,
future leaders. Detail of Succession Planning representing an accumulative increase of Rs.
is available in the Human Resources portion 0.91 billion compared to last year. Detail of
of the Corporate Governance Section. retirement benefit funds have been disclosed
in note 11 of the financial statements.
60
Annual Report of Fauji Fertilizer Company Limited 2014
Corporate Governance
With a view to ensuring long term have been consistently applied in to promote confidence and trust between
satisfaction of our shareholders, creditors, preparation of the financial statements individuals and entities. Upholding the
employees, customers, suppliers and and accounting estimates are based on highest standards of ethical behaviour is
regulators, we have ensured existence of reasonable and prudent judgment therefore a driver of business growth.
transparency and good governance at the International Financial Reporting
Conflict of
very core of our business strategies and Standards, as applicable in Pakistan,
practices. have been followed in preparation
Compliance
from the best practices of corporate
governance, as detailed in the Listing
All the directors exercise their due rights of
Compliance
Directors At FFC, we ensure high level of ethical
Information technology governance at FFC
provides advice, oversight and contributes
Compliance behaviour in all aspects of business conduct
and decision making. Code of Conduct
to the overall strategic decision making by
Statement
the management keeping in view the impact
and ethical principles have been formulated
of information technology on shareholders
and disseminated to all our employees in
value and returns.
Directors are pleased to state that: compliance with the Code of Corporate
The financial statements, prepared by Governance. Proper systems and controls
Towards this end, the Company
the Management of the Company, are in place for identification and redress of
continuously explores the prospects of
present fairly its state of affairs, the grievances arising as a result of any unethical
implementing the best and latest IT
result of its operations, cash flows and practice.
technologies and infrastructure to enable
changes in equity efficient and timely decision making, in
Proper books of account of the Conformity with applicable regulations
addition to economising on the costs related
Company have been maintained and organizational objectives is ensured
to operating and decision making processes.
Appropriate accounting policies through a set of values and ethical standards
61
Directors Report
Corporate Governance
FFCs IT Governance Policy encompasses: concerns, monitor the progress of resultant amongst other criteria. The succession
inquiries, provide feedback and where policy is updated periodically in line with
Engaging stakeholders to establish required, also voice concerns against any the Companys requirements and career
priorities for technology investment unsatisfactory inquiry or proceeding. development objectives.
that are aligned with institutional goals
Social and
and priorities The Policy covers unethical conduct,
Influencing development and design offence, breach of law or failure to comply
of technology services, policies and
solutions
with legal obligations and possible fraud
/ corruption. Due emphasis has also been Environmental
Promoting governance, transparency,
accountability and dialogue about
placed on health, safety and environmental
risks. Inappropriate or malicious reporting
Responsibility
technology that facilitates effective
strategy adoption
leading to wrongful convictions have been
specifically forbidden, with clear definition
Policy
Ensuring compatibility, integration of consequences for the persons making FFC is committed to act responsibly
and avoiding redundancy wrongful accusations. towards the community and environment
Maximizing return on technology for our mutual benefit as FFC believes that
investment and controlling spending, Instances during the year the success of the Company emanates from
while providing FFC with a coherent, the development of the community. Our
No material incidence was reported to the
integrated IT architecture and Social and Environmental practices have
Audit Committee during the year regarding
management structure been elaborated in the section relating to
improprieties in financial, operating, legal
Securing the Companys data Corporate Social Responsibility, with the
or other matters. All minor events requiring
Keeping the IT function proactive following distinct features:
managements attention were duly addressed
from an innovation perspective,
with dissemination of messages across the
providing ideas to the business Community investment & welfare
Company for avoidance of such incidents in
the future. schemes
Whistle Blowing
Rural development programmes
Corporate Social Responsibility
The Whistle Blowing Policy is applicable to induction in all functions of the Company
all employees, management & the Board
and extends to every individual associated
and ensures provision of a conducive
environment to stimulate performance,
Investors
with the Company including contractors,
suppliers, business partners and shareholders
in addition to market commensurate
remuneration to retain quality workforce,
Grievance Policy
etc., who can participate effectively and in
confidentiality, without fear of reprisal or
and developing and refining their abilities
for prospective leadership roles.
/ Redressal
repercussions. The employees are required of Investors
to report concerns directly to immediate The Company also ensures availability of
supervisors. However, where reporting to competent personnel in each department complaints
supervisors is impracticable, the level may be through a comprehensive Succession
raised to the senior management. Planning Policy, carried out in terms of The Company believes in allowing full
an individuals potential, qualification, access to all shareholders including potential
The policy has been designed to encourage period of service and professional attitude investors, to call for information or detail on
all stakeholders to raise questions and
62
Annual Report of Fauji Fertilizer Company Limited 2014
grievance
Investigations are also carried out Relations Section reserve sites to maintain real-time
backup of all primary data
to inquire whether the cause of the
grievance was a weakness in the system
on FFC website Implementation of a comprehensive
password authorization matrix for
or negligence/willful act on part of any security of electronic documentation
Detailed Company information regarding
employee financial highlights, investor information, including the Companys SAP-ERP
Appropriate remedial action is taken share pattern/value and other requisite system
immediately to ensure avoidance in the information specified under the relevant Determination of responsibility
future regulations, has been placed on the for all Company departments for
corporate website of the Company, which is safeguarding of their respective record
updated on regular basis. Immediate reporting of breach of
security or damage of record to the
In order to promote investor relations and management
facilitate access to the Company for grievance
63
Directors Report
Corporate Governance
Establishment of on-site and remote executive) is indicated in the Statement of
Disaster Recovery areas to provide Compliance with the Code of Corporate Balance of Non-Executive &
Executive Directors
immediate backup of all primary Governance, issued by the Company.
data, in line with Business Continuity
Composition
Practices
8%
8%
directors possessing relevant industry All three members of the Human Resource
experience. and Remuneration Committee are non-
executive directors. They were neither
0
The Board comprises of a group of involved in the Management of the 163rd
BOD
164th
BOD
165th
BOD
166th
BOD
167th
BOD
168th
BOD
highly qualified professionals from varied Company previously nor are connected Attendance Quorum Required
(Number) (Number)
disciplines in order to ensure effective and with any business or other relationships that
efficient decision making. Management could interfere materially with, or appear to
professionals from Armed Forces, affect, their judgment.
engineering, commerce, Government Decisions made by the Board during the
and the financial sector form a nonpareil meetings were clearly stated in the minutes
combination of knowledge, experience and Meetings of the of the meetings maintained by the Company
Secretary, and were duly circulated to all
expertise to run the affairs of the Company.
Furthermore, gender representation is also Board the directors for endorsement and were
encouraged on FFCs Board of Directors. approved in the subsequent Board meetings.
Legally, the Board is required to meet at least
once per quarter to monitor the Companys All meetings of the Board during the year
Detailed profiles of directors including
performance aimed at effective and timely had attendance more than requisite quorum
the names, status (independent/non-
accountability of its Management. Special prescribed by the Code of Corporate
executive/executive), in addition to industry
meetings were also called during the year to Governance and were also attended by the
experience and directorship of other
discuss other important matters on required Chief Financial Officer and the Company
companies, has been stated in the beginning
basis. The Board held 6 meetings during the Secretary.
of the Annual Report 2014. The status of
year, the notices / agendas of which were
directorship (independent, executive, non-
circulated in advance, in a timely manner.
64
Annual Report of Fauji Fertilizer Company Limited 2014
Roles and
For the purpose of ensuring consistency
as new fellow members joining during the
and standardization, the Board has devised
year. We hope this change in composition of
Responsibilities
formal policies for conducting business
the Board will bring new vision and spirit to
and ensures their monitoring through an
FFC and the members of the Board would
of the Board of
independent Internal Audit Department,
which continuously monitors adherence to work cohesively as a team for the benefit of
the organization and to generate new ideas
Directors
Company policies.
for progress and improvement.
The directors are fully aware of the level of Changes to the Directors
trust shareholders entrust in them and the
immense responsibility they have bestowed Board Remuneration
on them for smooth running of the
Company and safeguarding their interests. During the year, six of our fellow Board
members retired and we would like to FFC has established formal and transparent
record our appreciation for the invaluable procedures for fixing the remuneration
65
Directors Report
Corporate Governance
The Chairman acts as the head of the Board
Directors Qualification Directors Tenure meetings and is responsible for avoidance
(Number) (Years)
of conflicts of interests. He has the power
to set the agenda, give directions and sign
the minutes of the Board meetings. The
Chairman is also responsible for assessing
2
and making recommendations regarding the
5 effectiveness of the Board, the committees
4
2
and individual directors. The Chairman
ensures effective role of the Board in
9 fulfilling all its responsibilities.
Review by the
In line with globally implemented / designed
Board Performance Evaluation mechanisms,
FFC has devised a methodology for
evaluating the Boards performance as
Brief Role & Board
an entity, by the members of the Board
themselves, on the basis of following factors:
responsibilities Appointment of the CEO is approved by
scope etc.
Board functions and responsibilities
CEO reviewed by the Board on annualised basis,
with regard to the roles and responsibilities
Monitoring of Companys performance The Chairman represents the non-executive stated above, in addition to responsibilities
directors of the Board and is entrusted with assigned by the statute.
Evaluation proformas are circulated to the the leadership of the Boards proceedings.
members and each member is required
66
Annual Report of Fauji Fertilizer Company Limited 2014
CEOs achievements for the year 2014 are Important documents pertaining to practices and policies adopted by developed
supported by strong Company profitability, the Companys legal status nations across the globe.
acquisitions, commercial / construction, Critical performance indicators
progress of diversified projects, identification Summary of major members, These courses help the directors reassess their
of new investment opportunities, in stakeholders, suppliers and auditors role in the Companys progress and hone
addition to transparency and good Role and responsibility of the Director their competencies for the betterment of the
governance. Nomination of CE&MD as per the Companies Ordinance, Company in line with Code of Corporate
of FFC on the Board of Directors of including Code of Corporate Governance.
International Fertilizer Association is also a Governance and any other regulatory
Directors
testimony to international recognition. laws applicable in Pakistan
FFCs expectations from the Board,
Formal
in terms of output, professional
behaviour, values and ethics Training Program
Orientation at Policy on Directors fees and other
expenses
Remaining well ahead of the requirements
of Code of Corporate Governance to
Induction Facets of the Companys business
including:
obtain Directors Certification by 2016, all
directors on FFC Board were appropriately
Strategic plans
Each new member of the Board is taken certified by April 2014 from SECP approved
Marketing analysis institution. Two of these directors were
through a detailed orientation process at the
Forecasts, budget and 5 year subsequently replaced by two new Board
time of induction, and is trained extensively
business plans members and certification of the two new
for enhancement of management skills.
Latest financial statements Board members is also scheduled during the
A formal familiarization program mainly
Important minutes of past current year to ensure certification of the
features the following:
meetings entire FFC Board, well in advance of the
Major litigations, current and prescribed timeframe.
The Companys visions and strategies
potential
Companys core competencies,
Policy in relation to dividends, Names of the directors who have attained
investments, diversification ventures,
health & safety, environment, the specified certification are given in the
etc.
ethics, corporate social attached table:
Organizational / group structure,
responsibility, bribery,
subsidiaries, associations and other
whistleblowing and conflict of 1 Lt Gen Naeem Khalid Lodhi, HI(M)
related parties
interest, among others (Retired)
Summary of the Companys major
2 Mr Qaiser Javed
assets, liabilities, noteworthy contracts
Apart from an official orientation, Directors 3 Dr Nadeem Inayat
and major competitors 4 Mr Jorgen Madsen
of FFC were sent abroad for trainings to
Major risks both external and internal, 5 Maj Gen Ghulam Haider, HI(M)
enhance their management skills and keep
including legal and regulatory risks and (Retired)
them abreast with the best management
constraints
67
Directors Report
Corporate Governance
6
7
Brig Dr Gulfam Alam, SI(M) (Retired)
Mr Khizar Hayat Khan Review of The annual financial statements along with
consolidated financial statements have also
8
9
Engr Rukhsana Zuberi
Mr Farhad Shaikh Mohammad
Related Party been audited by the external auditors and
approved by the Board within one month
10
11
Mr Shahid Ghaffar
Ms Nargis Ghaloo
Transactions after the closing date and will be presented
to the shareholders in the Annual General
Meeting for approval.
In compliance with the Code of Corporate
last AGM
circulated to governing bodies and other
transactions are placed before the Audit
stake holders were also delivered in an
Committee and upon recommendations of
accurate and timely manner.
Companys shareholders raised a concern the Audit Committee, the same are placed
during the 36th Annual General Meeting before the Board for review and approval.
of the Company held on March 14, Auditors
2014, regarding the cost of publishing of
Companys annual report and requested
Quarterly and A.F.Ferguson & Co. Chartered Accountants
reduction in the printing costs. The matter
was taken up with SECP and as a result of
Annual Financial have completed the annual audit for the
year ended December 31, 2014, and have
Companys efforts, SECP allowed circulation
of annual reports to the shareholders in
Statements issued an unqualified audit report. The
auditors will retire on the conclusion of the
electronic format through email, enabling Periodic financial statements of the upcoming Annual General Meeting of the
savings in terms of time and costs through Company during 2014 were circulated Company, and being eligible, have offered
utilization of cost effective and efficient to directors, duly endorsed by the CEO themselves for reappointment for the year
technology. and the Chief Financial Officer. Quarterly ending December 31, 2015.
financial statements of the Company, along
Trading in shares with consolidated financial statements Based on a notice received from a
of the Group, were approved, published shareholder to change the Auditors and
68
Annual Report of Fauji Fertilizer Company Limited 2014
Information Technology
The Company remains focused on
continuous exploration of best technologies Business Disaster
and infrastructure, to enable efficient
and timely decision making, in addition
Continuity Recovery
to economising on the costs related to
operating and decision making processes.
Planning Planning
In todays era of technological dominance As part of BCP, a Disaster Recovery site
At FFC, IT governance is aligned to and extreme competition, sustained / (DR) has been established to further
promote transparency, accountability and continued business operations is critical strengthen the availability of IT/SAP services
dialogue in our technological / infrastructure and the Company has undertaken effective in case of a disaster.
development activities, in addition to measures to enhance the resilience and
safeguarding of Companys information endurance capacities of its business and The site hosts backup servers for shifting of
/ data bank and maximizing the return operations, against disruptions / calamities. services during a disaster. A comprehensive
on technology investment and controlled set of policies and procedures have also
spending. External as well as internal stake holders been implemented to ensure a hassle free
from all critical departments of the movement of transactions from primary site
Disaster Investors
computer, communications and network
environment in the event of an unexpected
Recovery & Business Continuity Planning (BCP) shows
and unscheduled interruption. An
organization wide information security
Business our investors that we take our business
seriously and are prepared to maintain
department has also been established for
enhancing overall security posture of the
Continuity productivity regardless of difficulty.
organization.
Planning Employees
69
Directors Report
Sustainability
Community support and uplift
Disaster relief and rehabilitation
Construction of new class rooms and
associated facilities at Govt. Girls
Development of partnerships with Primary School Wahid Buksh Lar
FFC is pleased to enter its 32nd year of
reputable social organizations Infrastructure development of three
sustainable and responsible business
Promotion of sports in the Country Primary Schools at Jhimpir
practices. With a contribution of over
Uplift of Govt. Higher Secondary
1% of after tax profitability towards CSR
Corporate / Social
School Old, Sadiqabad
initiatives during 2014, our commitment
towards the development of the society Tameer-e-Millat Foundation (TMF)
remains strong, fully aligned with the Responsibility TMF is a reputed Not for profit
evolving dynamics of the 21st century.
Initiative organization working for the provision of
cost effective & quality education to talented
In FFC, CSR is a management process that
integrates the Companys socio-economic Education and deserving students from across Pakistan.
concerns with its business operations FFC contributed to the cause by donating
Rehabilitation of schools at Goth
and the interests of all its stakeholders. Machhi and Jhimpir 5 vehicles for the transportation of students
The Company has diversified its field of and faculty and provided full sponsorship
FFC through its CSR Program is committed
interventions by venturing into more critical to 5 deserving talented students for 3 years
to the provision of quality education
challenging and extensive programs in 2014, Diploma of Associate Engineering Programs
to the underprivileged and deprived
as highlighted below: inclusive of boarding and lodging expense.
children of Pakistan. In pursuance of this
a comprehensive infrastructure uplift and FFC collaborates with leading
Provision of education to the
rehabilitation program was successfully academia and educational institutes
underprivileged
concluded for over 50 schools in Goth
Development of health care facilities Complete support was extended to 2
Machhi and Jhimpir, entailing the following:
Environmental conservation students at NAMAL College, by donating
70
Annual Report of Fauji Fertilizer Company Limited 2014
71
Directors Report
72
Annual Report of Fauji Fertilizer Company Limited 2014
73
Directors Report
Business
Prompt action by the Management to through import substitution based on 2,403
check such unfair practices and ensure thousand tonnes of urea manufactured
Ethics & Anti- that such activities are not repeated during the year.
continuously monitored to ensure fairness provide assistance to the drought hit areas
and honesty in all business practices and and ongoing efforts are still being made as
40000
activities, by all FFC functions, through the the relentless conditions continue to prevail
following salient measures: in this region.
