Академический Документы
Профессиональный Документы
Культура Документы
PREFACE
TRIBUTE
REASON FOR SELECTION OF THIS INSTITUTION
DUN & BRADSTREET
INTERNATIONAL CREDIT INFORMATION
BOARD OF DIRECTORS
MANAGEMENT
WHAT IS ICIL’S CORE BUSINESS?
PRODUCTS AND SERVICES OF ICIL
o EXPORT FACILITATION SERVICES
o BANKING SERVICES
o WHAT IS DUNS NO
o BUSINESS INFORMATION REPORT
CLIENTELE
o FINANCIAL SECTOR
o EXPORT SECTOR
COMPETITORS
o CURRENT MARKET SITUATION
CONCLUSION
RECOMMENDATIONS
FINANCIAL ANALYSIS
o VERTICAL ANALYSIS
o HORIZONTAL ANALYSIS
o RATIO ANALYSIS
o CONCLUSION
ANNEXURE
o X-BIR REPROT (SAMPLE)
o LOCAL REPORT (SAMPLE)
o SEARCH REPORT (SAMPLE)
o INCOMEESTIMATION REPORT (SAMPLE)
PREPARED BY ___________________
MBA Registration No: ____________ Page 2 of 46
International
Credit Information Ltd
I have tried to use the latest techniques of the production & management on a very different
style, hence making the report unique. I am sure that I am on a very different subject and
again I would like to say that only the help of my teacher could handle such a big problem.
Regards
__________________
PREPARED BY ___________________
MBA Registration No: ____________ Page 3 of 46
International
Credit Information Ltd
I pay my tribute to Mr. Mirza Asad Ahmad, who not only assisted me in my project but also like a
teacher he taught me many things in the normal conversation.
Although he is a very busy person but he made spare some time for mine and I became able to get the
information in a consequent way.
PREPARED BY ___________________
MBA Registration No: ____________ Page 4 of 46
International
Credit Information Ltd
Before going into the problem I should have the knowledge about the company and its products.
PREPARED BY ___________________
MBA Registration No: ____________ Page 5 of 46
International
Credit Information Ltd
Dun & Bradstreet is more than 163 years old US based multinational which has its head office in USA
and has its working offices in more than 213 countries which have been serving well in them. From our
humble beginning as a credit rating agency, set up by Lewis Tappen in 1841 we have become a global
organization. In many of the markets we serve, we are unique in our ability to provide dedicated local
services backed by the global capabilities and resources of a worldwide corporation.
...Is a company more keenly focused on our core business areas? We have grown to become the world's
largest provider of business information and related services, with annual revenue of more than US$2
Billion.
PREPARED BY ___________________
MBA Registration No: ____________ Page 6 of 46
International
Credit Information Ltd
Dun & Bradstreet has the world's largest commercial database with more than 70 Million business
records. Serving your information needs around the clock, we have more than 18,000 professionals working
in more than 40 countries ensuring the quality & timelines of our information with over 1.5 million updates
completed each business day. Maintaining the most comprehensive commercial databases gives Dun &
Bradstreet a unique advantage of providing quality credit & marketing information services. In Asia Pacific
it is headed by DUN & BRADSTREET SINGAPORE.
Dun & Bradstreet in Pakistan D&B entered in the Pakistani Market with the concept of Risk Management
Services through its distributor International Credit Information Ltd. in February 1998.
PREPARED BY ___________________
MBA Registration No: ____________ Page 7 of 46
International
Credit Information Ltd
INTERNATIONAL CREDIT
INFORMATION LIMITED (ICIL)
• ICIL is an unlisted public limited company: Registration No. K-07137 NTN Number: 13-07-
1017382
• ICIL is distributor / Local affiliate of Dun & Bradstreet in Pakistan (visit website:
www.dnb.com.sg)
• ICIL is co-operation partner of Gerling credit insurance company of Germany (visit website:
www.gerling.com)
• ICIL has a marketing agreement with Schober Direct Marketing Company of Germany. (Visit
website: www.schober-international.com)
• ICIL's Board of Director comprises of Commercial, Investment Bankers, Chartered Accountants,
Corporate large and Industrial Managers of proven performance in Pakistan. Its management
team is academically qualified and has been trained by Dun & Bradstreet in different discipline.
