Академический Документы
Профессиональный Документы
Культура Документы
Introduction................................................................................................................ 3
Brief Overview of Company........................................................................................ 3
Industry Overview...................................................................................................... 4
Brief History and Background..................................................................................4
Vision....................................................................................................................... 5
Mission.................................................................................................................... 5
FFBLs Internal Environment....................................................................................... 5
Hierarchy of FFBL.................................................................................................... 5
Departments.............................................................................................................. 6
HR Department....................................................................................................... 6
Finance department................................................................................................ 7
PESTLE Analysis.......................................................................................................... 8
Political.................................................................................................................... 8
Economic................................................................................................................. 9
Social....................................................................................................................... 9
Technological........................................................................................................... 9
Environmental......................................................................................................... 9
Legal...................................................................................................................... 10
Porter Five Forces analysis........................................................................................ 10
Bargaining power of supplier................................................................................. 10
Bargaining power of buyers................................................................................... 10
Rivalry among Competitors...................................................................................10
Threat of new entrants.......................................................................................... 10
Threat of Substitute............................................................................................... 11
Relationship with international markets...................................................................11
Competition and its impact...................................................................................... 12
Engro Fertilizer Limited.......................................................................................... 12
Fatima Fertilizer Limited........................................................................................ 13
Dawood Hercules Fertilizer Limited.......................................................................14
Agritech................................................................................................................. 14
EXTERNAL ANALYSIS................................................................................................. 14
SWOT Analysis...................................................................................................... 14
Marketing Strategy................................................................................................... 15
Strategy Formulation............................................................................................. 15
Product and Service Range.................................................................................... 16
Branding and Quality............................................................................................. 17
Sales Performance................................................................................................. 18
MIS & Technology
Issues
18
Introduction
Agriculture is the backbone of Pakistans economy. From the past few years, agriculture
sector of Pakistan is showing mixed growth (Economic Survey 2011-12). During 2013-2014
the performance of this sector was encouraging with the growth of 2.1% (Economic Survey
2013-14). Agriculture has a major contribution in the GDP of Pakistan. The chief objective of
the agriculture is to produce food and to provide source of income to the people of Pakistan.
Major work force i.e. 43.7% (Economic Survey 2012-13) of the Pakistan is employed in
agriculture sector of Pakistan and this major chunk of total population is growing food for
themselves and for the nation.
The increasing population means that more food is required for feeding more people. It is
very important to use fertilizers for increased production and improved quality of crops.
Although government policies and laws are always in favor of fertilizer industry but there are
just a hand-full of companies operating in this industry. The biggest reason behind this is
high capital investment is required for setting up a production plant.
Since the role of fertilizer industry is pivotal in agricultural countries like Pakistan, thus, we
aim to frame this research over strategic analysis of leading fertilizer company, Fauji
Fertilizer Bin Qasim. It is among the top manufacturing company of fertilizers, it has strong
financial position and it has various advantages over its competitors. Also Fauji Fertilizer
Bin Qasim is listed on stock exchange and value of its shares is increasing (FFBL 2014)
which shows that companys performance is good.
The main goal of the study is to collect the information about functional areas of FFBL, the
best practices of industry, corporate culture, and industry concentration. In addition to that we
will be studying international best practices of fertilizer industry, economic survey, and how
the industry get impacted by the external factors like shortage of gas etc.
alone meets 45% of the demand of DAP and 13% of the demand of urea (FFBL 2014).
Hence, contributing towards the agricultural growth Pakistan, and ultimately contributing in
GDP of the country. It is an ISO-certified manufacturer of granular urea and Di-ammonium
phosphate fertilizers. The company started as a result of a joint-venture between Fauji
Foundation group and Jordan Mines Company (JPMC) in November 1993. Initially the
company was named FFC-Jordan Fertilizer Company. At that time FFC had 30%, FF had
10% and JPMC had 10% stakes of the company. The Company was listed on Karachi Stock
Exchange in May 1996 while the commercial production was started in January 2000. The
company was renamed as Fauji Fertilizer Bin Qasim in 2003 when JPMC sold its entire
stakes to Fauji Fertilizer. The production units of FFBL are located in Karachi while the
head-office is located in Harley Street Rawalpindi. FFBL is a member of Rawalpindi
Chamber of Commerce and International Fertilizer Association.