30000
74
Annual Report of Fauji Fertilizer Company Limited 2014
75
Directors Report
2014 witnessed increase in GIDC cost at dividend receipt from Fauji Cement and first The Board is confident that with the
the beginning of the year and again during ever dividend distribution from Askari Bank implementation of effective mitigation
July 2014. A significant portion of this provide further confidence of sustained strategies, cost economization and
price increase had to be absorbed because of profitability, as a result of strategic objectives consolidation of our diversification
market conditions, negatively impacting the of the Company. Construction work on initiatives, we shall continue to provide
Company margins. the Individually Quick Freeze (IQF) Plant sustained returns to our shareholders, in
of Fauji Fresh n Freeze Limited (formerly addition to maintaining our reputation for
The Company however attained all of the Al-Hamd Foods Limited), is progressing as good governance.
Boards objectives in terms of profitability, per plan with scheduled inauguration during
diversification and good governance. 2015. Favourable Governmental policies in line
with the Fertilizer Policy 2001 shall play a
Going forward, Company urea production FFC is also evaluating further diversification, vital role towards ensuring the availability
and sales are expected to remain fairly this time into establishing an offshore of affordable indigenous fertilizers for the
consistent whereas operating and other fertilizer plant in Tanzania, which offers farming community, in addition to assisting
costs, except for the cost of feed/fuel gas, strong prospective fertilizer demand the Government not only in terms of
are projected to move in line with historical within Tanzania and its neighbouring foreign exchange and subsidy savings, but
trends. However, our performance is based landlocked countries, to augment Company also towards ensuring food security in the
on a variety of external factors many of profitability in addition to extension of Country.
which are beyond the Companys control. A technical / professional services to other
higher than projected change in these factors fertilizer complexes. We are further
can lead to material variances between actual exploring the prospects of coal mining and On behalf of the Board,
and projected performance. Quantification the Company is considering undertaking
of projections / forecasts can therefore of initial technical, geographical and
expose FFC towards the possibility of over / commercial evaluation before final decision
under valuation of Company equity, by the on project implementation.
market.
Pursuant to our drive for energy Lt Gen Khalid Nawaz Khan
The achievement of Tariff True-up by conservation and identification of alternate HI (M), Sitara-i-Esar (Retired)
FFC Energy during 2014 shall add to the energy sources, FFC is evaluating the Chairman
revenues of the wind power project and installation of coal fired boilers to hedge Rawalpindi
returns for the Company. Incremental against gas curtailment and declining gas January 30, 2015
reserves.
76
Financial Statements of Fauji Fertilizer Company Limited 2014
Financial Statements
Fauji Fertilizer Company Limited
77
Report of the Audit Committee
on Adherence to the Code of Corporate Governance
The Audit Committee has concluded its annual review of the conduct and operations of the Company during 2014, and
reports that:
The Company has issued a Statement of Compliance with the Code of Corporate Governance which has also
been reviewed and certified by the Auditors of the Company.
Understanding and compliance with Company codes and policies has been affirmed by the members of the
Board, the Management and employees of the Company individually. Equitable treatment of shareholders has
also been ensured.
Appropriate accounting policies have been consistently applied. All core & other applicable International
Accounting Standards were followed in preparation of financial statements of the Company and consolidated
financial statements on a going concern basis, for the financial year ended December 31, 2014, which present
fairly the state of affairs, results of operations, profits, cash flows and changes in equities of the Company and its
subsidiaries for the year under review.
The Chief Executive and the CFO have endorsed the financial statements of the Company, consolidated financial
statements and the Directors Report. They acknowledge their responsibility for true and fair presentation of the
Companys financial condition and results, compliance with regulations and applicable accounting standards and
establishment and maintenance of internal controls and systems of the Company.
Accounting estimates are based on reasonable and prudent judgment. Proper and adequate accounting records
have been maintained by the Company in accordance with the Companies Ordinance, 1984. The financial
statements comply with the requirements of the Fourth Schedule to the Companies Ordinance, 1984 and the
external reporting is consistent with Management processes and adequate for shareholder needs.
All Directors have access to the Company Secretary. All direct or indirect trading and holdings of Companys
shares by Directors & executives or their spouses were notified in writing to the Company Secretary along with
the price, number of shares, form of share certificates and nature of transaction which were notified by the
Company Secretary to the Board within the stipulated time. All such holdings have been disclosed in the Pattern
of Shareholdings. The Annual Secretarial Compliance Certificates are being filed regularly within stipulated time.
Closed periods were duly determined and announced by the Company, precluding the Directors, the Chief
Executive and executives of the Company from dealing in Company shares, prior to each Board meeting involving
announcement of interim / final results, distribution to shareholders or any other business decision, which could
materially affect the share market price of Company, along with maintenance of confidentiality of all business
information.
INTERNAL AUDIT
The internal control framework has been effectively implemented through an independent in-house Internal Audit
function established by the Board which is independent of the External Audit function.
The Companys system of internal control is sound in design and has been continually evaluated for effectiveness
and adequacy.
The Audit Committee has ensured the achievement of operational, compliance, risk management, financial
reporting and control objectives, safeguarding of the assets of the Company and the shareholders wealth at all
levels within the Company.
78
Financial Statements of Fauji Fertilizer Company Limited 2014
The Internal Audit function has carried out its duties under the charter defined by the Committee. The Committee
has reviewed material Internal Audit findings, taking appropriate action or bringing the matters to the Boards
attention where required.
The Head of Internal Audit has direct access to the Chairperson of the Audit Committee and the Committee has
ensured staffing of personnel with sufficient internal audit acumen and that the function has all necessary access
to Management and the right to seek information and explanations.
Coordination between the External and Internal Auditors was facilitated to ensure efficiency and contribution to the
Companys objectives, including a reliable financial reporting system and compliance with laws and regulations.
EXTERNAL AUDITORS
The statutory Auditors of the Company, A.F. Ferguson & Co., Chartered Accountants, have completed their
Audit assignment of the Companys Financial Statements, the Consolidated Financial Statements and the
Statement of Compliance with the Code of Corporate Governance for the financial year ended December 31,
2014 and shall retire on the conclusion of the 37th Annual General Meeting.
The Audit Committee has reviewed and discussed Audit observations and Draft Audit Management Letter with
the External Auditors. Final Management Letter is required to be submitted within 45 days of the date of the
Auditors Report on financial statements under the listing regulations and shall accordingly be discussed in the
next Audit Committee Meeting. Audit observations for interim review were also discussed with the Auditors.
The Auditors have been allowed direct access to the Committee and the effectiveness, independence and
objectivity of the Auditors has thereby been ensured. The Auditors attended the General Meetings of the Company
during the year and have confirmed attendance of the 37th Annual General Meeting scheduled for March 17,
2015 and have indicated their willingness to continue as Auditors.
Based on a notice received from a shareholder to change the Auditors and in view of the good governance, the
Audit Committee has recommended the appointment of KPMG Taseer Hadi & Co., Chartered Accountants as
External Auditors of the Company for the year ending December 31, 2015.
79
Statement of Compliance
with the Code of Corporate Governance
This statement is being presented to comply with the Code of Corporate Governance (CCG) contained in listing regulations
of Karachi, Lahore and Islamabad stock exchanges for the purpose of establishing a framework of good governance,
whereby a listed Company is managed in compliance with the best practices of corporate governance.
The Company has applied the principles contained in the CCG in the following manner:-
1. The Company encourages representation of independent non-executive directors and directors representing
minority interests on its Board of directors. At present the Board includes:-
Category of Directors Names
Non-Executive Lt Gen Khalid Nawaz Khan, HI(M) (Retd)
Non-Executive Mr. Qaiser Javed
Non-Executive Dr. Nadeem Inayat
Non-Executive Mr. Jorgen Madsen
Non-Executive Maj Gen Ghulam Haider, HI(M) (Retd)
Non-Executive Brig Dr. Gulfam Alam, SI(M) (Retd)
Non-Executive Mr. Khizar Hayat Khan
Non-Executive Maj Gen Muhammad Farooq Iqbal, HI(M) (Retd)
Executive Lt Gen Naeem Khalid Lodhi, HI(M) (Retd)
Independent Engr Rukhsana Zuberi
Independent Mr. Farhad Shaikh Mohammad
Independent Mr. Shahid Ghaffar
Independent Ms. Nargis Ghaloo
(The independent directors meet the criteria of independence under clause i (b) of the CCG).
2. The directors have confirmed that none of them is serving as a director on more than seven listed companies,
including this Company.
3. All the resident directors of the Company are registered as taxpayers and none of them has defaulted in payment
of any loan to a banking Company, a DFI or an NBFI or, being a member of a stock exchange, has been declared
as a defaulter by that stock exchange.
4. Following casual vacancies occurring in the Board during the year 2014 were filled up by the directors within 7
days:
Maj Gen Ghulam Haider, HI(M) (Retd) appointed in place of Brig Dr. Gulfam Alam, SI(M) (Retd) w.e.f March
01, 2014
Maj Gen Muhammad Farooq Iqbal, HI(M) (Retd) appointed in place of Maj Gen Nasir Mahmood,
HI(M) (Retd) w.e.f June 02, 2014
Brig Dr. Gulfam Alam, SI(M) (Retd) appointed in place of Brig Parvez Sarwar Khan, SI(M) (Retd) w.e.f June 02,
2014
Mr. Muhammad Raeesuddin Paracha appointed in place of Mr. Alamuddin Bullo w.e.f June 02, 2014
Mr. Shahid Ghaffar appointed in place of Mr. Manzoor Ahmed w.e.f October 20, 2014
Ms Nargis Ghaloo appointed in place of Mr. Muhammad Raeesuddin Paracha w.e.f. November 05, 2014
Lt Gen Khalid Nawaz Khan, HI(M) (Retd) appointed in place of Lt Gen Muhammad Mustafa Khan, HI(M)
(Retd) w.e.f January 02, 2015
5. The Company has prepared a Code of Conduct and has ensured that appropriate steps have been taken to
disseminate it throughout the Company along with its supporting policies and procedures.
6. The Board has developed a vision / mission statement, overall corporate strategy and significant policies of
the Company. A complete record of particulars of significant policies along with the dates on which they were
approved or amended has been maintained.
80
Financial Statements of Fauji Fertilizer Company Limited 2014
7. All the powers of the Board have been duly exercised and decisions on material transactions, including
appointment and determination of remuneration and terms and conditions of employment of the CEO and non-
executive directors, have been taken by the Board / shareholders.
8. All the meetings of the Board were presided over by the Chairman and the Board met at least once in every
quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated within due
time before the meetings. The minutes of the meetings were appropriately recorded and circulated.
9. Eleven of the directors have attended directors training program during the year 2014. The remaining two
directors shall obtain certification under directors training program upto 2016.
10. The Board has approved appointment of the Chief Financial Officer (CFO), Company Secretary and Head of
Internal Audit, including their remuneration and terms & conditions of employment.
11. The Directors Report for this year has been prepared in compliance with the requirements of the CCG and fully
describes the salient matters required to be disclosed.
12. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board.
13. The directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed
in the pattern of shareholding.
14. The Company has complied with the corporate and financial reporting requirements of the CCG.
15. The Board has formed an Audit Committee. It comprises of four members, three of whom are non-executive
directors and the Chairperson of the committee is an independent non - executive director.
16. The meetings of the Audit Committee were held at least once every quarter prior to approval of interim and final
results of the Company and as required by the CCG. The terms of reference of the Committee have been formed
and advised to the Committee for compliance.
17. The Board has formed a Human Resources and Remuneration Committee. It comprises three members, all of
whom are non-executive directors including the Chairman of the Committee.
18. The Board has set up an effective Internal Audit function which is considered suitably qualified and experienced
for the purpose and is conversant with the policies and procedures of the Company.
19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under
the Quality Control Review program of the ICAP, that they or any of the partners of the firm, their spouses and
minor children do not hold shares of the Company and that the firm and all its partners are in compliance with
International Federation of Accountants (IFAC) guidelines on Code of Ethics as adopted by the ICAP.
20. The statutory auditors or the persons associated with them have not been appointed to provide other services
except in accordance with the Listing Regulations and the auditors have confirmed that they have observed IFAC
guidelines in this regard.
21. The closed period, prior to the announcement of interim / final results, and business decisions, which may
materially affect the market price of Companys securities, was determined and intimated to the directors,
employees and stock exchanges.
22. Material / price sensitive information has been disseminated among all market participants at once through the
stock exchanges.
23. We confirm that other material principles enshrined in the CCG have been complied with.
81
Review Report to the Members
on Statement of Compliance with Code of Corporate Governance
We have reviewed the Statement of Compliance with the best practices contained in the Code of Corporate Governance
(the Code) prepared by the Board of Directors (the Board) of Fauji Fertilizer Company Limited (the Company) for the
year ended December 31, 2014, to comply with the requirements of Listing Regulation No. 35 of the respective Stock
Exchanges where the Company is listed.
The responsibility for compliance with the Code is that of the Board of the Company. Our responsibility is to review, to the
extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the
Companys compliance with the provisions of the Code and report if it does not and to highlight any non-compliance with
the requirements of the Code. A review is limited primarily to inquiries of the Companys personnel and review of various
documents prepared by the Company to comply with the Code.
As a part of our audit of the financial statements we are required to obtain an understanding of the accounting and internal
control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider
whether the Boards statement on internal control covers all risks and controls or to form an opinion on the effectiveness of
such internal controls, the Companys corporate governance procedures and risks.
The Code requires the Company to place before the Audit Committee, and upon recommendation of the Audit Committee,
place before the Board for their review and approval its related party transactions distinguishing between transactions
carried out on terms equivalent to those that prevail in arms length transactions and transactions which are not executed at
arms length price and recording proper justification for using such alternate pricing mechanism. We are only required and
have ensured compliance of this requirement to the extent of the approval of the related party transactions by the Board
upon recommendation of the Audit Committee. We have not carried out any procedures to determine whether the related
party transactions were undertaken at arms length price or not.
Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does
not appropriately reflect the Companys compliance, in all material respects, with the best practices contained in the Code
as applicable to the Company for the year ended December 31, 2014.
82
Financial Statements of Fauji Fertilizer Company Limited 2014
We have audited the annexed balance sheet of Fauji Fertilizer Company Limited (the Company) as at December 31, 2014
and the related profit and loss account, statement of comprehensive income, cash flow statement and statement of
changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained
all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of
our audit.
It is the responsibility of the Companys management to establish and maintain a system of internal control, and prepare
and present the above said statements in conformity with the approved accounting standards and the requirements of the
Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.
We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that
we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the above said statements. An audit also includes assessing the accounting policies and significant estimates made by
management, as well, evaluating the overall presentation of the financial statements. We believe that our audit provides a
reasonable basis for our opinion and, after due verification, we report that:
(a) in our opinion, proper books of account have been kept by the Company as required by the Companies Ordinance,
1984;
(i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in
conformity with the Companies Ordinance, 1984 and are in agreement with the books of account and are
further in accordance with accounting policies consistently applied,
(ii) the expenditure incurred during the year was for the purpose of the Companys business; and
(iii) the business conducted, investments made and the expenditure incurred during the year were in accordance
with the objects of the Company.
(c) in our opinion and to the best of our information and according to the explanations given to us, the balance
sheet, profit and loss account, statement of comprehensive income, cash flow statement and statement of
changes in equity together with the notes forming part thereof conform with the approved accounting standards
as applicable in Pakistan, and give the information required by the Companies Ordinance, 1984, in the manner so
required and respectively give a true and fair view of the state of the Companys affairs as at December 31, 2014
and of the profit, total comprehensive income, its cash flows and changes in equity for the year then ended; and
(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980) was deducted
by the Company and deposited in the Central Zakat Fund established under section 7 of that Ordinance.