• As a part of Dun & Bradstreet Asia Pacific Region, ICIL Pakistan has access to D&B
technologies, its world databases, its global network & resources. It is engaged in the
development of database of Pakistan's business universe and is providing global as well as local
business-to-business credit, marketing, purchasing and receivable management service.
The Co. has started its activities in February 1998 as a sole and authorized distributor of Dun & Bradstreet’s
Services in Pakistan.
PREPARED BY ___________________
MBA Registration No: ____________ Page 8 of 46
International
Credit Information Ltd
BOARD OF DIRECTORS
• Mr. M R Khan
-Investment banker
-Chairman Pakistan Kuwait Investment Bank Ltd.
-Chartered Accountant
-Entrepreneur with Industrial management background
-Ph.D.
-Entrepreneur with industrial management background
-Banker
-Managing Director Canadian Imperial Bank of Commerce, Liaison office in Pakistan
-Corporate Lawyer
• Mr. Ar if Mufti
-Chartered accountant
-Chairman American Life Insurance Company Limited ( ALICO)
PREPARED BY ___________________
MBA Registration No: ____________ Page 9 of 46
International
Credit Information Ltd
MANAGEMENT
A team of professional and qualified individuals manages the company. Company has a total strength of
more than 53 personnel.
Operation Manager
Mr. Salman Raza (BBA Finance, MBA Finance)
PREPARED BY ___________________
MBA Registration No: ____________ Page 10 of 46
International
Credit Information Ltd
DETAILS OF BRACHES
COMPANY'’S BANKS:
ANZ Grindlays Bank, Clifton Branch, Karachi.
Bank Al- Habib, Karachi.
Bank Al - Falah, Karachi.
COMPANY AUDITORS:
KPMG
(Taseer Hadi & Company)
PREPARED BY ___________________
MBA Registration No: ____________ Page 11 of 46
International
Credit Information Ltd
Being Local partner of Dun & Bradstreet in Pakistan, ICIL is primarily engaged in:
Providing D&B's cross border credit, marketing and purchase and Receivable Management Services
to Pakistani companies.
Development of database of Pakistani companies and putting it on D&B World base.
Providing Credit reports on Pakistani companies to D&B customers worldwide and to Pakistani
businesses.
Registered Charges Search Report and Registration of charges.
D&B International Receivable Management / Debt Collection Services to Pakistani exporters.
Gerling Export Credit insurance.
PREPARED BY ___________________
MBA Registration No: ____________ Page 12 of 46
International
Credit Information Ltd
ICIL has been serving the business sector of Pakistan since its incorporation and is unique due
to its professional touch and quality of the services. Following is a brief description of the
products that are being offered by the Co.
Marketing Services
DUNS Number
Business Marketing Services
Direct Marketing Service
Business Marketing Services
T.R.A.D.E Report
Banking Services
Credit Services
Marketing Services:
PREPARED BY ___________________
MBA Registration No: ____________ Page 13 of 46
International
Credit Information Ltd
A) D-U-N-S Number
The Data Universal Numbering System (D-U-N-S) is maintained solely by Dun & Bradstreet. We assign
each business location with a distinct, unique and separate operation its own DUNS No. when the business
first enters into D&B Business Information Database. DUNS No. is assigned once and if a business
decides to shut its operation, its DUNS No. is retired and will not be assigned to any other business
concern. This specific DUNS No. will only become alive if the same concern becomes operational again.
Access the world's most premier database of more than 60 million business records worldwide customized
to meet your business objectives and uniquely identified through the D&B DUNS No. The D&B DUNS
No.'s distinctive nine digit identification sequence links you to a wealth of quality information products
and services originally exclusively from D&B. As an internationally recognized common company
identifier in EDI and e-commerce transactions, the DUNS No. is in use by the world's most influenced
standard organizations. And more than 50 global industrial and trade associations and the US Federal
Government recognize, recommend or require the D&B DUNS No.
DUNS No. May be Ass igned to any business ent i ty inc luding:
PREPARED BY ___________________
MBA Registration No: ____________ Page 14 of 46
International
Credit Information Ltd
1. Clinics
2. Law Firms
3. CA Firms
• Different Departments of the same company located at the same location, such as a single company's
marketing and finance departments will not have different DUNS No.
• Post Office Box No. used only for general mailing purposes.
How to reg ister your co. on D&B's World Database by Gett ing
your own DUNS No.
Contact International Credit Information Ltd.- Dun & Bradstreet to get your own DUNS NO.