In 2005, FFBL did joint venture with a Moroccan firm Office Cherifien des Phosphate
(OCP), and Pakistan Maroc Phosphorus S.A was established on Pakistan. Moreover in
2006 FFBL achieved ISO certifications in Quality Management System (QMS) (9001:2000),
Environment Management System (EMS) (14001:2004) and Occupational health and safety
(OHSAS) (18001:1999). Further, for integration of different departments and for sharing
information among all of the employees company implemented SAP-ERP system in 2010.
Now FFBL is planning to diversify its portfolio and starting two new projects. One is Fauji
Meat and the other one is Fauji Food.
Industry Overview
Brief History and Background
At the time of establishment of Pakistan in 1947 there were not any fertilizer plants or
manufacturing facilities. Pakistan has remained essentially an agrarian economy. The
governments in the past have recognized the great significance fertilizers have on agricultural
productivity. So, conscious efforts have been made to install new plants and attract foreign
investment in this sector. Pakistans agricultural growth is has a significant dependence on
the fertilizer industry because it provides one of the key inputs of crop production.
Agriculture is the backbone of Pakistans economy since it contributes a hefty 21% to the
GDP. Any progress in the fertilizer sector not only helps the country and economy thrive at a
quicker pace but also dos good to the whole population of the country. Directly or indirectly,
around 62% of Pakistans population has dependence on agriculture.
Vision
To be a premier organization focused on quality and growth, leading to enhanced
stakeholders value.
Mission
Fauji Fertilizer Bin Qasim Limited is committed to remain amongst the best companies by:
Maintaining the spirit of excellence through sustained growth rate in all activities
Maintaining competitive price
Maintaining quality fertilizer
Providing safe and conducive working environment for the employees
Departments
HR Department
For any organization, human resource department plays a major role in performance of
business. If a human resource department is efficient it can fulfill business need by attracting,
recruiting and retaining most important resource i.e. human resource
e.
Finance department
Finance is one of the most sensitive areas as it deals with all the cash and investment
management etc. A single mistake in finance department can cause millions of Rupees loss to
the company and hence the company may ultimately loss the basic reason for the operation
of their business activity i.e. Profit maximization.
Most of the financial decisions of the company are made by the CFO. However, the
operations of the department routine work and documents are signed by treasury manager
and as well as CFO. The long term planning and budgeting is done by separate finance
department of planning and budgeting department which is located in the head office.
Like other companies, FFBL publish their annual statements as well as quarterly statements
to inform the general public and stakeholders about the performance of their company.
Financial Statements is made on accrual bases and reported according to IAS 1. Inventory
valuation technique used by company is Weighted Average as allowed by IAS 2 and straight
line method of Fixed Assets is used to charge depreciation on them. On Average 10 years of
useful life is calculated for the machinery and equipment.
Company maintains gratuity fund which is maintained by trustees for its permanent
employees. The amount that is in gratuity fund is close to 1 billion rupees. These gratuity
funds involves very little risk because they are invested in banks or in risk free securities
such as government treasury bills where default risk is very low.
The software which the company is using is SAP. This software was purchased in 2008.
Company officials believe that SAP is very comprehensive software that allows them to have
all sort of information they require. SAP also includes accounting elements in it. For e.g.
maintaining payrolls, Inventory management etc. Initially there was a communication bridge
between different departments. As communication wasnt fluent hence decision making was
taking time. After introduction of SAP in their operating system much of these issues were
resolved. Management can have a look about companys position and any information they
need, it is in front of them with only few clicks.