2014 2013
Note (Rupees 000)
84
Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
Note (Rupees 000)
ASSETS
NON - CURRENT ASSETS
Property, plant and equipment 15 20,093,898 18,444,188
Intangible assets 16 1,611,204 1,651,592
Long term investments 17 28,134,520 20,662,532
Long term loans and advances 18 823,188 740,408
Long term deposits and prepayments 19 15,624 2,654
50,678,434 41,501,374
CURRENT ASSETS
Stores, spares and loose tools 20 3,314,823 3,244,645
Stock in trade 21 981,750 301,957
Trade debts 22 822,460 700,541
Loans and advances 23 1,058,754 921,460
Deposits and prepayments 24 26,376 37,225
Other receivables 25 1,072,461 799,922
Short term investments 26 27,432,837 18,960,295
Cash and bank balances 27 1,173,767 1,361,651
35,883,228 26,327,696
TOTAL ASSETS 86,561,662 67,829,070
2014 2013
Note (Rupees 000)
2014 2013
(Rupees 000)
2014 2013
Note (Rupees 000)
(Rupees 000)
Balance at December 31, 2013 12,722,382 160,000 6,802,360 5,456,013 10,508 25,151,263
Transfer to general reserve
Total comprehensive income for the year
Profit after taxation 18,170,760 18,170,760
Other comprehensive income - net of tax 56,621 293,056 349,677
18,227,381 293,056 18,520,437
Distribution to owners
Final dividend 2013: Rs 4.00 per share (5,088,952) (5,088,952)
First interim dividend 2014: Rs 3.00 per share (3,816,714) (3,816,714)
Second interim dividend 2014: Rs 3.40 per share (4,325,610) (4,325,610)
Third interim dividend 2014: Rs 3.75 per share (4,770,893) (4,770,893)
(18,002,169) (18,002,169)
Balance at December 31, 2014 12,722,382 160,000 6,802,360 5,681,225 303,564 25,669,531
The annexed notes 1 to 42 form an integral part of these financial statements.
90
Financial Statements of Fauji Fertilizer Company Limited 2014
Items included in the financial statements are measured using the currency of the primary economic environment
in which the Company operates. These financial statements are presented in Pak Rupees, which is the Companys
functional currency.
4.3 Staff Retirement benefits
(a) The Company has the following plans for its employees:
Defined benefit funded gratuity and pension fund for all eligible employees who complete qualifying period of
service and age.
These funds are administered by trustees. Annual contributions to the gratuity and management staff pension
funds are based on actuarial valuation using Projected Unit Credit Method, related details of which are given in
note 11 to the financial statements. All contributions are charged to profit or loss for the year.
Calculation of gratuity and pension requires assumptions to be made of future outcomes which mainly include
increase in remuneration, expected long-term return on plan assets and the discount rate used to convert future
cash flows to current values. Calculations are sensitive to changes in the underlying assumptions.
Contributory Provident Fund
Defined contribution provident fund for all eligible employees for which the Companys contributions are charged
to profit or loss at the rate of 10% of basic salary.
(b) Compensated absences
The Company has the policy to provide for compensated absences of its employees in accordance with respective
entitlement on cessation of service; related expected cost thereof has been included in the financial statements.
4.4 Taxation
Current tax
Provision for current taxation is based on taxable income at the applicable rates of taxation after taking into
account tax credits and tax rebates, if any. Income tax expense is recognised in profit or loss except to the extent
that it relates to items recognised directly in equity or in other comprehensive income.
Deferred tax
Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences
arising from differences between the carrying amount of assets and liabilities in the financial statements and the
corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are recognised for all
taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable
profits will be available against which the deductible temporary differences, unused tax losses and tax credits can
be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised. Deferred tax is not recognised on temporary differences
arising from the initial recognition of assets or liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss, and differences arising on the initial recognition of goodwill.
91
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse, based
on tax rates that have been enacted. Deferred tax assets and liabilities are offset if there is a legally enforceable
right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on
the same taxable entity, or on different taxable entities, but they intend to settle current tax liabilities and assets on
a net basis or their tax assets and liabilities will be realised simultaneously.
The Company takes into account the current income tax law and decisions taken by the taxation authorities.
Instances where the Companys views differ from the income tax department at the assessment stage and where
the Company considers that its view on items of material nature is in accordance with law, the amounts are shown
as contingent liabilities.
4.5 Property, plant and equipment and capital work in progress
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any
except freehold land and capital work in progress, which are stated at cost less impairment losses, if any. Cost
comprises acquisition and other directly attributable costs.
Depreciation is provided on a straight-line basis and charged to profit or loss to write off the depreciable amount of
each asset over its estimated useful life at the rates specified in note 15. Depreciation on addition in property, plant
and equipment is charged from the date when the asset becomes available for use upto the date of its disposal.
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the
item if it is probable that the future economic benefits embodied within the part will flow to the Company and its
cost can be measured reliably. The carrying amount of the replaced part is derecognised, if any. The costs of the
day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within
other income in profit or loss.
The Company reviews the useful life and residual value of property, plant and equipment on a regular basis. Any
change in estimates in future years might affect the carrying amounts of the respective items of property, plant and
equipment with a corresponding effect on depreciation charge and impairment.
4.6 Impairment
The carrying amount of the Companys assets are reviewed at each balance sheet date to determine whether
there is any indication of impairment. If such indications exist, the assets recoverable amount is estimated in
order to determine the extent of the impairment loss, if any. Impairment loss is recognised as an expense in the
profit or loss. An impairment loss is reversed only to the extent that the assets carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss
had been recognised. For non-financial assets and available-for-sale financial assets that are debt securities, the
reversal is recognised in profit or loss. For available-for-sale financial assets that are equity securities, the reversal
is recognised directly in statement of comprehensive income.
4.7 Goodwill
On acquisition of an entity, excess of the purchase consideration over the fair value of the identifiable assets and
liabilities acquired is initially recognised as goodwill and thereafter tested for impairment annually. Subsequent to
initial recognition goodwill is recognised at cost less impairment, if any. In respect of equity accounted investees,
goodwill is included in the carrying amount of investment.
92
Financial Statements of Fauji Fertilizer Company Limited 2014
4.8 Investments
Investment in subsidiary is initially recognised at cost. At subsequent reporting date, recoverable amounts are
estimated to determine the extent of impairment loss, if any, and carrying amount of investment is adjusted
accordingly. Impairment losses are recognised as expense in profit or loss. Where impairment loss is subsequently
reversed, the carrying amounts of investment are increased to its revised recoverable amount but limited to the
extent of initial cost of investment. Reversal of impairment losses are recognised in the profit or loss.
The profits and losses of subsidiaries are carried forward in their financial statements and not dealt within these
financial statements except to the extent of dividend declared by the subsidiaries. Gains and losses on disposal of
investment are included in other income. When the disposal of investment in subsidiary resulted in loss of control
such that it becomes an associate, the retained investment is carried at cost.
4.8.2 Investment in associates and jointly controlled entities
Investments in associates and jointly controlled entities are initially recognised at cost. At subsequent reporting
date, the recoverable amounts are estimated to determine the extent of impairment losses, if any, and carrying
amounts of investments are adjusted accordingly. Impairment losses are recognised as expense in the profit
or loss. Where impairment losses are subsequently reversed, the carrying amounts of these investments are
increased to the revised recoverable amounts but limited to the extent of initial cost of investments. A reversal of
impairment loss is recognised in the profit or loss.
The profits and losses of associates and jointly controlled entities are carried forward in their financial statements
and not dealt within these financial statements except to the extent of dividend declared by the associates and
jointly controlled entities. Gains and losses on disposal of investments are included in other income.
4.8.3 Investment available for sale
These are initially measured at their fair value plus directly attributable transaction cost and at subsequent
reporting dates measured at fair values and gains or losses from changes in fair values other than impairment loss
are recognised in other comprehensive income until disposal at which time these are recycled to profit or loss.
Impairment loss on investments available for sale is recognised in the profit or loss.
4.8.4 Acquisition under common control
Acquisition under common control of the shareholders are initially recognised using exchange transaction basis.
All the acquisitions under common control are accounted for from the year in which the acquisition takes place
without restating the Companys (acquirer) comparative financial statements.
4.8.5 Investments at fair value through profit or loss
Investments which are acquired principally for the purpose of selling in the near term or the investments that are
part of a portfolio of financial instruments exhibiting short term profit taking, are classified as fair value through
profit or loss and designated as such upon initial recognition. These are stated at fair values with any resulting
gains or losses recognized directly in profit or loss.
The Company recognizes the regular way purchase or sale of financial assets using settlement date accounting.
4.8.6 Loans and receivables
Investments are classified as loans and receivables which have fixed or determinable payments and are not quoted
in an active market. These investments are measured at amortised cost using the effective interest method, less
any impairment losses. 93
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
Stores, spares and loose tools are valued at weighted average cost less impairment. The Company reviews the
carrying amount of stores and spares on a regular basis and provision is made for obsolescence if there is any
change in usage pattern and physical form of related stores, spares and loose tools. Impairment is also made for
slow moving spares. Stores in transit are stated at invoice value plus other charges paid thereon.
4.10 Stock in trade
Stocks are valued at the lower of cost and net realisable value.
Cost is determined as follows:
Raw materials at weighted average purchase cost and directly attributable expenses
Work in process and finished goods at weighted average cost of purchase, raw materials and
applicable manufacturing expenses
Net realisable value signifies the estimated selling price in the ordinary course of business less the estimated costs
of completion and the estimated costs necessary to make the sale.
The Company reviews the carrying amount of stock in trade on a regular basis and as appropriate, inventory
is written down to its net realizable value or provision is made for obsolescence if there is any change in usage
pattern and / or physical form of related inventory.
4.11 Foreign currency transaction and translation
Transactions in foreign currency are accounted for at the exchange rates prevailing on the date of transactions. All
monetary assets and liabilities denominated in foreign currencies at the year end are translated at exchange rates
prevailing at the balance sheet date. Non monetary items that are measured in terms of historical cost in a foreign
currency are translated using exchange rate at the date of transaction. Exchange differences are included in profit
or loss for the year.
4.12 Revenue recognition
Sales revenue is recognised when the goods are dispatched and significant risks and rewards of ownership are
transferred to the customer. Revenue from sale of goods is measured at the fair value of consideration received or
receivable, net of returns and trade discounts. Scrap sales and miscellaneous receipts are recognised on realised
amounts. Commission on sale of subsidiary company products is recognised when such products are sold on its
behalf.
4.13 Borrowing costs
Borrowing costs which are directly attributable to the acquisition, construction or production of a qualifying asset
are capitalised as part of the cost of that asset. Borrowing cost includes exchange differences arising from foreign
currency borrowings to the extent these are regarded as an adjustment to borrowing costs. All other borrowing
costs are charged to profit or loss.
4.14 Research and development costs
Research and development costs are charged to profit or loss as and when incurred.
94
Financial Statements of Fauji Fertilizer Company Limited 2014
4.15 Provisions
Provisions are recognised when the Company has a present legal or constructive obligation as a result of past
events, it is probable that an outflow of resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of obligation. Provisions are reviewed at each
balance sheet date and adjusted to reflect current best estimate.
4.16 Basis of allocation of common expenses
Selling and distribution expenses are allocated to Fauji Fertilizer Bin Qasim Limited (FFBL), in proportion to the
sales volume handled on its behalf under the Inter Company Services Agreement.
4.17 Dividend and reserve appropriation
Dividend is recognized as a liability in the period in which it is declared. Movement in reserves is recognised in the
year in which it is approved.
4.18 Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, cash with banks on current, saving and deposit accounts,
short term borrowings and other short term highly liquid investments that are readily convertible to known amounts
of cash and which are subject to insignificant risk of change in value.
4.19 Financial instruments
Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions
of the instrument and de-recognised when the Company loses control of the contractual rights that comprise
the financial assets and in case of financial liabilities when the obligation specified in the contract is discharged,
cancelled or expired. All financial assets and liabilities other than at fair value through profit or loss are initially
recognised at fair value plus transaction costs. Financial assets and liabilities carried at fair value through profit or
loss are initially recognised at fair value, and transaction costs are charged to profit or loss for the year. Any gain
or loss on derecognition of financial assets and financial liabilities is included in profit or loss for the year.
Financial assets and liabilities are offset and the net amount is reported in the balance sheet if the Company has
a legally enforceable right to setoff the recognised amounts and the Company intends to settle on a net basis, or
realise the asset and settle the liability simultaneously.
4.20 Mark-up bearing borrowings
Mark-up bearing borrowings are recognised initially at fair value being consideration received less attributable
transactions costs. Subsequent to initial recognition, mark-up bearing borrowings are stated at amortised cost.
4.21 Trade and other payables
Liabilities for trade and other payables are carried at their amortised cost which approximates the fair value of the
consideration to be paid in the future for goods and services received.
95
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
Trade debts and other receivables are recognised and carried at their amortised cost less an allowance for any
uncollectable amounts. Carrying amounts of trade debts and other receivables are assessed on a regular basis
and if there is any doubt about the realisability of these receivables, appropriate amount of provision is made.
4.23 Earnings per share
The Company presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted
average number of ordinary shares outstanding during the year. Diluted EPS is determined by adjusting the profit
or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for
the effects of all dilutive potential ordinary shares.
Finance income comprises interest income on funds invested (including available-for-sale financial assets),
dividend income, gain on disposal of available-for-sale financial assets and changes in fair value of investments
held for trading. Interest income is recognised as it accrues in profit or loss, using effective interest method.
Dividend income is recognised in profit or loss on the date that the Companys right to receive payment is
established.
Finance costs comprise interest expense on borrowings, changes in fair value of investment carried at fair value
through profit or loss and impairment losses recognised on financial assets. Borrowing costs that are not directly
attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using
effective interest method.
Foreign currency gains and losses are reported on a net basis.
4.25 Operating leases
Rentals payable under operating leases are charged to profit or loss on a straight line basis over the term of the
relevant lease.
4.26 Intangible assets
Intangibles are stated at the cash price equivalent of the consideration given less accumulated amortization
and impairment loss, if any. Intangibles with finite useful lives are amortized over the period of their useful lives.
Amortization is charged on a straight line basis over the estimated useful life and is included in the profit or loss.
4.27 Contingent Liabilities
A contingent liability is disclosed when the Company has a possible obligation as a result of past events, whose
existence will be confirmed only by the occurrence or non-occurrence, of one or more uncertain future events
not wholly within the control of the Company; or the Company has a present legal or constructive obligation that
arises from past events, but it is not probable that an outflow of resources embodying economic benefits will be
required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability.
96
Financial Statements of Fauji Fertilizer Company Limited 2014
4.28 New accounting standards, amendments and IFRIC interpretations that are not yet effective
Standards, amendments and interpretations to existing standards that are not yet effective and have not been
early adopted by the Company:
Effective date (annual
reporting periods
beginning on or after)
97
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
5. SHARE CAPITAL
AUTHORISED SHARE CAPITAL
This represents 1,500,000,000 (2013: 1,500,000,000) ordinary shares of Rs 10 each amounting to Rs 15,000,000
thousand (2013: Rs 15,000,000 thousand).
ISSUED, SUBSCRIBED AND PAID UP CAPITAL
2014 2013 2014 2013
(Numbers) (Rupees 000)
256,495,902 256,495,902 Ordinary shares of Rs 10 each
issued for consideration in cash 2,564,959 2,564,959
1,015,742,345 1,015,742,345 Ordinary shares of Rs 10 each
issued as fully paid bonus shares 10,157,423 10,157,423
1,272,238,247 1,272,238,247 12,722,382 12,722,382
5.1 Fauji Foundation held 44.35% (2013: 44.35%) ordinary shares of the Company at the year end.
2014 2013
Note (Rupees 000)
6. CAPITAL RESERVES
Share premium 6.1 40,000 40,000
Capital redemption reserve 6.2 120,000 120,000
160,000 160,000
7. REVENUE RESERVES
General reserve 6,802,360 6,802,360
Unappropriated profit 5,681,225 5,456,013
12,483,585 12,258,373
98
Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
Note (Rupees 000)
These finances are secured by an equitable mortgage on the Companys assets and hypothecation of all
Companys assets including plant and machinery, stores, spares and loose tools and all other moveable properties
including stocks and book debts, ranking pari passu with each other with 25% margin.
2014 2013
Note (Rupees 000)
9. DEFERRED LIABILITIES
Deferred taxation 9.1 3,650,872 3,259,563
Provision for compensated leave absences 9.2 923,156 818,806
4,574,028 4,078,369
99
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
2014 2013
(Rupees 000)
Acturial valuation has not been carried out as the impact is considered to be immaterial.
2014 2013
(Rupees 000)
Creditors include Rs 24,740,966 thousand (2013: Rs 8,532,062 thousand) on account of Gas Infrastructure
Development Cess (GIDC). In accordance with GIDC Act, 2011 the Company was required to pay GIDC at the
rates specified in the second schedule. During the year the Honorable Supreme Court dismissed appeals against
an earlier decision of the Honorable Peshawar High Court which declared GIDC Act, 2011 Ultra Vires to the
Constitution. The President of Pakistan promulgated the GIDC Ordinance, 2014 on September 25, 2014 with
retrospective effect which ordinance is yet to be passed by the National Assembly. The Honorable Islamabad
High Court has granted stay against recovery of GIDC through a stay order in December 2014.