Only a one time processing cost of US$ 7.50 applies (equivalent to Pak Rs. 395/-)
PREPARED BY ___________________
MBA Registration No: ____________ Page 15 of 46
International
Credit Information Ltd
Not only in Pakistan but also all over the world there is no reliable database especially of commercial
exporters and importers who are partnerships and proprietorships. D&B only put reliable information on
their database. Once a company is on D&B database foreign buyers can have online access to ICIL. This
database is actually the raw material for the business-to-business dealings and reliability. The edge of the
Co. is that the commercial database maintained by the Co. is updated day by day so the customer can get
timely updated and fresh data. So according to the needs of the day it is very important to get such type of
data.
At D&B we have Total Marketing Solution to help your business in finding out the right
buyers/suppliers. Through our Business Marketing Services (BMS), you can explore potential markets
around the world for your products/services. Just specify the region you want to explore potential and we
will come up with a list of your potential buyers/suppliers with brief corporate profiles. Information on
each buyer/supplier will be provided to you in the shape of PROSPEST CARD.
PREPARED BY ___________________
MBA Registration No: ____________ Page 16 of 46
International
Credit Information Ltd
The results have also encouraged us to consider cross border Direct Marketing Services as a profitable
product.
E) T.R.A.D.E Report
PREPARED BY ___________________
MBA Registration No: ____________ Page 17 of 46
International
Credit Information Ltd
D&B's BIR is the most widely used & trusted report of its kind. The BIR can
enhance the accuracy of your decision making process by providing you the vital
facts & figures that reflects a firm's overall condition & ability to meet its credit
obligations.
Our worldwide information base can help you answer such questions:
Business Information Report (BIR) is a comprehensive Credit Report, covering areas such as;
1. Company Summary: A quick overview of the Co., D&B rating Duns numbers, year started, sales,
worth etc.
2. Credit Risk Index: A DnB Credit opinion.
3. Payment Experience: Payment history from trade suppliers
4. Court Information: High court or similar information
5. Registered Charges: Secured loans, debentures etc.
6. Finance: Balance sheet, Income Statement, & Financial Commentary
7. Banking Information: Principal Bankers
8. History: Company registry information, shareholding, name of officers and principals, experience
& background of key personnel
9. Operations: Nature of Business & how it is conducted
10. Corporate Structure: Listing of parent/subsidiaries/branches/affiliates
11. Special Event: Latest media/ credit significant updates
PREPARED BY ___________________
MBA Registration No: ____________ Page 18 of 46
International
Credit Information Ltd
Receivable Management Service (RMS) provides you a set of tool; practices and
services that will help you manage your receivable professionally and efficiently. We
have more than 600 professionals working in over 40 countries ensuring careful
handling of your claims and information.
D&b's professional experience, physical presence and comprehensive information on Companies allow our
local offices to know the business climate and legal implications in our major centers of global commerce
around the world. 70% of all accounts placed with D&B are collected before legal action is necessary. In fact
all accounts placed us that are less than 150 old could be settled within a month.
Membership Pr iv i leges
On signing the D&b RMS subscription form, our customer is entitled to certain privileges that include:
1. D&B Global Membership: The client can ask for advice and consultancy on international trade
problems, UCP Laws and L/C terms etc. free of cost.
2. DUNS Number: A RMS subscriber is issued a DUNS No. (Free of cost) that makes his company
globally recognized and makes it eligible for e-commerce facility.
3. Complementary BMS Cards: A member is also entitled to receive 5-10 free BMS Cards of Buyers
in USA for their product.
4. Free BIR: As a member you are given one free BIR of your Customer in category A & B.
5. Special DUNS Letter: This Letter is specifically tailored to be sent along with the shipping
documents, stating that D&B is the Collection Management against a particular consignment as a
precautionary letter.
6. Coverage for 9 Years: RMS subscription covers all the cases that are stuck up for the last 8 years in
addition to providing cover the one year in future.
7. Unlimited No. of Claims: A RMS member can lodge unlimited no. of stuck up invoices with D&B
for collection. D&B will not charge any commission unless the amount is recovered.
PREPARED BY ___________________
MBA Registration No: ____________ Page 19 of 46
International
Credit Information Ltd
I.On expiry of a credit term, the customer can ask for "D&B Fast Collection Service." This service
constitutes a set of three letters that are sent to the debtor at 10 days intervals. If the amount is recovered
through this service, the ICIL/D&B will charge a flat commission of 5% on the amount collected.
