Fatima Fertilizer Company Limited

Corporate Briefing Program Lahore Stock Exchange March 27, 2012

Index
Pakistan Agriculture Why Balanced Application of Fertilizer Nutrient wise offtake Pakistan Crops Yield Who We Are Brief Profile of the Company Vision and Mission Financial Performance of Pakarab Fertilizers Milestones Achieved Pakistan Fertilizer Market Urea CAN NP Financial Performance Fatimas Production and Offtake Financial Results Unique advantages Future Projects
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Pakistan Agriculture
Mainstay of Pakistans economy with 20% share in GDP Average agriculture growth has remained at 3.5% over past 7 years Growth likely to range between 3.0-4.0% during FY12. Contributes to growth as the supplier of the raw material to industries About 67 percent of the population lives in rural area and are directly and indirectly involved with agriculture Approx. 22 million hectares is under permanent cultivation Amongst the highest cropped area in the world Pakistan is predominantly a Nitrogen (Urea) market The growth in Phosphate has been inconsistent Usage of Potash has been negligible

Nutrient-wise Offtake in Pakistan

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 2002 2003 2004 2005 2006 2007 2008 2009 7.0% 5.5%
Thousands Tons of Nutrients

Growth in Nutrient Offtake 5.5%

120%
100% 80% 60% 40% 20% 0% P:33 N:50

78:21:0

78:21:1

77:23:1

76:23:1

75:24:1

76:23:1

85:14:1

78:21:0

Desired NPK Ratio K:17

2002

2003

2004

2005

2006

2007

2008

2009
4

Source: Food and Agriculture Organization of the United Nations

Pakistan Crop Yield A Comparative Analysis

Cotton Yield (Kg/acre)
Australia China Brazil Bangladesh USA Pakistan India 0

Sugarcane Yield (Kg/acre)

1,824
Brazil Australia USA India China Pakistan Bangladesh

32,049 31,433 28,285 26,762 26,606 21,193 17,739

0 5,000 10,000 15,000 20,000

1,495 1,441 1,367 885 858 655

500 1,000 1,500 2,000

is the 4th largest Producer

is the 5th largest Producer

25,000 30,000 35,000

Rice (Kg/acre)
Australia

Wheat Yield (Kg/acre)

4,388
China

1,922
1,262 1,145 1,122 1,033 970 663
0 500 1,000 1,500 2,000 2,500

USA
China Bangladesh Brazil India Pakistan 0

3,050 2,650 1,693 1,689 1,321 1,238

1,000 2,000 3,000 4,000 5,000

USA
India Brazil

is the largest Producer

11th

Pakistan Bangladesh Australia

is the 8th largest Producer

Source: Food and Agriculture Organization of the United Nations

Agriculture issues in Pakistan

Non Fertilizer Related Issues

Fertilizer Related Issues

Low Crop Yield

Input

No use of micronutrients Use of low quality seeds

Imbalance use of Nutrients

Soil Inborn

High pH of soil Salinity problems

Lower than recommended dosage

Use of traditional practices Practices Old technology in use

Fertilizer Selection

Fatima Fertilizer Who We Are

A green field project under the 2001 Fertilizer Policy with a project cost of USD750 million, aiming to encourage investors in this field, in view of growing demand of fertilizer. Joint venture between two prominent business houses of the country i.e. Fatima Group and Arif Habib Group. They also share equal ownership in Pakarab Fertilizers Limited, which was purchased through GoPs Privatization program Production facility is at Sadiqabad Geographically located at the middle of the agriculture belt. The fertilizer complex is a fully integrated production facility, capable of producing two intermediate products, i.e., Ammonia and Nitric Acid and three final products which are Urea, Calcium Ammonium Nitrate (CAN) and Nitro Phosphate (NP). The Complex has a 56MW captive power plant in addition to off-sites and utilities. The Complex has been allocated 110 MMCFD of gas from the dedicated Mari Gas fields. Fatima is the first Pakistan based company which has launched Level I ADR tradable in US OTC Market.

Vision, Mission & Core Values

Vision
To be a world class manufacturer of fertilizers and ancillary products, with a focus on safety, quality, and positive contribution to national economic growth and development. We will care for the environment and the communities we work in while continuing to create shareholders value

Mission

To be the preferred fertilizer company for farmers, business associates and suppliers through quality and service. To provide employees an exciting, enabling and supportive environment to excel in, be innovative, entrepreneurial in an ethical and safe working place based on meritocracy and equal opportunity. To be a responsible corporate citizen with a concern for the environment and the communities we deal with.