100
Financial Statements of Fauji Fertilizer Company Limited 2014
viii) The expected return on plan assets is based on the market expectations and depends upon the asset portfolio
of the Funds, at the beginning of the year, for returns over the entire life of the related obligations.
101
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
The impact of changes in financial assumptions has been determined by revaluation of the obligations on different
rates.
102
Financial Statements of Fauji Fertilizer Company Limited 2014
xiii) The weighted average number of years of defined benefit obligation is given below:
Gratuity Pension
(Years)
Plan Duration
December 31, 2014 6.50 7.00
xiv) The Company contributes to the pension and gratuity funds on the advice of the funds actuary. The contributions
are equal to the current service cost with adjustment for any deficit. If there is a surplus, the Company takes a
contribution holiday.
xvi) Salaries, wages and benefits expense, stated in notes 29 and 30 include retirement benefits in respect of
gratuity, provident fund, pension plan and compensated absences amounting to Rs 149,918 thousand,
Rs 112,607 thousand, Rs 103,826 thousand and Rs 172,284 thousand respectively (2013: Rs 125,368 thousand,
Rs 102,393 thousand, Rs 94,381 thousand and Rs 156,899 thousand respectively). These are reduced by the
amount of charges debited to Fauji Fertilizer Bin Qasim Limited under Inter Company Services Agreement.
2014 2013
Total Total
(Rupees 000)
11.1 Defined contribution plan
Details of the Employees Provident Fund based on unaudited financial statements
for the year ended December 31, 2014 are as follows:
Size of the fund (total assets) 5,273,006 4,309,085
Cost of investments made 4,533,096 3,657,124
Fair value of investments made 4,737,691 3,860,364
% %
Percentage of investments made 90 90
2014 2013
Rupees 000 % age Rupees 000 % age
Breakup of investment - at cost
Term deposits and funds with scheduled banks 2,697,876 60 2,002,931 55
Government securities 276,299 6 37,908 1
Listed securities, mutual funds and term
finance certificates 1,558,921 34 1,616,285 44
4,533,096 100 3,657,124 100
Investments out of provident funds have been made in accordance with the provisions of section 227 of the Companies
Ordinance, 1984 and the rules formulated for the purpose, except for the prescribed limit for listed securities. 103
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
2014 2013
Note (Rupees 000)
MCB Bank Limited (MCB - 1) 1 month KIBOR + 0.08 May 31, 2015
MCB Bank Limited (MCB - 2) 1 month KIBOR + 0.35 May 31, 2015
Allied Bank Limited (ABL) 3 month KIBOR + 0.15 July 31, 2015
Bank Al-Habib Limited (BAHL) 1 month KIBOR + 0.05 June 30, 2015
United Bank Limited (UBL) 1 month KIBOR + 0.25 January 31, 2015
Askari Bank Limited (AKBL) 1 month KIBOR + 0.20 June 30, 2015
Bank Alfalah Limited (BAF) 3 month KIBOR + 0.10 March 31, 2015
Habib Bank Limited (HBL) 1 month KIBOR + 0.30 April 30, 2015
Meezan Bank Limited (MBL - 1) 3 month KIBOR + 0.10 May 31, 2015
Meezan Bank Limited (MBL - 2) 3 month KIBOR + 0.05 March 26, 2015
Dubai Islamic Bank (Pakistan) Limited (DIBL) 1 month KIBOR + 0.10 June 30, 2015
These represent amounts available against facilities available from various banking companies under mark-up /
profit arrangements amounting to Rs 13.30 billion (2013: Rs 10.35 billion) which represent the aggregate of sale
prices of all mark-up / profit agreements between the Company and respective banks.
The facilities are secured by pari passu and ranking hypothecation charges on assets of the Company. Facilities
amounting to Rs 1.0 billion (2013: Rs 2.0 billion) are secured against lien over Term Deposit Receipts / PIBs.
104
Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
(Rupees 000)
105
106
15. PROPERTY, PLANT AND EQUIPMENT
(Rupees 000)
As at January 1, 2013
Cost 534,811 178,750 4,888,462 42,150 26,517 26,371,128 1,149,115 457,442 198,215 431,028 1,519,571 20,194 2,002,191 37,819,574
Accumulated Depreciation - (106,599) (1,808,180) (41,299) (26,517) (15,640,906) (575,401) (291,980) (105,269) (266,428) (1,120,396) (17,844) - (20,000,819)
Net Book Value 534,811 72,151 3,080,282 851 - 10,730,222 573,714 165,462 92,946 164,600 399,175 2,350 2,002,191 17,818,755
Year ended December 31, 2013
Opening Net Book Value 534,811 72,151 3,080,282 851 - 10,730,222 573,714 165,462 92,946 164,600 399,175 2,350 2,002,191 17,818,755
Additions - - 418,168 - - 1,056,589 288,739 434,910 110,031 97,134 222,374 1,902 2,254,912 4,884,759
Disposals
Cost - - (17,127) - - (122) - (19,901) (4,207) (43,370) (12,675) - - (97,402)
Depreciation - - - - - 50 - 15,335 3,573 43,370 12,499 - - 74,827
- - (17,127) - - (72) - (4,566) (634) - (176) - - (22,575)
Transfers - - - - - - - - - - - - (2,608,794) (2,608,794)
Depreciation Charge - (14,071) (209,765) (106) - (834,957) (234,228) (97,285) (26,274) (56,356) (153,603) (1,312) - (1,627,957)
for the year ended December 31, 2014
Closing Net Book Value 534,811 58,080 3,271,558 745 - 10,951,782 628,225 498,521 176,069 205,378 467,770 2,940 1,648,309 18,444,188
As at January 1, 2014
Cost 534,811 178,750 5,289,503 42,150 26,517 27,427,595 1,437,854 872,451 304,039 484,792 1,729,270 22,096 1,648,309 39,998,137
Accumulated depreciation - (120,670) (2,017,945) (41,405) (26,517) (16,475,813) (809,629) (373,930) (127,970) (279,414) (1,261,500) (19,156) - (21,553,949)
Net Book Value 534,811 58,080 3,271,558 745 - 10,951,782 628,225 498,521 176,069 205,378 467,770 2,940 1,648,309 18,444,188
Year ended December 31, 2014
Opening Net Book Value 534,811 58,080 3,271,558 745 - 10,951,782 628,225 498,521 176,069 205,378 467,770 2,940 1,648,309 18,444,188
Additions 9,436 - 306,957 216,240 - 1,381,134 583,853 98,839 48,136 108,301 254,171 1,434 2,640,753 5,649,254
Disposals
Cost - - (1,578) - - (8,672) (213,769) (18,149) (1,238) (39,630) (16,994) - - (300,030)
Depreciation - - 1,051 - - 2,173 213,769 17,854 1,209 34,957 16,806 - - 287,819
- - (527) - - (6,499) - (295) (29) (4,673) (188) - - (12,211)
Transfers - - - - - - - - - - - - (2,179,162) (2,179,162)
Adjustments
Cost - - (1,733,407) 1,733,407 - - - - - - - - - -
Accumulated depreciation - - 108,459 (108,459) - - - - - - - - - -
- - (1,624,948) 1,624,948 - - - - - - - - - -
Depreciation Charge - (14,072) (134,205) (91,880) - (887,061) (267,760) (105,214) (29,031) (69,360) (208,127) (1,461) - (1,808,171)
Balance as at December 31, 2014 544,247 44,008 1,818,835 1,750,053 - 11,439,356 944,318 491,851 195,145 239,646 513,626 2,913 2,109,900 20,093,898
As at December 31, 2014
Cost 544,247 178,750 3,861,475 1,991,797 26,517 28,800,057 1,807,938 953,141 350,937 553,463 1,966,447 23,530 2,109,900 43,168,199
Accumulated depreciation - (134,742) (2,042,640) (241,744) (26,517) (17,360,701) (863,620) (461,290) (155,792) (313,817) (1,452,821) (20,617) - (23,074,301)
Notes to and forming part of the Financial Statements
Net Book Value 544,247 44,008 1,818,835 1,750,053 - 11,439,356 944,318 491,851 195,145 239,646 513,626 2,913 2,109,900 20,093,898
Rate of depreciation / amortisation in % - 61/4 to 91/4 5 to 10 5 5 5 20 15 10 20 15 - 33 1/3 30 - -
Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
Note (Rupees 000)
15.2
Details of property, plant and equipment disposed off:
2014 2013
Note (Rupees 000)
107
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
16.2 Goodwill
This represents excess of the amount paid over fair value of net assets of Pak Saudi Fertilizer Company Limited
(PSFL) on its acquisition. The recoverable amount of goodwill was tested for impairment by allocating the amount
of goodwill to respective assets on which it arose, based on value in use in accordance with IAS-36 Impairment
of Assets. The value in use calculations are based on cash flow projections. These are then extrapolated for a
period of 5 years using a steady long term expected demand growth of 2% and terminal value determined based
on long term earning multiples. The cash flows are discounted using a discount rate of 16.4%. Based on this
calculation no impairment is required to be accounted for against the carrying amount of goodwill.
2014 2013
Note (Rupees 000)
17. LONG TERM INVESTMENTS
Investment in Associated Companies (Quoted) - at cost
Fauji Cement Company Limited (FCCL) 17.1 1,500,000 1,500,000
Fauji Fertilizer Bin Qasim Limited (FFBL) 17.2 4,658,919
Askari Bank Limited (AKBL) 17.3 10,461,921
Investment in joint venture (Unquoted) - at cost
Pakistan Maroc Phosphore S.A., Morocco (PMP) 17.4 705,925 705,925
Investment in Subsidiary Companies - at cost
Quoted:
Fauji Fertilizer Bin Qasim Limited (FFBL) 17.2 4,752,330
Askari Bank Limited (AKBL) 17.3 10,461,921
Unquoted:
FFC Energy Limited (FFCEL) 17.5 2,438,250 2,438,250
Fauji Fresh n Freeze Limited (FFFL) - Formerly Al-Hamd
Foods Limited (AHFL) 17.6 1,035,500 585,500
Investments available for sale 17.7
Certificates of Investment 113,868 118,239
Pakistan Investment Bonds 7,178,198 59,497
Term Finance Certificates 99,500 96,000
7,391,566 273,736
28,192,081 20,717,662
Less: Current portion shown under short term investments
Investments available for sale
Certificates of Investment 27,094 26,005
Pakistan Investment Bonds 30,467 29,125
Term Finance Certificates
26 57,561 55,130
28,134,520 20,662,532
17.1 Investment in FCCL - at cost
Investment in FCCL represents 93,750 thousand fully paid ordinary shares of Rs 10 each representing 6.79% of
its share capital as at December 31, 2014. The Company is committed not to dispose off its investment in FCCL
so long as the loan extended to FCCL by Faysal Bank Limited, remains outstanding or without prior consent of
FCCL. Market value of the Companys investment as at December 31, 2014 was Rs 2,422,500 thousand (2013:
Rs 1,495,313 thousand).
17.2 Investment in FFBL - at cost
Investment in FFBL represents 465,892 thousand fully paid ordinary shares of Rs 10 each representing 49.88%
of FFBLs share capital as at December 31, 2014. Market value of the Companys investment as at December
31, 2014 was Rs 21,062,973 thousand (2013: Rs 20,819,958 thousand; 475,233 thousand fully paid ordinary
shares of Rs 10 each representing 50.88% of FFBLs share capital).
108
Financial Statements of Fauji Fertilizer Company Limited 2014
During the year, 1% equity of FFBL aggregating to 9,341,100 ordinary shares, held by FFC, sold to FF on October
03, 2014 at the closing market price.
Further, FFC irrevocably appointed FF as its proxy, to represent FFC in the general meetings of FFBL and AKBL
allowing FF to vote for and on behalf of FFC and resolved that representatives of FF may be elected or co-opted
or appointed on the Board of Directors of FFBL and AKBL, as nominated by FF. This resulted in loss of control of
FFBL and AKBL. Accordingly, the status of FFBL and AKBL has changed to associated companies of FFC.
17.3 Investment in AKBL - at cost
Investment in AKBL represents 543,768 thousand fully paid ordinary shares of Rs 10 each representing 43.15%
(2013: 43.15%) of AKBLs share capital. Market value of the Companys investment as at December 31, 2014
was Rs 12,544,728 thousand (2013: Rs 7,613,315). Pursuant to sale of 1% equity of Fauji Fertilizer Bin Qasim
Limited (FFBL) and issuance of irrevocable proxies as referred to above in note 17.2, the status of AKBL has been
changed from subsidiary to associate.
17.4 Investment in joint venture - at cost
The Company has 12.5% equity participation in PMP, amounting to Moroccan Dirhams (MAD) 100,000 thousand
equivalent to Rs 705,925 thousand. PMP is a joint venture between the Company, Fauji Foundation, FFBL
and Office Cherifien Des Phosphates, Morocco. The principal activity of PMP is to manufacture and market
Phosphoric acid, fertilizer and other related products in Morocco and abroad.
According to the Shareholders agreement, if any legal restriction is laid on dividends by PMP, the investment will
be converted to interest bearing loan. The Company has also committed not to pledge shares of PMP without
prior consent of PMPs lenders.
17.5 Investment in FFCEL - at cost
FFCEL is presently a wholly owned subsidiary of FFC. Investment in FFCEL represents 243,825 thousand fully
paid ordinary shares of Rs 10 each. FFCEL has been incorporated for the purpose of implementing a project
comprising establishment and operation of wind power generation facility and supply of electricity. The Company
currently holds 100% shareholding interest in FFCEL, out of which 70,000 shares amounting to Rs 700 thousand
are held in the name of seven nominee directors of the Company in FFCEL.
17.6 Investment in FFFL (formerly AHFL) - at cost
Investment in FFFL represents 93,937 thousand fully paid ordinary shares of Rs 10 each. The Company currently
holds 100% shareholding interest in FFFL, out of which 7,000 shares amounting to Rs 70 thousand are held in
the name of seven nominee directors of the Company.
109
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
2014 2013
Note (Rupees 000)
18. LONG TERM LOANS AND ADVANCES - SECURED
Loans and advances - considered good, to:
Executives 769,788 693,808
Other employees 338,839 285,950
1,108,627 979,758
Less: Amount due within twelve months, shown
under current loans and advances 23 285,439 239,350
823,188 740,408
These represent secured house building loans, house rent advances and advances pursuant to agreement with
employees which are repayable within one to ten years. House building loans carry mark - up at 7% per annum.
The maximum amount of loans and advances to executives outstanding at the end of any month during the year
was Rs 772,804 thousand (2013: Rs 769,035 thousand).
2014 2013
Note (Rupees 000)
19. LONG TERM DEPOSITS AND PREPAYMENTS
Deposits 12,388 2,092
Prepayments 3,236 562
15,624 2,654
110
Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
Note (Rupees 000)
23.1 This represents aggregate unsecured advance to subsidiary company under a revolving credit facility
upto an amount of Rs 1,500,000 thousand to meet debt servicing obligations and other working capital
requirements. This carries markup at 1 month KIBOR+60bps. The maximum outstanding amount at the
end of any month during the year was Rs 540,386 thousand (2013: Nil).
2014 2013
Note (Rupees 000)
25.1 This represents tax paid by PSFL in excess of admitted tax liabilities net of adjustments of determined refunds.
The Company intends to adjust the remaining amount after finalisation of pending re-assessments by the taxation
authorities.
2014 2013
Note (Rupees 000)
25.2.1 This represents amount paid to WPPF in prior years in excess of the Companys obligation.
25.3 The maximum amount of receivable from Fauji Fresh n Freeze Limited and FFC Energy Limited during the
year was Rs 77,116 thousand (2013: Rs 10,448 thousand) and Rs 96,418 thousand (2013: Rs 747,257)
respectively.
2014 2013
Note (Rupees 000)
26.1 These represent investments having maturities ranging between 1 to 12 months and are being carried at cost
as management expects there would be insignificant change in the rate of returns on comparable investments.
Term deposits receipts amounting to Rs 500,000 thousand (2013: Rs 2,000,000 thousand) are under lien of an
Islamic financial institution in respect of Istisna facility availed.
26.2 Fair values of these investments are determined using quoted market / repurchase price.
112
Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
(Rupees 000)
27.1 Balances with banks include Rs 653,943 thousand (2013: Rs 567,735 thousand) in respect of security deposits received.
27.2 Balances with banks carry markup ranging from 5% to 10% (2013: 5% to 10.25%) per annum.
28. SALES
Sales include Rs 8,734,079 thousand (2013: Rs 4,774,850 thousand) in respect of sale of purchased fertilizers
and are exclusive of sales tax of Rs 14,188,461 thousand (2013: Rs 13,484,281 thousand).