II.In case the D&B Fast collection service does not bring about the positive result, the client will then give
D&B a Final Clearance to collect on its own behalf. The under-mentioned structure will be applicable then.
• US $ 2.5 billion (30%) of Pakistani exports are on consignment basis (unsecured credit).
• Every year unpaid export bills remain stuck-up.
• D&B's global receivable management and debt collection network service is already available on
Pakistani exporters and the banking industry.
• D&B RMS and debt collection service is again an essential tool for increasing export profitably.
• D&B have a collection network in 40 countries around the world.
• D&B Receivable managers and debt collectors have the knowledge of local languages, laws, cultures,
business practices etc. of 40 different countries.
• In additions to local presence, D&B collectors and receivable managers have in-depth know-how of
international laws, which enables D&B to provide excellent Receivable management services
throughout the world.
PREPARED BY ___________________
MBA Registration No: ____________ Page 20 of 46
International
Credit Information Ltd
Credit Services:
The company provides many corporate/credit services to the banking as well as business sector for the
enhancement of the confidence for their decision making.
PREPARED BY ___________________
MBA Registration No: ____________ Page 21 of 46
International
Credit Information Ltd
ICIL provides Credit Reports on Pakistani businesses. These reports are prepared after
thorough investigation and contain vital information such as Company contact details,
Financial figures, Trade references, management background, etc.
ICIL provides search reports including registered charges at the Securities & Exchange
Commission. ICIL Search reports are developed covering of bank-wise, security-wise and
date-wise charges.
Registration of Charge:
For the convenience of our banking customers ICIL provides registration of charge
documents, creation of charge, and modification of charges and also satisfaction of charges.
CLIENTELE
FINANCIAL SECTOR
PREPARED BY ___________________
MBA Registration No: ____________ Page 22 of 46
International
Credit Information Ltd
EXPORT SECTOR
COMPETITORS:
ICIL has been facing a lot of competitors for the corporate services that are as follows:
Projects
Observers
Aslam Associates
Spelvision
PREPARED BY ___________________
MBA Registration No: ____________ Page 23 of 46
International
Credit Information Ltd
It is observed from the current market analysis that ICIL is having the major market share of the search
reports because of its effective marketing and product services. Following is the current market share of the
companies;
Projects 15
Observers 10
Aslam Associates 13
Spelvision 8
Ale Imran 4
Others 11
PREPARED BY ___________________
MBA Registration No: ____________ Page 24 of 46
International
Credit Information Ltd
PREPARED BY ___________________
MBA Registration No: ____________ Page 25 of 46
International
Credit Information Ltd
PREPARED BY ___________________
MBA Registration No: ____________ Page 26 of 46
International
Credit Information Ltd
PREPARED BY ___________________
MBA Registration No: ____________ Page 27 of 46
International
Credit Information Ltd
(RUPEES’000)
2002 % AGE 2001 % AGE 2000 % AGE
Sales 16,786,699 95.54 11,982,414 91.86 10,201,319 90.35
les: Cost of goods sold 10,109,117 57.53 6,362,616 48.78 5,574,858 49.37
GROSS PROFIT 6,677,582 38.00 5,619,798 43.08 4,626,461 40.97
Less: Selling & distribution expenses 1,457,797 8.30 1,022,139 7.84 869370 7.70
Financial expenses 668,213 3.80 275,271 2.11 333,124 2.95
Other Income 783,922 4.46 1,061,844 8.14 1,089,623 9.65
other charges 496,073 2.82 390,520 2.99 323,677 2.87
NET PROFIT BEFORE TAX 4,839,421 27.54 4,993,712 38.28 4,189,913 37.11
Provision for taxation 1,766,000 10.05 1,790,000 13.72 1,546,000 13.69
NET PROFIT AFTER TAXATION 3,073,421 17.49 3,203,712 24.56 2,643,913 23.42
Unappropriated profit b/f 253,246 1.44 229,750 1.76 337,805 2.99
Profit available for appropriations 3,326,667 18.93 3,433,462 26.32 2,981,718 26.41
APPROPRITIONS:
Transfer to general reserve 800,000 4.55 1,000,000 7.67 700,000 6.20
Dividends:
First interim 641,240 3.65 769,488 5.90 512,992 4.54
Second interim 769,488 4.38 641,240 4.92 512,992 4.54
Third interim 641,240 3.65 512,992 3.93 512,992 4.54
Proposed final 256,496 1.46 256,496 1.97 512,992 4.54
UNAPPROPRIATED PROFIT c/f 218,203 1.24 253,246 1.94 229,750 2.03
Earning per share 11.98 12.49 10.31
PREPARED BY ___________________
MBA Registration No: ____________ Page 28 of 46
International
Credit Information Ltd
COMMENTS ON VERTICAL
ANALYSIS
BALANCE SHEET
Fixed assets:
There is a subsequent increase in the fixed assets of the company in 2002 (33.30%) with reference to 2001
(10.82%) and 2000 (14.90%). However, it decreases in 2001 as compared to 2000 but it regains its position.