Core Values
Integrity Excellence Innovation Valuing People

Team work

Safety, Health, Environment & CSR

Customer Focus

Post Privatization Performance of Pakarab Fertilizer

Turnover PKR - Millions 18,887 Profit after Tax PKR - Millions 7,090

16,706

18,248

16,701 4,739 4,590 3,232 1,442 685

9,102 5,954 7,069 1,359

2005

2006

2007

2008

2009

2010

2011

2005

2006

2007

2008

2009

2010

2011

Gross Profit Margins

66% 57% 50% 40%

Shareholders Equity PKR - Millions 14,847

11,976

12,248

34%

38%

41% 5,839 1,532 7,069

10,414

2005

2006

2007

2008

2009

2010

2011

2005

2006

2007

2008

2009

2010

2011

Sponsors Asset Base of ~USD2 bn Each

Arif Habib Group asset also totaled at ~USD 2bn
USD1,942 m

USD743 m

USD763 m USD274 m USD300 m

Total Assets
Fatima Divisions Companies
Status as at Total Assets Shareholders Equity Net Sales Gross Profit EBITDA

Shareholders Equity
Fertilizers

Net Sales
Textile Sugar Fatima Sugar
30th Sep 2011
8,648 5,957 5,048 632 1,178

Gross Profit
International Trade

EBITDA
Total Total

Pakarab Fertilizers
31st Dec 2011
65,091 22,214 16,711 9,509 10,521

Fatima Fertilizer
31st Dec 2011
76,347 28,055 14,833* 10,052* 9,862*

Fazal Cloth
30th Jun 2011
14,123 5,157 18,934 2,026 2,154

Reliance Weaving
30th Jun 2011
5,597 1,944 9,994 1,351 1,196

Reliance Commodities
30th Jun 2011
4,706 3,484 341 83 972

Rs (Million)
174,512 66,811 65,861 23,653 25,883

US $ (Million)
1,942 743

763
274 300
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* Six months since commercial operations began Jul 1, 2011 Exchange Rate For Balance Sheet Item: Rs89.87 per USD (as at Dec 31, 2011) Exchange Rate For Income Statement Items: Rs86.32 per USD (Average for CY11)

Fatima Fertilizer Milestones Achieved

28.00 26.00 24.00 22.00 20.00 18.00 16.00 14.00 12.00 10.00 8.00 May-10 May-11 Aug-10 Aug-11
1 2 3 4

5
6

FATIMA was the best performing stock during CY11 with 103% return

1 Mar 2010

2 Mar 2011

3 May 2011

4 Jul 2011

5 Oct 2011

6 Mar 2012

7 Mar 2012

Ammonia, Urea & Nitric Acid Started

ADR Launched

NP Trail Run Started

COD Declared

Stock made all-time-high

CY11 Profit & Dividend announced

BoA-ML to act as Market Maker11

Mar-12

Mar-10

Jun-10

Jan-11

Mar-11

Jun-11

Dec-10

Dec-11

Oct-10

Apr-10

Sep-10

Feb-11

Apr-11

Sep-11

Oct-11

Jan-12

Jul-10

Jul-11

Nov-10

Nov-11

Feb-12

Pakistan Fertilizer Market

Urea Capacity
Fatima Group, 9%

CAN Capacity

NP Capacity

Others, 91%

Fatima 48%

Pakarab 52%

Fatima 54%

Pakarab 46%

Total Capacity: 6.5 m tons

Total Capacity: 870 k tons

Total Capacity: 664 k tons

Nutrient based Capacity - Nitrogen

ENGRO 31% Dawood FFBL 6% 11%

Nutrient based Capacity - Phosphate

FFBL 60% Pakarab 12%

Pakarab 7%

FFC 27%

Fatima 12% Agritech 6%

Fatima 14%
Suraj 5% Agritech NFC 6% 3%

Total Capacity: 3.5 m tons

Total Capacity: 500 k tons

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Urea The primary fertilizer for N

Domestic urea price on ascending trend. This is due to unscheduled gas curtailment resulting in production losses to manufacturer and resultant increase in the product price to offset those losses. Imposition of GST and Infrastructure Development Cess also contributed to price hike. Fatima is facing 12% curtailment as prescribed by ECC for fertilizer manufacturers on Mari Network. At current, local Urea is at ~25% discount to international Urea. 2,000
1,500 1,000 500 0 Mar-10 May-10 Dec-09 Feb-10 Apr-10 Jan-10 39% Nov-10 Mar-11 May-11 Nov-11 Dec-10

Urea Position in CY11 Opening Inventory Production Imports Available for sale Offtake Closing Inventory Adjustment

Industry 166 4,890 997 6,052 5,918 125 -9

Fatima 22 425 0 447 442 0 -5

Source: NFDC; Data in 000 M. Tons 75%

Sep-11

Sep-10

Aug-10

Aug-11

Dec-11

Jul-10

Feb-11

Apr-11

Jul-11

13

Feb-12

Oct-10

Jun-11

Jun-10

Oct-11

Jan-11

Jan-12

CAN A complex fertilizer with dual N

1,600 1,400 1,200 1,000 800 600 400 200 0

CAN price follows Urea trends, however, is priced at a discount of 20% to Urea. Comparative slow release of Nitrogen reduces nutrient loss and improves efficiency. Require less water to dissolve, therefore, effective in Barani areas too. Fatima produces granular CAN which is a preferred farmers choice. CAN is superior to Urea.