2014 2013
Note (Rupees 000)
29. COST OF SALES
Raw materials consumed 24,372,474 18,614,731
Fuel and power 7,707,652 6,817,258
Chemicals and supplies 366,674 377,799
Salaries, wages and benefits 5,002,549 4,070,292
Training and employees welfare 833,770 708,160
Rent, rates and taxes 13,533 21,644
Insurance 184,768 197,739
Travel and conveyance 29.1 478,674 390,715
Repairs and maintenance (includes stores and spares consumed of
Rs 1,239,353 thousand; (2013: Rs 1,267,633 thousand) 1,357,448 1,406,520
Depreciation 15.1 1,717,142 1,538,622
Amortisation 16.1 37,484 31,762
Communication and other expenses 29.2 1,627,187 1,827,762
43,699,355 36,003,004
Opening stock - work in process 67,903 45,216
Closing stock - work in process (64,860) (67,903)
3,043 (22,687)
Cost of goods manufactured 43,702,398 35,980,317
Opening stock of manufactured urea 71,424 80,055
Closing stock of manufactured urea (584,930) (71,424)
(513,506) 8,631
Cost of sales - own manufactured urea 43,188,892 35,988,948
Opening stock of purchased fertilizers 274,029
Purchase of fertilizers for resale 6,969,361 3,685,595
6,969,361 3,959,624
Closing stock of purchased fertilizers (21,504)
Cost of sales - purchased fertilizers 6,947,857 3,959,624
50,136,749 39,948,572
113
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
29.1 These include operating lease rentals amounting to Rs 45,478 thousand (2013: Rs 41,670 thousand).
29.2 This includes provision for slow moving spares amounting to Rs 58,694 thousand (2013: Rs 30,008 thousand).
2014 2013
Note (Rupees 000)
30.1 These include operating lease rentals amounting to Rs 130,420 thousand (2013: Rs 110,477 thousand).
2014 2013
(Rupees 000)
114
Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
(Rupees 000)
33. OTHER INCOME
Income from financial assets
Income on loans, deposits and investments 1,651,851 1,310,555
Gain on re-measurement of investments classified
as fair value through profit or loss 34,622 231,194
Dividend income 92,689
Exchange gain 119,313
Gain on disposal of FFBL shares 281,728
Income from subsidiary
Commission on sale of FFBL products 19,979
Dividend from FFBL 1,544,507 2,376,165
Dividend from AKBL 543,768
Income from associates
Dividend from FFBL 349,419
Dividend from FCCL 140,625 117,188
Income from non-financial assets
Gain on disposal of property, plant and equipment 33,075 27,008
Commission on sale of FFBL products 18,185
Other income
Scrap sales 19,373 10,689
Others 103,713 63,161
4,720,866 4,367,941
34. PROVISION FOR TAXATION
Current tax 7,866,979 9,195,000
Deferred tax 203,021 89,000
8,070,000 9,284,000
Reconciliation between tax expense and accounting profit
Accounting profit before taxation 26,240,760 29,418,548
2014 2013
% %
Applicable tax rate 33.00 34.00
Tax effect of income that is exempt or
taxable at reduced rates (2.61) (2.38)
Effect of change in tax rate 0.38 (0.32)
Others (0.02) 0.26
Average effective tax rate charged on income 30.75 31.56
115
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
2014 2013
There is no dilutive effect on the basic earnings per share of the Company.
36. REMUNERATION OF CHIEF EXECUTIVE, DIRECTORS AND EXECUTIVES
The aggregate amounts charged in these financial statements in respect of remuneration including benefits
applicable to the chief executive, directors and executives of the Company are given below:
2014 2013
Chief Executive Chief Executive
Executive Executive
(Rupees 000) (Rupees 000)
Managerial remuneration 8,561 1,445,955 7,510 1,231,613
Contribution to provident fund 615 90,516 518 77,355
Bonus and other awards 3,703 1,766,538 5,261 1,344,210
Allowances and contribution to retirement benefit plans 6,398 1,102,304 8,738 942,546
Total 19,277 4,405,313 22,027 3,595,724
No. of person(s) 1 723 1 623
The above were provided with medical facilities; the chief executive and certain executives were also provided
with some furnishing items and vehicles in accordance with the Companys policy. Gratuity is payable to the chief
executive in accordance with the terms of employment while contributions for executives in respect of gratuity
and pension are based on actuarial valuations. Leave encashment of Rs 43,480 thousand (2013: Rs 58,749
thousand) were paid to executives on separation, in accordance with the Companys policy.
In addition, 18 (2013: 14) directors were paid aggregate fee of Rs 5,570 thousand (2013: Rs 5,125 thousand).
116
Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
(Rupees 000)
117
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
Other
financial Total
liabilities
(Rupees 000)
Financial liabilities
Maturity up to one year
Trade and other payables 29,243,800 29,243,800
Interest and mark-up accrued 30,117 30,117
Current portion of long term borrowings 1,780,000 1,780,000
Short term borrowings 11,602,443 11,602,443
Maturity after one year
Long term borrowings 2,500,000 2,500,000
45,156,360 45,156,360
118
Financial Statements of Fauji Fertilizer Company Limited 2014
Other
financial Total
liabilities
(Rupees 000)
Financial liabilities
Maturity up to one year
Trade and other payables 13,548,266 13,548,266
Interest and mark-up accrued 22,098 22,098
Current portion of long term borrowings 1,460,000 1,460,000
Short term borrowings 7,000,000 7,000,000
Maturity after one year
Long term borrowings 4,280,000 4,280,000
26,310,364 26,310,364
39.2 Credit quality of financial assets
The credit quality of companys financial assets have been assessed below by reference to external credit rating
of counterparties determined by the Pakistan Credit Rating Agency Limited (PACRA) and JCR - VIS Credit Rating
Company Limited (JCR - VIS). The counterparties for which external credit ratings were not available have been
assessed by reference to internal credit ratings determined based on their historical information for any default in
meeting obligations.
2014 2013
Rating (Rupees 000)
Trade Debts
Counterparties without external credit ratings
Existing customers with no default in the past 822,460 700,541
Loans and advances
Counterparties without external credit ratings
Loans and advances to employees 369,363 733,102
Loan to subsidiary company 540,386
909,749 733,102
Deposits
Counterparties without external credit ratings
Others 13,354 3,048
Other receivables
Counterparties with external credit ratings A1 + 438,517 127,928
A1 96,260 38,291
Counterparties without external credit ratings
Advances to related parties 14,561 129,437
Others 15,860 70,158
565,198 365,814
Short term investments
Counterparties with external credit ratings A1 + 23,824,739 15,418,578
A1 3,608,099 2,741,717
A2 800,000
27,432,838 18,960,295
Bank balances
Counterparties with external credit ratings A1 + 997,166 1,088,383
A1 175,137 270,898
1,172,303 1,359,281
119
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
2014 2013
Rating (Rupees 000)
2014 2013
(Rupees 000)
120
Financial Statements of Fauji Fertilizer Company Limited 2014
Impairment losses
The aging of trade debts at the reporting date was:
Gross Impairment Gross Impairment
2014 2014 2013 2013
(Rupees 000)
Based on past experience, the management believes that no impairment allowance is necessary in respect of
trade debts.
b) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The
Companys approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable
losses or risking damage to the Companys reputation. The Company uses different methods which assists
it in monitoring cash flow requirements and optimizing its cash return on investments. Typically the Company
ensures that it has sufficient cash on demand to meet expected operational expenses for a reasonable period,
including the servicing of financial obligation; this excludes the potential impact of extreme circumstances that
cannot reasonably be predicted, such as natural disasters. In addition, the Company maintain lines of credit as
mentioned in note 13 to the financial statements.
121
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
The following are the contractual maturities of financial liabilities, including expected interest payments and
excluding the impact of netting agreements:
Carrying Contractual Six months Six to twelve One to Two to Five years
amount cash flows or less months two years five years onwards
2014 (Rupees 000)
The contractual cash flow relating to long and short term borrowings have been determined on the basis
of expected mark-up rates. The mark-up rates have been disclosed in notes 8 and 13 to these financial
statements.
c) Market risk
Market risk is the risk that the value of the financial instrument may fluctuate as a result of changes in market
interest rates or the market price due to change in credit rating of the issuer or the instrument, change in market
sentiments, speculative activities, supply and demand of securities and liquidity in the market. The Company
incurs financial liabilities to manage its market risk. All such activities are carried out with the approval of the
Board. The Company is exposed to interest rate risk, currency risk and market price risk.
i) Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions of receivables
and payables that exist due to transactions in foreign currencies.
Exposure to Currency Risk
The Company is exposed to currency risk on bank balances and investments which are denominated in currency
other than the functional currency of the Company. The Companys exposure to foreign currency risk is as
follows:
2014 2013
Rupees 000 US Dollar 000 Rupees 000 US Dollar 000
122
Financial Statements of Fauji Fertilizer Company Limited 2014
Sensitivity analysis
A 10% strengthening of the functional currency against foreign currencies at December 31 would have decreased
profit and loss by Rs 87,953 thousand (2013: Rs 88,208 thousand). A 10% weakening of the functional currency
against foreign currencies at December 31 would have had the equal but opposite effect of these amounts. The
analysis assumes that all other variables remain constant.
ii) Interest rate risk
The interest rate risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. Majority of the interest rate exposure arises from short term
borrowings, long term borrowings, long term investments, loans and advances, short term investments and
deposits with banks. At the balance sheet date the interest rate risk profile of the Companys interest bearing
financial instruments is:
Carrying Amount
2014 2013
(Rupees 000)
123
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
124
Financial Statements of Fauji Fertilizer Company Limited 2014
125
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
2014 2013
(Rupees 000)
Transactions with subsidiary companies
Expenses charged on account of marketing
of fertilizer on behalf of subsidiary company 513,009 835,558
Commission on sale of subsidiary companys products 10,904 19,979
Services and materials provided 55,150
Payments under consignment account 34,056,198 66,026,408
Services and materials received 6,281 10,889
Dividend income 2,088,275 2,376,165
Balance payable at the year end - unsecured 347,142
Balance receivable at the year end - unsecured 556,428 118,989
Investments in TDRs issued by subsidiary company and
outstanding at the year end 2,570,000
Bank balance at the year end 62,306
Long term investments - additions 450,000 2,267,750
Long term investments - disposals 93,411
Transactions with associated undertakings / companies due to
common directorship
Expenses charged on account of marketing
of fertilizer on behalf of associated company 326,791
Commission on sale of subsidiary companys products 7,281
Services and materials provided 91
Payments under consignment account 25,125,468
Purchase of gas as feed and fuel stock 30,476,475 23,915,067
Services and materials received 371,989 358,494
Sale of fertilizer 2,162 4,825
Donations 95,371 445,558
Dividend income 490,044 117,185
Dividend paid 7,983,961 9,225,286
Investments in TDRs issued by associated company and
outstanding at the year end 3,200,000
Bank balance at the year end 22,955
Balance receivable at the year end 8,353 8,726
Balance payable at the year end 26,119,281 9,262,274
126
Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
(Rupees 000)
Other related parties
Payments to:
Employees Provident Fund Trust 320,291 287,927
Employees Gratuity Fund Trust 586,201 91,929
Employees Pension Fund Trust 94,067 47,191
Others:
Balance receivable / (payable) from Gratuity Fund Trust 28,090 (436,283)
Balance receivable from Pension Fund Trust 59,019 9,759
2014 2013
(Tonnes 000)
42. GENERAL
127
Notes to and forming part of the Financial Statements
for the year ended December 31, 2014
2014 2013
42.4 Number of employees
Total number of employees at end of the year 2,333 2,319
Average number of employees for the year 2,314 2,312
128
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
129
130
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
We have audited the annexed consolidated financial statements comprising consolidated balance sheet of Fauji Fertilizer
Company Limited (the Holding Company) and its subsidiary companies, FFC Energy Limited and Fauji Fresh n Freeze
Limited (formerly AI Hamd Foods Limited) as at December 31, 2014 and the related consolidated profit and loss account,
consolidated statement of comprehensive income, consolidated cash flow statement and consolidated statement of
changes in equity together with the notes forming part thereof, for the year then ended. We have also expressed separate
opinion on the financial statements of Fauji Fertilizer Company Limited. The financial statements of the subsidiary companies,
FFC Energy Limited and Fauji Fresh n Freeze Limited (formerly AI Hamd Foods Limited), and FFBL results for the period
January 1, 2014 to October 3, 2014 have been audited by another firm of chartered accountants whose reports have been
furnished to us and our opinion, in so far as it relates to the amounts included for such companies, is based solely on the
reports of such other auditor. These financial statements are the responsibility of the Holding Companys management. Our
responsibility is to express an opinion on these financial statements based on our audit.
Our audit was conducted in accordance with the Auditing Standards as applicable in Pakistan and accordingly included
such tests of accounting records and such other auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated financial statements present fairly the financial position of Fauji Fertilizer Company Limited
and its subsidiary companies FFC Energy Limited and Fauji Fresh n Freeze Limited (formerly AI Hamd Foods Limited) as at
December 31, 2014 and the results of their operations for the year then ended.
131
Consolidated Balance Sheet
as at December 31, 2014
2014 2013
Note (Rupees 000)
The annexed notes 1 to 43 form an integral part of these consolidated financial statements.
132
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
Note (Rupees 000)
ASSETS
NON - CURRENT ASSETS
Property, plant and equipment 15 33,104,620 44,314,880
Intangible assets 16 1,974,531 2,014,919
Long term investments 17 41,787,131 23,478,872
Long term loans and advances 18 823,188 740,408
Long term deposits and prepayments 19 17,804 83,055
77,707,274 70,632,134
CURRENT ASSETS
Stores, spares and loose tools 20 3,314,823 5,352,138
Stock in trade 21 985,347 1,431,214
Trade debts 22 2,221,263 2,871,255
Loans and advances 23 531,379 1,500,047
Deposits and prepayments 24 27,589 74,255
Other receivables 25 1,182,227 1,056,198
Short term investments 26 27,432,837 24,283,431
Cash and bank balances 27 2,050,602 4,193,929
37,746,067 40,762,467
TOTAL ASSETS 115,453,341 111,394,601
(Re-presented)
2014 2013
Note (Rupees 000)
The annexed notes 1 to 43 form an integral part of these consolidated financial statements.
(Re-presented)
2014 2013
Note (Rupees 000)
(Re-presented)
2014 2013
Note (Rupees 000)
CONTINUING OPERATIONS
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 38 41,007,491 37,636,465
Finance cost paid (2,000,206) (1,346,698)
Income tax paid (9,355,565) (9,736,363)
Net cash generated from operating activities 29,651,720 26,553,404
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed capital expenditure (4,295,821) (4,459,344)
Proceeds from disposal of property, plant and equipment 47,260 51,639
Interest received 1,298,540 1,279,859
Investment in Askari Bank Limited (10,461,921)
Investment in Fauji Fresh n Freeze Limited (formerly Al-Hamd
Foods Limited) (585,500)
Sale of shares in Fauji Fertilizer Bin Qasim Limited 375,139
(Increase) / decrease in other investment - net (8,083,631) 919,406
Dividends received 2,578,319 2,586,042
Net cash used in investing activities (8,080,194) (10,669,819)
CASH FLOWS FROM FINANCING ACTIVITIES
Long term financing - disbursements 653,130 3,787,078
- repayments (1,803,504) (2,328,613)
Dividends paid (17,582,659) (20,677,553)
Net cash used in financing activities (18,733,033) (19,219,088)
CASH FLOWS FROM DISCONTINUED OPERATIONS
Operating cash flows (1,276,675) 9,939,754
Investing cash flows (2,721,686) (10,245,513)
Financing cash flows 1,541,562 (1,369,143)
Cash and cash equivalents (585,607) -
Net cash used in discontinued operations (3,042,406) (1,674,902)
Net decrease in cash and cash equivalents (203,913) (5,010,405)
Cash and cash equivalents at beginning of the year 16,409,752 21,324,043
Effect of exchange rate changes (47,862) 96,114
Cash and cash equivalents at end of the year 38.1 16,157,977 16,409,752
The annexed notes 1 to 43 form an integral part of these consolidated financial statements.