Capital work in progress:
Is continuously increasing from 2000-2002 which shows that the conversion of capital work in progress
into fixed assets is very slow. It should be avoided in order to increase the fixed assets of the company.
Long term investment of the company shows a decline in 2001 as compared to 2000 but in 2002 it shows
an increase which is more then in 2000. This is the result of co’s long term planning; it also states that co is
mush conscious about their prosperity in the future.
Long term advances of the co, is increased in amount from 2000-2002 but its proportion in total this year
is reduced as compared to last year. Advances are major source of earnings so, it should be improved.
Long term deposits of the co is lower in current year with reference to previous two years which shows
that company has not enough deposits to meet any long term liabilities.
Current Assets:
As a whole there is decrease in current assets of the company in 2002 with reference to previous years.
Especially cash and bank balance of the co is decreasing in 2002 which is not a good sign and shows that co
has not adequate funds to meet the short tem liabilities of the bank. Decrease in trade debts is a good sign in
current year However; in 2001 the position of current assets is better then 2000. So, instead of maintaining
and improving its position the bank loses its position. In order to earn more profits the co has to overcome
all these difficulties.
Share capital:
PREPARED BY ___________________
MBA Registration No: ____________ Page 29 of 46
International
Credit Information Ltd
Current liabilities of the company especially creditors and other liabilities are decreasing in 2002 as
compared to 2001 and 2000. Which is a good sign for the co, the company also declare dividend which is an
attractive sign for the investors to invest. The amount of dividend increasing but its proportion is more in
2001 as compare to 2002.
Over all 2001 is good as compare to 2002 &2000
PREPARED BY ___________________
MBA Registration No: ____________ Page 30 of 46
International
Credit Information Ltd
PREPARED BY ___________________
MBA Registration No: ____________ Page 31 of 46
International
Credit Information Ltd
PREPARED BY ___________________
MBA Registration No: ____________ Page 32 of 46
International
Credit Information Ltd
(RUPEES’000)
2002 Trend 2001 Trend 2000 Trend
PREPARED BY ___________________
MBA Registration No: ____________ Page 33 of 46
International
Credit Information Ltd
COMMENTS ON HORIZONTAL
ANALYSIS
BALANCE SHEET
Fixed assets of the company are decreasing in 2001 but in 2002 due to addition, there is a substantial
increase in the value of the fixed assets of the company. Capital work in progress is considerably increasing
which means that the company is not only exercising good managerial efforts to convert it into fixed assets
but also acquiring more assets that will ultimately convert into fixed.
Long-term investment shows a negative trend in 2001 but in 2002 there is a significant increase in long
term investment, which means that the company is utilizing its idle cash/ resources in efficient manner.
Overall the company’s long term and fixed assets are showing a mixed trend.
The current assets of the company are decreasing due to decrease in short term investment and cash and
bank balance which is not a positive sign for the company.
There is a significant increase in current liabilities of the company in financial year 2002 due to increase in
the creditors and retiring a portion of redeemable capital. The increase in creditors means that the company
has made purchases on credit basis due to its good will in the market. However, there is a decreasing trend in
current liabilities due to decrease in current maturity of the debts.
Capital reserves is constant and revenue reserve showing an increasing trend which become a cause of
increase in equity base of the company and this is positive sign for shareholders and investors as the
company raised more funds from the financial institutions.
The company has consistent dividend policy, which shows that it is not holding the benefits but also passing
it to the shareholders.