At the moment making financial decisions in order to reduce cost of production is a major
challenge faced by FFBL says Accounts and finance manager of FFBL. At the moment
company is facing curtailment of gas and as a result company is unable to produce its product
UREA. Gas is the raw material of urea and hence with shortage of gas company was unable
to produce urea to its full capacity. In 2013 4.8 metrics of urea was produced whereas plant
had a capacity of producing 6.8 million metrics. Rising fixed costs per unit is a serious
problem faced by the company at the moment. Its effects and reasons are further discussed in
economic analysis later on.
FFBL is commissioning continuous improvement model of Plan, Do, Check and Act.
PESTLE Analysis
Political
Political factors impact the overall operations of businesses. The Political factors which can
affect fertilizer industry to great extent are:
Terrorism Unfortunately, Pakistan has security issues. Every other day there is a blast or
other terrorist activities due to which the economy and the businesses are being affected. Any
terrorist activity near the manufacturing plan or head office can result in closure of operations
hence causing company a loss. Fertilizer bombs, an issue recently raised by Pakistani and
Afghan authorities is also a threat.
Political unrest Pakistan is a politically unbalanced country, every now and then road are
being blocked due to protests. It disturbs the transportation and distribution of goods.
Government support -- Government always support fertilizer industry because of the fact
that Pakistan is an agricultural country and a major part of its GDP consists of agricultural
products. The main buyer of fertilizer is Government of Pakistan; it provides fertilizer to the
farmer on subsidized rates.
Economic
Inflation Inflation reduces the buying power of the people. This results in reduction of
number of farmers who can afford good quality inputs to the agricultural products.
Shortage of gas Pakistan industries are facing shortage of gas since 2008; this is adversely
affecting the production of fertilizers because natural gas is the major raw material required
for the production of fertilizers.
Increased fuel prices The Company has outsourced its transportation system. As fuel prices
fluctuate the cost of transportation varies accordingly.
Social
Social commitments (internal) - FFBL has collaborated with an NGO named Human
Development Foundation and setup a medical camp in Ghagar Phatak, a small town in Bin
Qasim area of Karachi.
Technological
Integration of systems Few years back FFBL implemented SAP which is software, the
purpose of this software is to integrate all departments. FFBL is the first company in fertilizer
sector of Pakistan which has installed SAP in its business.
New technology New machinery and technologies keep on coming into the market. But
these new technologies are capital intensive.
Environmental
Calamity In case of floods or natural disasters, crop may be damaged, this results in
decrease in demand of fertilizer.
Disposal of industrial effluent The production of fertilizers results in creation of waste
material which may have the adverse affect on the environment. These waste materials can
cause problems such as acid rain, eutrophication, and groundwater pollution. All of these
problems can later sum into bigger global problems like greenhouse effect.
Legal
Export of fertilizer - The export of fertilizer is forbidden in Pakistan so that it can provide to
the demand of farmers in the country.
Threat of Substitute
Fertilizer has no substitute; it is important and necessary for the growth and health of crops.
If farmers do not use fertilizers, they may suffer loss. So far this industry does not have a
threat of substitute.
Promotes the efficient use of nutrients to maintain and meet the agricultural demand
worldwide.
Continuously improve the fertilizer industry environment.
Collect, organize and compile data of fertilizer industry. It also provides a platform to
discuss all the ideas and issues relevant to fertilizers.
The government of Pakistan developed The national fertilizer development centre back in 1977.
NFDC is basically a research and development institute with the function of planning, production
and imports, marketing, soil science and training etc of fertilizer industry of Pakistan. NFDC
studies all the problems related to fertilizer sector, it also help government to form and
implement policies related to fertilizer industry. Apart from its domestic presence, NFDC has
established relations with other countries. The list of which is as follow:
this is a non-profit organization which aims to work for the betterment of fertilizer sector
worldwide. NFDC is a member of IFA, it shares data like fertilizer consumption,
various areas.