Balance as at January 1, 2013 12,722,382 156,184 120,000 718,442 6,436 5,502,360 8,739,258 7,695 6,157,734 34,130,491
Transfer to general reserve 1,300,000 (1,300,000)
Total comprehensive income for the year
Profit after taxation 20,908,121 2,753,023 23,661,144
Other comprehensive income net of tax 329,665 27,923 2,813 141,283 501,684
329,665 20,936,044 2,813 2,894,306 24,162,828
Distribution to owners
FFC dividends:
Final dividend 2012: Rs 5.00 per share (6,361,191) (6,361,191)
First interim dividend 2013: Rs 3.50 per share (4,452,834) (4,452,834)
Second interim dividend 2013: Rs 3.75 per share (4,770,893) (4,770,893)
Third interim dividend 2013: Rs 4.10 per share (5,216,177) (5,216,177)
Dividend by FFBL to non controlling interest holders
Final dividend 2012: Rs 2.25 per ordinary share (1,032,460) (1,032,460)
for the year ended December 31, 2014
First interim dividend 2013: Rs 1.75 per ordinary share (803,043) (803,043)
Second interim dividend 2013: Rs 1.00 per ordinary share (458,882) (458,882)
(20,801,095) (2,294,385) (23,095,480)
Balance as at December 31, 2013 12,722,382 156,184 120,000 1,048,107 6,436 6,802,360 7,574,207 10,508 6,757,655 35,197,839
Transfer to general reserve
Total comprehensive income for the year
Profit after taxation 33,615,001 1,023,438 34,638,439
Other comprehensive income net of tax (137,120) 43,130 293,056 (79,791) 119,275
(137,120) 33,658,131 293,056 943,647 34,757,714
Distribution to owners
FFC dividends:
Final dividend 2013: Rs 4.00 per share (5,088,952) (5,088,952)
First interim dividend 2014: Rs 3.00 per share (3,816,714) (3,816,714)
Second interim dividend 2014: Rs 3.40 per share (4,325,610) (4,325,610)
Third interim dividend 2014: Rs 3.75 per share (4,770,894) (4,770,894)
Dividend by FFBL to non controlling interest holders
Final dividend 2013: Rs 2.25 per ordinary share (1,032,473) (1,032,473)
First interim dividend 2014: Rs 1.00 per ordinary share (458,876) (458,876)
(18,002,170) (1,491,349) (19,493,519)
Discontinued operations note 35 (116,184) (459,395) (6,436) (6,209,953) (6,791,968)
Consolidated Statement of Changes in Equity
Balance as at December 31, 2014 12,722,382 40,000 120,000 451,592 6,802,360 23,230,168 303,564 43,670,066
The annexed notes 1 to 43 form an integral part of these consolidated financial statements.
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
137
Chairman Chief Executive Director
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
If the business combination is achieved in stages, the acquisition date carrying value of the acquirers previously
held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or losses arising
from such remeasurement are recognised in profit or loss.
Any contingent consideration to be transferred by the group is recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability
is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income.
Contingent consideration that is classified as equity is not re-measured, and its subsequent settlement is
accounted for within equity.
Inter-company transactions, balances and unrealised gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated. When necessary, amounts reported by subsidiaries have been
adjusted to conform with the groups accounting policies.
139
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
These funds are administered by trustees. Annual contributions to the gratuity and management staff pension
funds are based on actuarial valuation using Projected Unit Credit Method, related details of which are given in
note 11 to the consolidated financial statements. All contributions are charged to profit and loss account for the
year.
140
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
Calculation of gratuity and pension requires assumptions to be made of future outcomes which mainly includes
increase in remuneration, expected long-term return on plan assets and the discount rate used to convert future
cash flows to current values. Calculations are sensitive to changes in the underlying assumptions.
Compensated absences
FFC has the policy to provide for compensated absences of its employees in accordance with respective
entitlement on cessation of service; related expected cost thereof has been included in the consolidated financial
statements.
4.5 Taxation
Income tax expense comprises current and deferred tax.
Current tax
Provision for current taxation is based on taxable income at the applicable rate of taxation after taking into
account tax credits and tax rebates, if any. Income tax expense is recognised in profit or loss except to the extent
that it relates to items recognised directly in equity or in other comprehensive income.
.
Deferred tax
Deferred tax is accounted for using the balance sheet liability method in respect of all taxable temporary
differences arising from differences between the carrying amount of assets and liabilities in the consolidated
financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax
liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against which the deductible temporary differences, unused
tax losses and tax credits can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced
to the extent that it is no longer probable that the related tax benefit will be realised.
Deferred tax is not recognised on temporary differences arising from the initial recognition of assets or liabilities
in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss,
and differences relating to investment in jointly controlled entities to the extent that it is probable that they will not
reverse in a foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising
on the initial recognition of goodwill.
Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse, based
on tax rates that have been enacted. Deferred tax assets and liabilities are offset if there is a legally enforceable
right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on
the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a
net basis or their tax assets and liabilities will be realised simultaneously.
The Group companies take into account the current income tax law and decisions taken by the taxation authorities.
Instances where the Group companys view differs from the income tax department at the assessment stage and
where the Group companies consider that their view on items of material nature is in accordance with law, the
amounts are shown as contingent liabilities.
4.6 Property, plant and equipment and capital work in progress
Property, plant and equipment including those acquired on Pak Saudi Fertilizer Company Limited (PSFL)
acquisition, are stated at cost less accumulated depreciation and impairment loss, if any except for freehold land
and capital work in progress, which are stated at cost less impairment, if any. Cost comprises acquisition and
other directly attributable costs. Property, plant and equipment acquired on PSFL acquisition are stated at their
cost to FFC, which represents their fair value on acquisition, less accumulated depreciation.
Depreciation is provided on the straight-line basis and charged to profit and loss account to write off the
depreciable amount of each asset over its estimated useful life at the rates specified in note 15. Depreciation on
addition in property, plant and equipment is charged from the date when the asset becomes available for use upto
the date of it disposal.
141
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the
item if it is probable that the future economic benefits embodied within the part will flow to the Group companies
and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of the
day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment, and are recognised net within
other income in profit and loss account.
The Group companies review the useful life and residual value of property, plant and equipment on a regular basis.
Any change in estimates in future years might affect the carrying amounts of the respective items of property,
plant and equipment with a corresponding effect on the depreciation charge and impairment.
4.7 Impairment
The carrying amount of the Group companies assets are reviewed at each balance sheet date to determine
whether there is any indication of impairment. If such indications exist, the assets recoverable amount is estimated
in order to determine the extent of the impairment loss, if any. Impairment loss is recognised as expense in the
profit and loss account. An impairment loss is reversed only to the extent that the assets carrying amount does
not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no
impairment loss had been recognised. For non-financial assets and available-for-sale financial assets that are
debt securities, the reversal is recognised in profit and loss account. For available-for-sale financial assets that are
equity securities, the reversal is recognised directly in comprehensive income.
4.8 Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred, the
amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity
interest in the acquiree over the fair value of the identifiable net assets acquired. If the total of consideration
transferred, non-controlling interest recognised and previously held interest measured at fair value is less than
the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is
recognised directly in the income statement.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of
the cash generating units (CGUs), or groups of CGUs, that is expected to benefit from the synergies of the
combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within
the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the
operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances
indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the
recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment
is recognised immediately as an expense and is not subsequently reversed.
Computer software
These are stated at the cash price equivalent of the consideration given i.e., cash and cash equivalent paid less
accumulated amortisation and impairment loss, if any. These are amortised over the period of their useful lives.
Amortisation is charged on a straight line basis over the estimated useful life and is included in the profit and loss
account.
Others
Other intangibles are stated at the cash price equivalent of the consideration given, i.e., cash and cash equivalent
paid less accumulated amortization and impairment loss, if any. Intangibles with finite useful lives are amortized
over the period of their useful lives. Amortization is charged on a straight line basic over the estimated useful
life and is included in the profit and loss account.
142
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
4.9 Investments
4.9.1 Investments available for sale
These are initially recognised at cost and at subsequent reporting dates measured at fair values. Gains or losses
from changes in fair values are taken to statement of comprehensive income until disposal at which time these
are recycled to profit and loss account.
4.9.2 Investments at fair value through profit or loss
Investments which are acquired principally for the purpose of selling in the near term or the investments that
are part of a portfolio of financial instruments exhibiting short term profit taking, are classified as held for trading
and designated as such upon initial recognition. These are stated at fair values with any resulting gains or losses
recognized directly in the profit and loss account.
The Group companies recognize the regular way purchase or sale of financial assets using settlement date
accounting.
4.9.3 Loans and receivables
Investments are classified as loans and receivables which have fixed or determinable payments and are not quoted
in an active market. These investments are measured at amortised cost using the effective interest method, less
any impairment losses.
143
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
145
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
The management anticipate that the adoption of the above standards, amendments and interpretations in future
periods, will have no material impact on the financial statements other than in presentation / disclosures.
146
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
Further, the following new standards and interpretations have been issued by the International Accounting
Standards Board (IASB), which are yet to be notified by the Securities and Exchange Commission of Pakistan
(SECP), for the purpose of their applicability in Pakistan:
Effective date (annual
reporting periods
beginning on or after)
5. SHARE CAPITAL
AUTHORISED SHARE CAPITAL
This represents 1,500,000,000 (2013: 1,500,000,000) ordinary shares of Rs 10 each amounting to Rs 15,000,000
thousand (2013: Rs 15,000,000 thousand).
ISSUED, SUBSCRIBED AND PAID UP CAPITAL
5.1 Fauji Foundation held 44.35% (2013: 44.35%) ordinary shares of the FFC at the year end.
2014 2013
Note (Rupees 000)
6. CAPITAL RESERVES
Share premium 6.1 40,000 156,184
Capital redemption reserve 6.2 120,000 120,000
Translation reserve 451,592 1,048,107
Statutory reserve 6,436
611,592 1,330,727
147
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
2014 2013
Note (Rupees 000)
7. REVENUE RESERVES
General reserve 6,802,360 6,802,360
Unappropriated profit 23,230,168 7,574,207
30,032,528 14,376,567
8. LONG TERM BORROWINGS
Loans from banking companies - secured
FFC 8.1
Al - Baraka Bank (Pakistan) Limited (AIBL) 25,000 75,000
Dubai Islamic Bank (Pakistan) Limited (DIBL - 1) 30,000 90,000
Dubai Islamic Bank (Pakistan) Limited (DIBL - 2) 350,000 450,000
Meezan Bank Limited (MBL) 250,000 500,000
Bank of Punjab (BOP - 1) 125,000 250,000
Bank of Punjab (BOP - 2) 750,000 1,000,000
Allied Bank Limited (ABL) 1,250,000 1,875,000
United Bank Limited (UBL) 1,500,000 1,500,000
4,280,000 5,740,000
FFBL 35
Government of Pakistan loan 2,514,867
Deferred Government assistance 77,935
2,592,802
FFCEL 8.2
Long term financing from financial institutions 9,157,138 9,500,642
Less: Transaction cost
Initial transaction cost (269,797) (269,797)
Accumulated amortisation 75,934 49,634
8,963,275 9,280,479
FFFL 8.3
MCB Bank Limited (MCB) 1,220,000 593,910
Less: Transaction cost
Initial transaction cost (4,000) (4,000)
Accumulated amortisation 928 187
1,216,928 590,097
14,460,203 18,203,378
Less: Current portion shown under current liabilities 3,054,000 3,812,186
11,406,203 14,391,192
148
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
These finances are secured by an equitable mortgage on the FFCs assets and hypothecation of all FFC assets
including plant and machinery, stores, spares and loose tools and all other moveable properties including stocks
and book debts, ranking pari passu with each other with 25% margin.
8.2 This represent long term loan from consortium of ten financial institutions. This loan carries mark-up at six months
KIBOR plus 295 basis points payable six monthly in arrears whereas the principal amount is repayable in twenty
bi-annual installments with a grace period of 2 years. Repayments of loan has commenced effective June 30,
2014. This loan is secured against:
- First ranking exclusive assignment / mortgage over receivables under Energy Purchase Agreement.
- Lien over and set-off rights on project accounts.
- First ranking, hypothecation charge over all moveable Assets.
- Exclusive mortgage over lease rights in immovable property on which project situate.
The Common Term Agreement contains certain covenants as to security, EPC, O&M, project Account, Insurance,
Tax and Financial Statements of the Project and Conditions Precedents (CPs) to each disbursements of loan.
The major disbursements CPs includes that all representations and warranties to be true and correct, no event
of default is subsisting and maintenance of debt to equity ratio.
8.3 This represents utilized portion of a term finance facility of Rs 1,600,000 thousand (including letter of credit
sub-limit of Rs 750,000 thousand). This facility carries mark-up at six months average KIBOR plus 0.50% per
annum, which is payable semi annually. This facility is repayable in six equal semi-annual installments starting from
April 2016. This is secured against hypothecation charge over all present and future fixed assets (excluding land
and building) of FFFL to the extent of Rs 2,133,000 thousand, mortgage charge by way of constructive deposit
of title deeds over the immovable properties of FFFL comprising land measuring 371 kanals and 02 Marlas,
together with present and future construction, fitting, fixtures and installations thereon in favour of the Bank up to
an amount of Rs 2,133,000 thousand.
149
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
2014 2013
Note (Rupees 000)
9. DEFERRED LIABILITIES
Deferred taxation 9.1 3,650,872 6,361,908
Provision for compensated leave absences 9.2 923,156 1,176,858
4,574,028 7,538,766
9.1 Deferred taxation
The balance of deferred tax is in respect of the following
major temporary differences:
Accelerated depreciation / amortisation 3,765,586 6,694,906
Provision for slow moving spares, doubtful debts,
other receivables and investments (139,565) (169,561)
Retirement benefit obligations (132,949) (163,437)
Remeasurement of investment available for sale 157,800
3,650,872 6,361,908
The gross movement in the deferred tax liability during the
year is as follows:
Balance at the beginning 6,361,908 6,593,232
Tax charge / (credit) recognised in profit and loss account
Continuing operations 203,021 89,000
Discontinued operations 35 (104,258) (342,925)
98,763 (253,925)
Tax charge recognised in other comprehensive income
Continuing operations 188,287 22,601
Discontinued operations 35
188,287 22,601
Discontinued operations 35 (2,998,086)
Balance at the end 3,650,872 6,361,908
9.2 Movement of provision for compensated leave absences:
Balance at the beginning 1,176,858 994,666
Provision during the year 254,538 311,133
1,431,396 1,305,799
Encashed during the year (67,934) (128,941)
Discontinued operations 35 (440,306)
Balance at the end 923,156 1,176,858
Actuarial valuation has not been carried out as the impact is considered to be immaterial.
150
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
(Rupees 000)
Creditors includes Rs 24,740,966 thousand (2013: Rs 8,532,062 thousand) on account of Gas Infrastructure
Development Cess (GIDC). In accordance with GIDC Act, 2011 FFC was required to pay GIDC at the rates
specified in the second schedule. During the year the Honorable Supreme Court dismissed appeals against
an earlier decision of the Honorable Peshawar High Court which declared GIDC Act, 2011 Ultra Vires to
the Constitution. The President of Pakistan promulgated the GIDC Ordinance, 2014 on September 25,
2014 with retrospective effect, this ordinance is yet to be passed by the National Assembly. The Honorable
Islamabad High Court has granted stay against recovery of GIDC through a stay order in December 2014.
151
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
152
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
The expected return on plan assets is based on the market expectations and depends upon the asset portfolio
viii)
of the Funds, at the beginning of the year, for returns over the entire life of the related obligations.
Funded gratuity Funded pension
2014 2013 2014 2013
(Rupees 000) (Rupees 000)
153
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
The impact of changes in financial assumptions has been determined by revaluation of the obligations on different
rates.
xiii) The weighted average number of years of defined benefit obligation is given below:
Gratuity Pension
(Years)
Plan Duration
December 31, 2014 6.50 7.00
xiv) The Group contributes to the pension and gratuity funds on the advice of the funds actuary. The contributions are
equal to the current service cost with adjustment for any deficit. If there is a surplus, the Group takes a contribu-
tion holiday.
xvi) Salaries, wages and benefits expense, stated in notes 29 and 30 include retirement benefits in respect of
gratuity, provident fund, pension plans and compensated absences amounting to Rs 149,918 thousand,
Rs 112,607 thousand, Rs 103,826 thousand and Rs 172,284 thousand respectively (2013: Rs 178,466 thousand,
Rs 156,662 thousand, Rs 94,381 thousand and Rs 311,133 thousand respectively).
154
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
Total Total
(Rupees 000)
2014 2013
(Rupees 000) % age (Rupees 000) % age
Breakup of investment - at cost
Term deposits and funds with scheduled banks 2,697,876 60 2,619,440 58
Government securities 276,299 6 37,908 1
Listed securities, mutual funds and term finance certificates 1,558,921 34 1,860,177 41
4,533,096 100 4,517,525 100
Investments out of provident fund have been made in accordance with the provisions of section 227 of the Companies
Ordinance, 1984 and the rules formulated for the purpose, except for the prescribed limit for listed securities.