PREPARED BY ___________________
MBA Registration No: ____________ Page 34 of 46
International
Credit Information Ltd
Sales are increasing in both the financial year (2001-2002) due to increase in production capacity of the
company. The cost of goods sold is increasing in proportion with the sales of 2001 but in 2002 it is increase
more than the proportion of sales, which is not a favorable sign as it shows that the company is not
implementing good cost control policies. No doubt the gross profit of the company is increasing but less
then the previous year because most of its portion is consumed in meeting the direct cost of the company.
Selling and administrative expenses are showing an increasing trend because such kind of expenses can’t
remain static. So, this increase will be compare with the net profit of the company. The financial charges are
increasing due to increase in the lending of the company. As the long & short term investments of the
company are decreasing so the other incomes of the company are showing decreasing trend.
Profit before taxation is increasing in 2001 due to effective cost controlling policy but in 2002 it is showing
a negative trend due to loose cost controlling policy of the company as the major portion of the profit is
consume in meeting these expenses. Provision for taxation is decreasing due to decrease in profits. As
taxation is related to pre-tax profit and it is a statuary requirement so it can’t be commented.
The company has a good dividend policy. However, its proportion is decreasing due to decrease in
profitability of the company.
In short the overall profitability of the company is satisfactory but it should implement and adopt good cost
control policies in order to keep equilibrium between expenses and revenues, otherwise it will have an
adverse effect over the profits. The equity base is increasing which is a positive sign for the investors.
Similarly, the fixed assets of the company are increasing which will effects its productivity in near future and
the company will enter in a more progressive era. So, the pulse feeling, on the basis of this analysis,
indicate that co, is developing.
PREPARED BY ___________________
MBA Registration No: ____________ Page 35 of 46
International
Credit Information Ltd
RATIO ANALYSIS
FINANCIAL PERFORMANCE ANALYSIS
The analysis of financial situation will focus on the following broad categories:
Operating and Performance
Leverage
Efficiency
Market/Share holder analysis
Valuation
Profitibility Analysis
60
50
Percentage
40
30
20
10
0
1998 1999 2000 2001 2002
GP Margin Year
NP Margin ROE
PREPARED BY ___________________
MBA Registration No: ____________ Page 36 of 46
International
Credit Information Ltd
Gross profit margin has shown seven percent decrease from last year, a significant decrease in the
percentage being the lowest percentage since last five years. Although the increase in sales was more than
40% in year 2002, but the increase in cost of sales is excessive than the increase in sales, that resulted in
decline of GP Margin in year 2002. Reduction in GP margin is caused mainly by the acquisition of PSFL.
PSFL was operating in a loss. Compilation of accounts of PSFL with FFC has thus resulted in decline of GP
ratio of FFC.
The decrease in NP margin is mainly caused by the reasons of decrease in GP margin. Additional reason for
decrease in financial charges is inclusion of financial charges in Year 2002 accounts. Financial charges have
increased from 2.3% (2001) to 4% (2002). This increase in financial charges has hit the NP margin adversely.
FFC’s operating income, augmented by treasury operations, which returned investment income of Rs. 709m
this year compared to Rs. 882m last year, was marginally higher than in 2001. The investment income was
lower mainly due to lowering of interest rates and strengthening of Pak Rupee against foreign currencies,
impacting negatively on exchange earnings with significant depreciation of the dollar during the year and
outflow of funds due to additionally equity investment of Rs. 3bn in FGFC.
Pre-tax profits of company this year decreased by 3% due to non-cash impairment charges of goodwill.
Correspondingly, the net profit at Rs. 3.07m was lower by 4% and the EPS at Rs. 11.98 also declined
proportionately compared to last year.
Significant reduction in ROCE has been observed. This is due the drastic increase in capital employed.
Similarly a decrease in earnings has been observed due the increase in depreciation. So ROCE has been hit
twice.
The company follows a strategy of earning through less risky, high yielding investments to cushion the
impact on profitability and arrest declining margins due to incremental costs.
PREPARED BY ___________________
MBA Registration No: ____________ Page 37 of 46
International
Credit Information Ltd
Performance of the company is also affected by economic conditions. The economic conditions improved in
2002, making business more favourable. Interest rates fell, reducing the interest expenditure. This fall in
interests has benefited FFC in borrowing loan for the acquisition of PSFL. There has been significant
reduction in the interest payments.
The performance of agriculture sector has also shown a decline in year 2002. Shortage of water resources
adversely affected summer crops. The output of cotton, on the major corps of Pakistan, observed a decline.
This decline in agriculture sector resulted in the consumption of fertilizers to decrease, consequently
affecting the sales revenue of the company.