CAN Position in CY11 Opening Inventory

Industry 91

Fatima 9

Production
Imports Available for sale Offtake

598
0 689 675

355
0 364 358

Closing Inventory
Adjustment

1
-12

0
-6

Source: NFDC; Data in 000 M. Tons 76%

33%

Mar-10

May-10

Mar-11

May-11

Nov-11

Nov-10

Sep-10

Dec-09

Dec-10

Sep-11

Aug-10

Aug-11

Dec-11

Feb-10

Apr-10

Jul-10

Feb-11

Apr-11

Jul-11

14

Feb-12

Jun-10

Oct-10

Jun-11

Oct-11

Jan-10

Jan-11

Jan-12

NP A substitute for DAP

Being a phosphate rich fertilizer, NP prices follows DAP price trend. Currently, priced at a discount of 33% to DAP. NP require phosrock as raw material which is less volatile compare to phosacid for DAP producers. Fatima capable of using multi grade phosrock, thereby lower cost, without compromising on endproduct quality and nutrients. Agriculture Research shows that NP is suitable for Alkaline soil, over DAP.
NP Position in CY11 Opening Inventory Industry 14 Fatima 0

Production
Imports Available for sale Offtake

405
13 432 335

143
0 143 108

Closing Inventory
Adjustment

91
-6

35
0

2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1,000

Source: NFDC; Data in 000 M. Tons 27%

55% Nov-10 Mar-10 May-10 Mar-11 May-11 Nov-11 Sep-10

Dec-10

Dec-09

Sep-11

Aug-10

Aug-11

Dec-11

Feb-10

Apr-10

Jul-10

Feb-11

Apr-11

Jul-11

15

Feb-12

Jun-10

Oct-10

Jun-11

Oct-11

Jan-10

Jan-11

Jan-12

Fatima Fertilizer QoQ Production & Offtake

300,000
Production in M. Tons

200,000 100,000

300,000
Offtake in M. Tons

200,000 100,000 0

Urea

CAN

NP
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Financial Results
Post COD
For the period (Rs m) Sales Cost of goods sold Gross profit Operating expenses Other operating expenses (net) Profit from operations Finance cost Profit before taxation Taxation Profit after taxation EPS (Rs) 3QCY11 4QCY11 7,326 7,507 2,640 2,141 4,686 5,366 291 88 4,307 1,811 2,496 649 1,847 0.92 343 113 4,910 1,249 3,661 1,238 2,423 1.21 CY11 14,833 4,781 10,052 715 187 9,151 3,063 6,088 1,971 4,117 2.06 Sales breakup
CAN 31% Urea 37%

NP 32%

Cost of sales breakup

Depreciation 14% Others 12% Raw Material consumed 49%

Fuel and Power 25%

Despite being the first year of operations, Fatima Fertilizer declared 15% cash dividend for the year ended 2011 which was 75% of CY11 earnings.
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Fatima Fertilizer Unique Advantages

Natural Gas Advantage
Preferential Fixed Tariff USD 0.70 per MMBTU till 2018
o Ensures highest profitability amongst peer

Nitro Phosphate Advantage

Raw Material Local Rock Phosphate / Improved Profitability
o Will meet 25% of requirement, enable expanding margins

Dedicated Supply Mari Gas Field / No Unscheduled Curtailment

o Most competitors supply subject to curtailment on National Gas Grid

Price Advantage NP and DAP; Price Deregulated & Interlinked

o DAP prices are volatile due to Phos acid and Sulphur price rises capability to use variable grades of Rock Phosphate without compromising on nutrient

Technology Lower Costs

o

Strong Cash Flows

Debt Free by 2017
o Fundamentals ensures comfortable debt payments

Other Advantages
Portfolio N & P
o
o

Pakistan soil demands balanced usage

Tax rate of 1% of Revenue till adjustment of Initial Tax depreciation

Initial Tax Depreciation allowance

Ready to Invest in Growth Projects

Projects initiated by Fatima Group

New Project

MOU Signed with Haldor Topsoe

Green Field Fertilizer Complex in Africa

Developing Phosphate Mines

Pakistan Mining would supply phosphate rock to group fertilizer companies

Expansion
100 MW Bio-mass Co-Gen Power Fatima Energy is under implementation at a cost USD200 m

Thank You
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