2014 2013
Note (Rupees 000)
155
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
2014 2013
(Rupees 000)
a) Contingencies:
i) Guarantees issued by banks on behalf of the Group companies 50,997 88,979
ii) Claims against FFC and / or potential exposure not acknowledged as debt 50,696 50,696
iii) The delay in the payment of sales tax on supply of electricity to NTDC
for the period from September 2013 to November 2014 could result in
levy of additional tax and penalties on FFCEL. FFCEL has already taken
up the matter at High Court and the consultants are of the opinion that
since the matter was sub judice, therefore, probability of levy of additional
tax and penalties are remote. 56,123
iv) The Competition Commission of Pakistan has imposed a penalty of Rs 5.5 billion on FFC for alleged
unreasonable increase in urea prices during the year 2011. However, the fact remains that price increase
was essentially caused by extended gas curtailment and delayed urea imports by the Government of
Pakistan resulting in product shortage leading to market imbalance and price hike. FFC has filed an appeal
against the above penalty before the Competition Appellate Tribunal. Based on legal advice from the FFCs
legal advisor, the FFC is confident that there are reasonable grounds for a favourable decision.
156
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
(Rupees 000)
157
158
15. PROPERTY, PLANT AND EQUIPMENT
Building and Building and Office and Furniture Maintenance Capital work
Freehold Leasehold Lease
structures on structures on Railway Plant and
Catalysts electrical and Vehicles and other Library in progress Total
land land siding machinery books vehicles
freehold land leashold land equipment fixtures equipment (note 15.3)
(Rupees 000)
As at January 1, 2013
Cost 654,811 392,100 4,888,462 2,137,540 26,517 49,854,225 1,475,841 532,187 206,359 707,327 1,675,908 22,280 13,355,596 75,929,153
Accumulated Depreciation (189,712) (1,808,180) (624,257) (26,517) (27,750,235) (721,796) (323,260) (108,149) (426,656) (1,251,566) (19,778) (33,250,106)
Net Book Value 654,811 202,388 3,080,282 1,513,283 22,103,990 754,045 208,927 98,210 280,671 424,342 2,502 13,355,596 42,679,047
Year ended December 31, 2013
Opening Net Book Value 654,811 202,388 3,080,282 1,513,283 22,103,990 754,045 208,927 98,210 280,671 424,342 2,502 13,355,596 42,679,047
Additions 68,709 41,404 418,168 1,056,589 312,601 449,762 111,330 166,786 237,379 1,902 4,947,444 2,439 7,814,513
Disposals
Cost (17,127) (122) (19,901) (4,207) (76,476) (12,892) (130,725)
Depreciation 50 15,335 3,573 69,607 12,638 101,203
(17,127) (72) (4,566) (634) (6,869) (254) (29,522)
Transfers / adjustments 211,537 12,264,875 16,022 (15,247,838) (2,755,404)
Depreciation Charge (19,730) (209,765) (69,700) (2,397,137) (288,094) (96,105) (28,306) (109,689) (173,566) (1,418) (244) (3,393,754)
Closing Net Book Value 723,520 224,062 3,271,558 1,655,120 33,028,245 778,552 558,018 196,622 330,899 487,901 2,986 3,055,202 2,195 44,314,880
As at January 1, 2014
for the year ended December 31, 2014
Cost 723,520 433,504 5,289,503 2,349,077 26,517 63,175,567 1,788,442 962,048 329,504 797,637 1,900,395 24,182 3,055,202 2,439 80,857,537
Accumulated depreciation (209,442) (2,017,945) (693,957) (26,517) (30,147,322) (1,009,890) (404,030) (132,882) (466,738) (1,412,494) (21,196) (244) (36,542,657)
Net Book Value 723,520 224,062 3,271,558 1,655,120 33,028,245 778,552 558,018 196,622 330,899 487,901 2,986 3,055,202 2,195 44,314,880
Year ended December 31, 2014
Opening Net Book Value 723,520 224,062 3,271,558 1,655,120 33,028,245 778,552 558,018 196,622 330,899 487,901 2,986 3,055,202 2,195 44,314,880
Additions 435,083 306,957 233,268 1,355,766 586,343 121,161 54,611 203,408 268,718 1,434 4,262,883 7,829,632
Disposals
Cost (1,578) (8,696) (213,769) (18,607) (1,516) (84,861) (17,449) (346,476)
Depreciation 1,051 2,197 213,769 18,049 1,348 75,818 17,085 329,317
(527) (6,499) (558) (168) (9,043) (364) (17,159)
Transfers (2,270,757) (2,270,757)
Adjustments
Cost (1,733,407) 1,733,407 3,006 (3,006)
Accumulated depreciation 108,459 (108,459) (1,948) 1,948
(1,624,948) 1,624,948 1,058 (1,058)
Depreciation Charge (19,749) (145,194) (139,441) (2,380,683) (305,824) (115,327) (31,120) (114,269) (218,271) (1,491) (379) (3,471,748)
Discontinued operations note 35
Cost (541,331) (254,754) (2,104,372) (23,794,963) (353,078) (95,826) (29,344) (332,731) (181,649) (2,086) (1,196,441) (28,886,575)
Accumulated depreciation 94,450 692,991 14,173,690 238,325 52,276 6,953 185,754 159,838 2,070 15,606,347
(541,331) (160,304) (1,411,381) (9,621,273) (114,753) (43,550) (22,391) (146,977) (21,811) (16) (1,196,441) (13,280,228)
Balance as at December 31, 2014 617,272 44,009 1,807,846 1,962,514 22,375,556 944,318 519,744 197,554 265,076 516,173 2,913 3,850,887 758 33,104,620
As at December 31, 2014
Cost 617,272 178,750 3,969,934 2,102,921 26,517 40,727,674 1,807,938 968,776 353,255 584,511 1,970,015 23,530 3,850,887 1,381 57,183,361
Accumulated depreciation (134,741) (2,162,088) (140,407) (26,517) (18,352,118) (863,620) (449,032) (155,701) (319,435) (1,453,842) (20,617) (623) (24,078,741)
Net Book Value 617,272 44,009 1,807,846 1,962,514 22,375,556 944,318 519,744 197,554 265,076 516,173 2,913 3,850,887 758 33,104,620
Rate of depreciation / amortisation in % 61/4 to 91/4 5 to 10 5 5 5 20 15 10 20 15 33 1/3 30
Notes to and forming part of the Consolidated Financial Statements
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
Note (Rupees 000)
2014 2013
Note (Rupees 000)
159
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
2014 2013
Note (Rupees 000)
16.2 Goodwill
Goodwill on acquisition of PSFL 16.3 1,569,234 1,569,234
Goodwill on acquisition of FFFL 16.4 363,327 363,327
1,932,561 1,932,561
16.3 This represents excess of the amount paid by FFC over fair value of net assets of Pak Saudi Fertilizer Company
Limited (PSFL) on its acquisition. The recoverable amount of goodwill was tested for impairment by allocating
the amount of goodwill to respective assets on which it arose, based on value in use in accordance with
IAS-36 Impairment of Assets. The value in use calculations are based on cash flow projections. These are
then extrapolated for a period of 5 years using a steady long term expected demand growth of 2% and terminal
value determined based on long term earning multiples. The cash flows are discounted using a discount rate of
16.4%. Based on this calculation no impairment is required to be accounted for against the carrying amount of
goodwill.
16.4 This represents excess of the amount paid by FFC over fair value of net assets of Fauji Fresh n Freeze Limited
(formerly Al-Hamd Foods Limited) on its acquisition. The recoverable amount of goodwill was tested for
impairment by allocating the amount of goodwill to respective cash generating unit on which it arose, based on
value in use in accordance with IAS-36 Impairment of Assets. The value in use calculations are based on cash
flow projections. The cash flows are discounted using a discount rate of 16.4%. Based on this calculation no
impairment is required to be accounted for against the carrying amount of goodwill.
2014 2013
Note (Rupees 000)
160
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
Note (Rupees 000)
17.1 Equity accounted investments
Investment in associated companies - under equity method
Fauji Fertilizer Bin Qasim Limited (FFBL) 17.3
Fair value of investment retained after loss of control 35 18,710,223
Share of profit for the period October 3, 2014 to December 31, 2014 1,118,510
Dividend received during the period October 3, 2014 to
December 31, 2014 (349,423)
19,479,310
Askari Bank Limited (AKBL) 17.4
Fair value of investment retained after loss of control 11,859,580
Share of profit for the period October 3, 2014 to
December 31, 2014
11,859,580
Fauji Cement Company Limited (FCCL) 17.5
Cost of investment 1,800,000 1,800,000
Post acquisition profits at the beginning 349,878 309,528
Share of profit for the year 207,670 180,972
Dividend received during the year (168,750) (140,622)
388,798 349,878
Discontinued operations 35 (364,798)
1,824,000 2,149,878
Foundation Wind Energy-I Limited
Advance for issue of shares - balance at beginning 923,941 329,390
Advance paid for the period January 1, 2014 to
October 3, 2014 / during the year 189,043 603,664
Share of loss for the period January 1, 2014 to
October 3, 2014 / for the year (10,631) (9,113)
178,412 594,551
Discontinued operations 35 (1,102,353)
923,941
Foundation Wind Energy-II (Private) Limited
Advance for issue of shares - balance at beginning 971,100 620,290
Advance paid during the period January 1, 2014 to
October 3, 2014 / during the year 96,226 357,546
Share of loss for period January 1, 2014 to
October 3, 2014 / for the year (1,653) (6,736)
94,573 350,810
Discontinued operations 35 (1,065,673)
971,100
Investment in joint venture - under equity method
Pakistan Maroc Phosphore S.A. Morocco (PMP) 17.6
Cost of investment 2,117,075 2,117,075
Post acquisition (loss) / profit at the beginning (155,301) 153,657
Share of profit / (loss) for the year 553,461 (308,958)
Gain on translation of net assets 1,354,774 1,558,662
1,752,934 1,403,361
Discontinued operations 35 (2,579,773)
Balance at the end 1,290,236 3,520,436
Advance paid against issue of shares 17.7
Fauji Meat Limited 35 1,000
Fauji Food Limited 35 1,000
2,000
34,453,126 7,567,355
161
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
2014 2013
Note (Rupees 000)
As explained in note 1.2, FFC has lost control over FFBL and investment of 465,892 thousand fully paid ordinary
shares of Rs 10 each representing 49.88% of FFBLs share capital retained in FFBL as at December 31, 2014 is
remeasured to its fair value at the date when control is lost. FFBL became associated company and investment
is accounted for under equity method. Market value of the FFCs investment in FFBL as at December 31, 2014
was Rs 21,062,973 thousand.
17.4 Investment in AKBL - at equity method
As explained in note 1.2, FFC has lost control over AKBL and investment retained in AKBL of 543,768 thousand
fully paid ordinary shares of Rs 10 each representing 43.15% (2013: 43.15%) of AKBLs share capital as at
December 31, 2014 is remeasured to its fair value at the date when control is lost. AKBL became associated
company and investment is accounted for under equity method. Market value of FFCs investment in AKBL as at
December 31, 2014 was Rs 12,544,728 thousand.
17.5 Investment in FCCL - at equity method
Investment in FCCL represents 93,750 thousand fully paid ordinary shares of Rs 10 each representing 6.79%
of its share capital as at December 31, 2014. FFC is committed not to dispose off its investment in FCCL so
long as the loan extended to FCCL by Faysal Bank Limited, remains outstanding or without prior consent of
FCCL. Market value of the FFCs investment as at December 31, 2014 was Rs 2,422,500 thousand (2013:
Rs 1,495,313 thousand).
162
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
Cost of investment represents equivalent to Moroccan Dirhams 100,000 thousand representing 12.50% interest
in PMP, a joint venture between FFC, FFBL, Fauji Foundation and Officie Cherifien Des Phosphates, Morocco.
The principal activity of PMP is to manufacture and market phosphoric acid, fertilizer and other related products
in Morocco and abroad.
According to the shareholders agreement, if any legal restrictions are laid on dividends by Pakistan Maroc Phos-
phore S.A. (PMP), the investment will be converted to interest bearing loan. FFC and FFBL has also committed
not to pledge shares of PMP without prior consent of PMPs lenders. According to the Shareholders agreement,
if any legal restriction is laid on dividends by PMP, the investment will be converted to interest bearing loan. FFC
has also committed not to pledge shares of PMP without prior consent of PMPs lenders.
17.7 Summary financial information for equity accounted investees as per their latest financial statements, not adjusted
for the percentage ownership of the Group companies:
Except for FFBL, Financial statements of other investees for the period ended September 30, 2014 have been
used for accounting under equity method as these were the latest approved financial statements. Further, results
of operations of last quarter of 2013 have also been considered for equity accounting.
17.8 Investments available for sale
Certificates of Investment (COI) / Term deposits receipts
These represent placements in Certificates of Investment / Term deposits receipts of financial institution for
periods ranging from one to five years having returns in the range of 7.58% to 12.32% per annum (2013:
7.58% to 14.18% per annum). Cost of these investments at year end amounted to Rs 113,868 thousand (2013:
Rs 118,239 thousand).
Pakistan Investment Bonds (PIBs)
PIBs ranging from 3 to 7 years were purchased and are due to mature within a period of 5 years. Profit is
receivable on half yearly basis with coupon rates ranging from 11.25% to 11.75% per annum (2013: 8% to
11.75% per annum). Cost of these investments at year end amounted to Rs 6,710,676 thousand (2013:
Rs 39,576 thousand).
Term Finance Certificates (TFCs)
These include 20,000 certificates of Rs 5,000 each of Engro Fertilizer Limited (EFL). Profit is receivable on half
yearly basis at the rate of six months KIBOR + 1.55% per annum. Cost of these investments at year end
amounted to Rs 100,000 thousand (2013: Rs 100,000 thousand).
163
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
2014 2013
Note (Rupees 000)
164
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
Note (Rupees 000)
2014 2013
Note (Rupees 000)
165
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
2014 2013
Note (Rupees 000)
2014 2013
Note (Rupees 000)
166
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
Note (Rupees 000)
2014 2013
(Rupees 000)
27.1 Balances with banks include Rs 653,943 thousand (2013: Rs 567,735 thousand) in respect of security deposits
received.
27.2 Balances with banks carry markup ranging from 5% to 10% (2013: 5% to 10.25%) per annum.
167
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
28. SALES
Sales include Rs 8,734,079 thousand (2013: Rs 4,774,850 thousand) in respect of sale of purchased fertilizers
and are exclusive of sales tax of Rs 22,555,150 thousand (2013: Rs 22,660,856 thousand).
(Re-presented)
2014 2013
Note (Rupees 000)
168
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
(Re-presented)
2014 2013
Note (Rupees 000)
30. ADMINISTRATIVE AND DISTRIBUTION EXPENSES
Administrative expenses 30.1 163,521 69,371
Product transportation 3,970,241 3,797,513
Salaries, wages and benefits 1,322,121 1,271,875
Training and employees welfare 80,924 82,640
Rent, rates and taxes 105,131 81,768
Technical services to farmers 14,795 10,558
Travel and conveyance 30.2 198,186 162,629
Sale promotion and advertising 208,218 113,027
Communication and other expenses 394,452 490,979
Warehousing expenses 69,757 64,736
Depreciation 15.1 77,988 68,590
Amortisation 16.1 11,706 23,869
6,617,040 6,237,555
30.1 Administrative expenses
These represents administrative and general expenses of FFCEL and FFFL
(Re-presented)
2014 2013
(Rupees 000)
Salaries, wages and benefits 83,895 31,229
Travel and conveyance 10,154 1,325
Utilities 8,923 898
Printing and stationery 2,036 17
Repairs and maintenance 1,119 659
Communication, advertisement and other expenses 4,144 (4,655)
Rent, rates and taxes 9,725 9,614
Legal and professional 19,413 14,777
Miscellaneous 24,112 15,507
163,521 69,371
30.2 These include operating lease rentals amounting to Rs 130,420 thousand (2013: Rs 110,477 thousand).
(Re-presented)
2014 2013
(Rupees 000)
31. FINANCE COST
Mark-up on long term borrowings 1,822,512 1,119,627
Mark-up on short term borrowings 218,782 168,689
Exchange loss - net 87,897
Bank charges 20,071 85,109
2,149,262 1,373,425
169
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
(Re-presented)
2014 2013
(Rupees 000)
170
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
(Re-presented)
2014 2013
(Rupees 000)
October 03,
2014
Note (Rupees 000)
October 03,
2014
(Rupees 000)
172
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
35.8 Details of the assets and liabilities of discontinued operations as at October 3, 2014 and included in consolidated
financial statements for the year ended December 31, 2014 are as follows:
October 03, December 31,
2014 2013
(Rupees 000)
Assets
Non - Current Assets
Property, plant and equipment 13,280,228 13,059,509
Long term investments 10,343,588 9,831,069
Long term deposits and prepayments 78,643 78,643
23,702,459 22,969,221
Current Assets
Stores, spares and loose tools 2,244,206 2,107,493
Stock in trade 6,813,564 1,129,257
Trade debts 1,244,908 1,603,643
Loans and advances 766,971 577,966
Deposits and prepayments 59,210 29,877
Other receivables 486,515 904,192
Short term investments 6,608,935 5,323,136
Cash and bank balances 3,411,098 2,479,548
21,635,407 14,155,112
Total Assets 45,337,866 37,124,333
Liabilities
Non - Current Liabilities
Long term borrowings 10,000,000 584,119
Deferred liabilities
- Compensated leave absences 440,306 358,052
- Deferred tax 2,998,086 3,102,345
3,438,392 3,460,397
13,438,392 4,044,516
Current Liabilities
Trade and other payables 11,253,812 8,371,863
Interest and mark - up accrued 253,060 236,052
Short term borrowings 5,602,571 7,985,128
Current portion of long term borrowings 1,944,600 2,008,683
Taxation 214,146 727,583
19,268,189 19,329,309
Total liabilities 32,706,581 23,373,825
Net Assets 12,631,285 13,750,508
173
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
2014 2013
(Rupees 000)
There is no dilutive effect on the basic earnings per share of the Group.