Competitive
Return on Assets 1998 1999 2000 2001 2002
FFC % 37.58 34.19 27.06 35.74 17.18
FFC has been more efficient on use of its assets as it has yielded more return on assets from 1998 to 2001.
The significant fall in ROA of FFC is evident of the fact that it has taken over FJFC. FJFC has operated it
loss previously. The combination has resulted in the over all utilization of assets to decrease.
Efficiency
The efficiency of the company in terms of stock turnover shows the FFC has reduced its investment in stock.
Although there is nominal increase in stock, but the amount has not increased inline with increase in cost of
capital. This is a good sign as it shows that the investment tied up in stock has decreased.
Leverage
PREPARED BY ___________________
MBA Registration No: ____________ Page 38 of 46
International
Credit Information Ltd
Company’s debt equity ratio is constantly decreasing from 28:72 (1997) to 02:98 (2001). The sudden
increase in debt/equity ratio is also because of the acquisition of PSFL. Acquisition was financed through
medium tem loans from Citibank and ABN Amro bank.
The company has strong financial position that enabled it to raise timely funding of over Rs. 8bn, being the
largest ever private syndicated local currency financing arrangements in the history of the country, for the
acquisition of PSFL.
Company’s interest cover before the issue of loan explains the reason of company’s strength that enabled it to
raise loan of such a big amount. Even after borrowing has been made, the interest cover has not dropped to
dangerous level. This show the security investors have regarding their returns.
Market Ratios
PREPARED BY ___________________
MBA Registration No: ____________ Page 39 of 46
International
Credit Information Ltd
90
85 80
Payout Ratio
80
Dividend
75 70
70
65 60
60
55 50
1998 1999 2000 2001 2002
Years
Divident Payout Payout Ratio
Company’s P/E ratio has increased. This represents the perception of market regarding the future of the
company. Investors are now willing to pay more for the company’s shares. This shows that the market has
perceived the acquisition of PSFL as a positive sign. P/E ratio has increased also because of the decrease of
the EPS because of reasons already discussed.
The company’s dividend in absolute terms has increased from previous year. Dividend yield however has
decreased. This is mainly because of the increase in share price of FFC. Company has distributed more
earnings as dividend to its owners in current financial year. This is because to maintain the dividend yield to
the investors. The increase in market price of the shares because of acquisition of PSFL forced the company
to increase the dividends, in order to maintain the dividend yield to acceptable level.
PREPARED BY ___________________
MBA Registration No: ____________ Page 40 of 46
International
Credit Information Ltd
Amount (Rs/Share)
60
20
50
Percentage
40 15
30 10
20
5
10
0 0
1998 1999 2000 2001 2002
Year
Market Price of shares (Avg) Dividend Yield
The company continues to maintain the policy of higher dividend distribution. It has been recommended a
final dividend of 10% over and above interim dividend declaration of 80% already paid to the share holders.
The cumulative dividend distribution for the year 2002 at 90% amounts to Rs. 2.3 billion and represents a
payout of 75% of the net profit after tax for the period as opposed to 68% paid last year.
As a result of operational and financial strategies, the company has continued to make excellent progress
over the years in delivering shareholder value which has been reflected in strong growth in earning per share
and high dividend payout. Net of tax profits of the company for the year 2002 crossed Rs. 3bn mark, yet
again this year, for the fifth time, the highest amount ever returned by any company in the fertilizer sector.
FFC yet again is the winner of the top 20 companies’ award, presented by Karachi Stock Exchange.
Company has secured third position. This reflects investor’s confidence over companies’ management and its
policies.
PREPARED BY ___________________
MBA Registration No: ____________ Page 41 of 46
International
Credit Information Ltd
Valuation
One theory of financial performance states that there is no need to measure financial performance of
managers using any model. It states that what ever company does, should make it public as soon as possible.
The market in itself could perceive the benefit of company’s policies. Keeping in view this theory in mind,
the study of market capitalisation shows that the market has taken company’s decision of acquiring PSFL
positively and immediately responded to it by increasing its value.
Company’s break up value has increased, representing that the investment in the company has become more
secured. This pattern could be related to the return offered by the company. As the risk of the company has
decreased, the return has also decreased. Market has not reacted to the break up values as it had in 1998.
Market price to break up has decreased from 2.08 to 1.22.