The aggregate amounts charged in these financial statements in respect of remuneration including benefits
applicable to the chief executive, directors and executives of the Group are given below:
2014 2013
Chief Executive Chief Executive
Executive Executive
(Rupees 000) (Rupees 000)
Managerial remuneration 8,561 1,486,652 7,510 1,253,607
Contribution to provident fund 615 91,310 518 78,322
Bonus and other awards 3,703 1,766,538 5,261 1,350,706
Allowances and contribution to retirement benefit plans 6,398 1,130,354 8,738 956,761
Total 19,277 4,474,854 22,027 3,639,396
No. of person(s) 1 743 1 660
The above were provided with medical facilities; the chief executive and certain executives were also provided
with some furnishing items and vehicles in accordance with the Groups policy. Gratuity is payable to the
chief executive in accordance with the terms of employment while contributions for executives in respect of
gratuity and pension are based on actuarial valuations. Leave encashment of Rs thousand (2013: Rs Nil) and
Rs thousand (2013: Rs 65,921 thousand) were paid to the chief executive and executives respectively on
separation, in accordance with the Groups policy.
In addition, 18 (2013: 14) directors were paid aggregate fee of Rs 5,570 thousand (2013: Rs 5,125 thousand).
174
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
(Re-presented)
2014 2013
(Rupees 000)
175
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
Other
financial Total
liabilities
(Rupees 000)
Financial liabilities
Maturity up to one year
Trade and other payables 20,074,468 20,074,468
Interest and mark-up accrued 290,784 290,784
Current portion of liability against assets subject to finance lease 849 849
Short term borrowings 14,985,128 14,985,128
Current portion of long term borrowings 3,812,186 3,812,186
Maturity after one year
Long term borrowings 14,391,192 14,391,192
Liability against assets subject to finance lease 564 564
53,555,171 53,555,171
177
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
2014 2013
Rating (Rupees 000)
Long term investments
Counterparties with external credit ratings AA - 6,722,322 96,000
AA 611,683 92,234
AA + 30,372
7,334,005 218,606
Long term loans and advances
Counterparties without external credit ratings
Loans and advances to employees 823,188 740,408
Not yet due 752,693 2,282,189
Past due 1-30 days 1,415,651 90,032
Past due 31-60 days 52,919 497,276
Past due 61-90 days
Over 90 days 1,758 1,758 1,758 1,758
2,223,021 1,758 2,871,255 1,758
Based on past experience, the management believes that no impairment allowance is necessary in respect of
trade debts.
179
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
The following are the contractual maturities of financial liabilities, including expected interest payments and
excluding the impact of netting agreements:
Carrying Contractual Six months Six to twelve One to Two to Five year
amount cash flow or less months two years five years onwards
2014 (Rupees 000)
Long term borrowings 18,245,798 35,444,788 4,649,862 1,045,412 4,466,615 16,998,084 8,284,815
Trade and other payables 20,074,468 20,074,468 20,074,468
Short term borrowings
including mark-up 15,234,905 15,234,905 15,234,905
53,555,171 70,754,161 39,959,235 1,045,412 4,466,615 16,998,084 8,284,815
It is not expected that the cash flows included in the maturity analysis could occur significantly earlier or at
significantly different amounts.
39.5.1 The contractual cash flow relating to long and short term borrowings have been determined on the basis of
expected mark-up rates. The mark-up rates have been disclosed in notes 8 and 13 to these consolidated
financial statements.
39.6 Market risk
Market risk is the risk that the value of the financial instrument may fluctuate as a result of changes in market
interest rates or the market price due to change in credit rating of the issuer or the instrument, change in
market sentiments, speculative activities, supply and demand of securities and liquidity in the market. The Group
companies incur financial liabilities to manage their market risk. All such activities are carried out with the approval
of the Board. The Group companies are exposed to interest rate risk and currency risk.
39.6.1 Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions of receivables
and payables that exists due to transactions in foreign currency.
Exposure to Currency Risk
The Group companies are exposed to currency risk on creditors, bank balance and investment in term deposit
receipts which are denominated in currency other than the functional currency of the Group companies. The
Group companies exposure to foreign currency risk is as follows:
2014 2013
Rupees US Dollar Rupees US Dollar
000 000 000 000
Sensitivity analysis
A 10% strengthening of the functional currency against USD at December 31 would have decreased profit and
loss by Rs 88,017 thousand (2013: Rs 139,799 thousand). A 10% weakening of the functional currency against
USD at December 31 would have had the equal but opposite effect of these amounts. The analysis assumes that
all other variables remain constant.
39.6.2 Interest rate risk
The interest rate risk is the risk that the fair value or the future cash flows of a financial instrument will fluctuate
because of changes in market interest rates. Majority of the interest rate exposure arises from short term
borrowings and long term borrowings, long term investments, loans and advances and short term deposits with
banks. At the balance sheet date the interest rate risk profile of the Group companys interest bearing financial
instruments is:
Carrying Amount
2014 2013
(Rupees 000)
The Group companies do not hold any fixed rate financial asset or liability at fair value through profit and
loss.
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates at the reporting date would have increased / (decreased) profit
or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign
currency rates, remain constant. The analysis is performed on the same basis for 2013.
181
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
For quoted investments classified as available for sale, a 1 percent increase in market price at reporting date
would have increased equity by Rs 48,761 thousand after tax (2013: Rs 1,026 thousand); an equal change in
the opposite direction would have decreased equity after tax by the same amount. For investments classified
as at fair value through profit or loss, the impact on profit or loss would have been an increase or decrease by
Rs 4,459 thousand after tax (2013: Rs 1,012 thousand). The analysis is performed on the same basis for 2013
and assumes that all other variables remain the same.
182
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
184
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
(Rupees 000)
40.1 Reconciliations of reportable segment assets and liabilities
Assets
Total assets for reportable segments 41,676,655 58,163,416
Intangible assets 1,974,531 2,014,919
Long term investments 41,787,131 23,478,872
Long term loans and advances 823,188 740,408
Long term deposits and prepayments 17,804 83,055
Short term loans and advances 531,379 1,500,047
Short term deposits and prepayments 27,589 74,255
Other receivables 1,182,227 1,056,198
Short term investments 27,432,837 24,283,431
Total assets 115,453,341 111,394,601
Liabilities
Total liabilities for reportable segments 64,588,715 63,655,002
Deferred liabilities 4,574,028 7,538,766
Liability against assets subject to finance lease 3,131 1,413
Interest and mark-up accrued 115,891 290,784
Taxation - net 2,501,510 4,710,797
Total liabilities 71,783,275 76,196,762
185
Notes to and forming part of the Consolidated Financial Statements
for the year ended December 31, 2014
186
Consolidated Financial Statements of Fauji Fertilizer Company Limited 2014
2014 2013
(Tonnes 000)
43. GENERAL
43.1 Production capacity
Design capacity
Urea 2,048 2,599
DAP 650
Production
Urea 2,403 2,633
DAP 744
43.2 Facilities of letters of guarantee and letters of credit
Facilities of letters of guarantee and letters of credit amounting to Rs 100,000 thousand and Rs 11,230,000
thousand (2013: Rs 216,000 thousand and Rs 7,930,000 thousand) respectively are available to the Company
against lien on shipping / title documents and charge on assets of the Company alongwith corporate guarantee
of the Company in a particular case.
43.3 Donations
Cost of Sales and Distribution Cost includes donations amounting to Rs 137,992 thousand (2013: Rs 145,208
thousand) and Rs 50,026 thousand (2013: Rs 189,175 thousand) respectively. These include Rs 95,371
thousand (2013: Rs 90,558 thousand), paid to Sona Welfare Foundation, Sona Tower, 156 - The Mall, Rawalpindi
(associated undertaking). Interest of Lt Gen Naeem Khalid Lodhi, HI (M) (Retd) in Sona Welfare Foundation is
limited to the extent of his involvement in Sona Welfare Foundation as Chairman.
Further, an amount of Rs Nil (2013: Rs 355,000 thousand) was donated for the projects of Fauji Foundation, Fauji
Towers Tipu Road Rawalpindi (associated undertaking). Directors interest in the projects of Fauji Foundation is
limited to the extent of their involvement in Fauji Foundation as management personnel:
2014 2013
Lt Gen Khalid Nawaz Khan, HI (M) (Retd) Lt Gen Muhammad Mustafa Khan, HI (M) (Retd)
Mr. Qaiser Javed Mr. Qaiser Javed
Dr. Nadeem Inayat Dr. Nadeem Inayat
Maj Gen Ghulam Haider, HI (M) (Retd) Maj Gen Zahid Parvez, HI (M) (Retd)
Maj Gen Muhammad Farooq Iqbal, HI (M) (Retd) Brig Agha Ali Hassan, SI (M) (Retd)
Brig Dr. Gulfam Alam, SI (M) (Retd) Brig Dr. Gulfam Alam, SI (M) (Retd)
2014 2013
43.4 Number of employees
Total number of employees at end of the year 2,412 2,392
Average number of employees for the year 2,402 2,369
188
Annual Report of Fauji Fertilizer Company Limited 2014
Pattern of Shareholding
as at December 31, 2014
189
Pattern of Shareholding
as at December 31, 2014
190
Annual Report of Fauji Fertilizer Company Limited 2014
Pattern of Shareholding
as at December 31, 2014
191
Pattern of Shareholding
as at December 31, 2014
192
Annual Report of Fauji Fertilizer Company Limited 2014
Pattern of Shareholding
as at December 31, 2014
193
Pattern of Shareholding
as at December 31, 2014
Directors 800,000
Public Sector Companies and Corporations 13,986,012
Banks, Development Finance Institutions, Non-Banking 227,844,556
Finance Institutions, Insurance Companies, Modarabas, Mutual Funds
Shareholders Holding Five percent or more voting interest
Fauji Foundation 564,204,254
State Life Insurance Corporation of Pakistan 116,022,735
Financial Calendar
The Company follows the period of January 01 to December 31 as the financial year.
194
Annual Report of Fauji Fertilizer Company Limited 2014
Definitions
Profitability Ratios
Profitability Ratios are used to assess the Companys ability to generate profits in relation to its sales, assets and equity.
Liquidity Ratios
Liquidity ratios determine the Companys ability to meet its short-term financial obligations. A higher ratio indicates a greater
margin of safety to cover current liabilities.
Activity/Turnover Ratios
Activity/Turnover ratios evaluate the operational efficiency of the Company to convert inventory & receivables into cash against
time taken to pay creditors, measured in terms of revenue and cost of sales.
Investment/Market Ratios
Investment ratios measure the capability of the Company to earn an adequate return for its shareholders.
Market Ratios evaluate the current market price of a share versus an indicator of the companys ability to generate profits.
Glossary of terms
AGM Annual General Meeting
FAC Farm Advisory Centre
AKBL Askari Bank Limited
FCCL Fauji Cement Company Limited
BCP Business Continuity Planning
FDI Foreign Direct Investments
BI&T Banking, Industries and Trading
FFBL Fauji Fertilizer Bin Qasim Limited
BoD Board of Directors
FFC Fauji Fertilizer Company
BTU British Thermal Unit
FFCEL FFC Energy Limited
CBA Collective Bargaining Agent
FFF Fauji Fresh n Freeze
CCP Competition Commission of Pakistan
FOB Free on Board
CE & MD Chief Executive & Managing Director
GDP Gross Domestic Product
CEO Chief Executive Officer
GGM-MKT Group General Manager - Marketing
CFO Chief Financial Officer
GM-HR General Manager - Human Resource
CILT Chartered Institute of Logistics and
GM-IS General Manager - Information Systems
Transportation
GHQ General Head Quarter
CPIs Critical Performance Indicators
GIDC Gas Infrastructure Development Cess
CSR Corporate Social Responsibility
GOP Government of Pakistan
CTO Chief Technical Officer
GRI Global Reporting Initiative
CCO Chief Coordinating Officer
GST General Sales Tax
DAP Di Ammonium Phosphate
GWh Gigawatt hour
DPS Dividend Per Share
HBL Habib Bank Limited
DR Disaster Recovery
HI(M) Hilal-e-Imtiaz (Military)
EBITDA Earnings Before Interest, Tax, Depreciation, and
ICAP Institute of Chartered Accountants Pakistan
Amortization
ICMAP Institute of Chartered Management Accountants
EPS Earnings Per Share
Pakistan
ERP Enterprise Resource Planning
195
IFA International Fertilizer Association OHSAS Occupational Health & Safety Advisory Services
IMF International Monetary Fund PASDAC Pakistan Stone Development Company
IMS Integrated Management System PICG Pakistan Institute of Corporate Governance
INSEAD Institute European dAdministration des Affaires PIDC Pakistan Industrial Development Centre
(European Institute of Business Administration) PIDE Pakistan Institute of Development Economics
IQF Individually Quick Freeze PITAC Pakistan Industrial Technical Assistance Centre
ISC2 Information Security Certification Consortium PMP Pakistan Maroc Phosphore
ISLA Information Security Leadership R&D Research & Development
ISO International Organization for Standardization RCCI Rawalpindi Chamber of Commerce & Industry
IT Information Technology Retd Retired
KIBOR Karachi Inter Bank Offer Rate ROE Return On Equity
KSE Karachi Stock Exchange SAFA South Asian Federation of Accountants
KT Thousand Tonnes SAP Systems, Applications and Products
KW Kilo Watt SECP Securities and Exchange Commission of
LUMS Lahore University of Management Sciences Pakistan
M-CC Manager - Corporate Communication SI(M) Sitara-e-Imtiaz (Military)
M-LLA Manager - Legal and Labour Affairs SM-A Senior Manager - Administration
MAP Management Association of Pakistan SM-CW Senior Manager - Civil Works
MMBTU Million British Thermal Units SM-CO Senior Manager - Coordination
MMSCF Million Standard Cubic Feet SM-P Senior Manager - Procurement
MOIPI Maintenance of Central Peace Incentives SM-CSR Senior Manager - Corporate Social Responsibility
MWs Mega Watts SM-E Senior Manager - Engineering
NFDC National Fertilizer Development Centre SOP Sulfate of Potash
NFEH National Forum of Environment and Health SWF Sona Welfare Foundation
NIT National Investment Trust Limited SWOT Strength, Weakness, Opportunity, Threat
NPO National Productivity Corporation TUESDEC Technology Up-gradation and Skill Development
NTDC National Transmission & Dispatch Company Company
NUST National University of Sciences and Technology USC Utility Stores Corporation
OHS Occupational Health & Safety WWF Workers Welfare Fund / World Wide Fund for
Nature
196
Form of Proxy
37th Annual General Meeting
I/We
of
of as my/our proxy in my / our absence to attend and vote for me /us and on my/our behalf
at the 37th Annual General Meeting of the Company to be held on Tuesday March 17, 2015 and / or any adjournment thereof.
Signed by
in the presence of
Signature on
Five Rupees
Revenue Stamp
IMPORTANT:
1. This Proxy Form, duly completed and signed, must be received at the Registered Office of the Company, 156 - The Mall,
Rawalpindi not less than 48 hours before the time of holding the meeting.
2. If a member appoints more than one proxy and more than one instruments of proxies are deposited by a member with the
Company, all such instruments of proxy shall be rendered invalid.
(i) Attested copies of CNIC or the passport of the beneficial owners and the proxy shall be provided with the proxy form.
(ii) The proxy shall produce his original CNIC or original passport at the time of the meeting.
(iii) In case of a corporate entity, the Board of Directors resolution/power of attorney with specimen signature shall be
submitted (unless it has been provided earlier alongwith proxy form to the Company).
AFFIX
CORRECT
POSTAGE
Company Secretary
FAUJI FERTILIZER COMPANY LIMITED
156 - The Mall, Rawalpindi Cantt
Website: www.ffc.com.pk
Tel No. 92-51-111-332-111, 8450001