10
0
1998 1999 2000 2001 2002
Year
PREPARED BY ___________________
MBA Registration No: ____________ Page 42 of 46
International
Credit Information Ltd
C O N C L U S I O N
Conclusion of the report will be discussed with reference to its aim objectives.
Another reason of the low profitability and high gearing is the acquisition of 100% management control of
PSFL a wholly owned subsidiary of NFC ”National Fertiliser Company Limited”
The company has achieved 40% growth in turnover as well as 19% growth in its gross profit during 2002.
During the year under review, company gained increased market shares in both urea and DAP sales, more
than the industry growth. FFC is continuing to maintain fundamentally strong competitive edge in the
dynamic and complex market place.
Short-term solvency also decreased significantly in both current and quick ratios. Liquid funds, net of short-
term borrowings dropped by 2.9 billion due to equity investment in FJFC and stood at Rs. 4.5 billion at the
close of the year. Although the company has very low percentage of short term liquidity which is normally
threatened but company’s track record and it’s financial worth is still very strong and lead in the sector
Company made a heavy investment in the year 2002 to acquire the PSFL , which resulted in the highest
gearing of both short and long term.
Although company’s performance has been decreased as compared to the previous years but company still
hold the market due to the strong position
Company’s market capitalisation has increased significantly from past years. This is mainly because of the
acquisition of PSFL. The perception of market as to the impact of acquisition of PSFL is included in the
share price, resulting in increases in overall market capitalisation.
PREPARED BY ___________________
MBA Registration No: ____________ Page 43 of 46
International
Credit Information Ltd
It has been assessed that investment in PSFL will further improve efficiencies, and enhance returns to our
shareholders in the years to come while improving skills and of people and retaining customer loyalty.
Higher quantities of phosphatic sales are also planned to diversify and bridge the gap to maintain existing
margins and counter reduction of income on deposits due to decline in rates and higher financial charges on
the acquisition of PSFL.
The impact of acquisition of PSFL on company/s short-term indicators is mainly negative. This is because of
the additional depreciation and non-cash goodwill amortisation charge to profit and loss account, having a
negative impact on profits. However, market has conceived future benefits of acquisition and has thus
included this effect in the share price of the company. With the passage of time, the company will enjoy the
benefits of the acquisition. This will later on be revealed in the accounts of the company. So the future
financial situation of the company will be improved.
Future Prospects
The company aims to sell and market over three million tonnes of urea phosphatic fertilizers during the year
2003 and maintain the lead in the market share, which presently stands at 54% in the urea sales.
Company’s current financial situation is better than previous year. It is expected to further improve as the
economies are achieved through joint operation of FFC and PSFL. Inefficiencies will be remover and
significant reduction in cost is expected. This all will add value to company’s share price. Company’s
financial indicators predict that the company will experience better situation in the coming year. However,
you cannot be certain about the future of fertilizers companies. Products of these companies are highly
PREPARED BY ___________________
MBA Registration No: ____________ Page 44 of 46
International
Credit Information Ltd
dependent on the agricultural situation in the country. Agriculture is unpredictable industry and performance
of it is dependent on certain factors. Some of which are:
Weather
Planted Acreage
Agricultural Policies of Government
Grain stocks
Crop failures
Changes in agriculture production methods
Seasonal usage of fertilizers
Economic Survey of Pakistan for current year predicts that the plan Acreage is not expected to increase. So
likely benefit to the company from increase of plant acreage and thus increase in urea consumption is
unlikely to happen.
Fertilizer policy was announced shows that the prices of fertilizer products expected to increase gradually.
The prices should nevertheless remain less than that of imported fertilizers, to discourage imports.
Fertilizers are a key input in agriculture contributing 30-70% increase in crop yield. Pakistan being the
agrarian country cannot survive without fertilizers. So the demand side of the market is relatively favorable
for the company. The competition in the market is not very high. The company’s previous performance is
evident of its management capabilities. Keeping the past and present in mind, future of FFC seems bright.
PREPARED BY ___________________
MBA Registration No: ____________ Page 45 of 46
International
Credit Information Ltd
B I B L I O G R A P H Y
S.NO REFERENCE
1 BPP (2000), Success in your Research & Analysis Project, London BPP
7 www.ffc.com.pk
8 www.engro.com
9 www.finance.gov.pk
10 www.kse.com.pk
11 www.pakboi.gov.pk
PREPARED BY ___________________
MBA Registration No: ____________ Page 46 of 46