Egyptian Fertilizer Development Centre (EFDC), Egypt: EFDC provide technical
support to NFDC.
Other International organizations: Other international institutions which are
collaborating with NFDC are: Fertilizer Association of India, Fertilizer and Pesticides
Authority of Manila, Philippines, National Fertilizer Secretariat of Sri Lanka and Arab
Fertilizer Association of Cairo etc.
Products:
The product line of Engro fertilizer include following products:
Engro Urea: Engro Fertilizer company started production of 173,000 tons of urea per annum in 1968,
further by increasing its capacity company is now producing 975,000 tons of Urea per annum. The
total urea market share of the company was 26% in 2013 (Annual Report 2013)
Engro DAP: Engro Fertilizer company is not producing DAP locally but it is importing and marketing
DAP in Pakistan since late 1990s. Here FFBL has a competitive edge.
Engro NP: NP is a fertilizer rich in nitrogen and phosphorus. The Pakistani soil lacks both of these
nutrients. Keeping in mind the need of these two important nutrients Engro fertilizer started
manufacturing of this fertilizer in 2005. Presently, Engro NP has the highest share in some parts of
Sind province.
Engro Zerkhez: The Company launched this fertilizer in 2002. This fertilizer is rich with all the three
nutrients required for cultivation of high quality crops.
Zingro: Another important nutrient required for better yield and quality of crops is zinc. Especially for
Rice crop zinc is an important nutrient so; to cater for the requirement the company has introduced
Zingro. Zingro has the highest market share in zinc fertilizers.
Engro envoy: In addition to develop products for better crop yield, Engro has designed a product
Engro Envoy for improved growth of garden, flowers, fruit plant, vegetable plants and decorative
plants. This can become a close substitute of FFBLs Sona DAP.
Sarsabz Calcium Ammonium Nitrate (CAN): CAN is a granulated nitrogenous fertilizer that is rich in
nitrogen, ammonia and calcium. The blend of these three nutrients makes Sarsabz CAN a special
product with neutral chemistry PH. This is not produced by FFBL, so Fatima Fertilizer can gain a
competitive edge.
Sarsabz Nitro-Phosphate (NP): NP is a granulated fertilizer rich in phosphorus and nitrogen. This
fertilizer is highly acidic so it is good for soils having high PH.
Sarsabz Urea: This fertilizer has 46% of nitrogen in it. Sarsabz Urea provides nitrogen to soil which is
necessary for growth and quality of crops.
Agritech
Agritech (also known as Pak-American Fertilizers LTD) was formed in 1958. Further in 1998, a new
production plant was installed. The company received two ISO certifications; one is Quality
Management ISO 9001:2000 and the other one is Environmental Management systems ISO
14001:2004.
Products:
There are three products which the company sells:
Tara Urea: Daily production of urea is 810 Metric Ton of Ammonia and 1420 Metric Ton.
Tara SSP: Agritech is manufacturing plant is producing 300 metric tons per day of granular single
superphosphate.
DAP: The company has not started the production of DAP yet.
EXTERNAL ANALYSIS
SWOT Analysis
Strengths:
i.
Weaknesses:
i.
ii.
gas supply
FFBL does not have its own marketing
company
that
has
which can
be seen by
iii.
iv.
Phosphoric acid.
Competent and committed Human
resource.
Opportunities:
Threats:
i.
i.
ii.
country.
Due to shortage, fuel and gas prices
iii.
increase.
Prices of most important raw material
demand.
There exists
iii.
it
an
opportunity
will
become
of
an
iv.
v.
coal
international market.
Competition is another threat for FFBL.
Law and order situation in our country.
Governments regulations can be a
threat as governments policies which
are against fertilizer industry can
adversely affect FFBL.
Marketing Strategy
Strategy Formulation
Fauji Fertilizer Bin Qasim Ltd (FFBL) and Fauji Fertilizer Company Limited (FFCL)
have an inter-company services agreement. The latter performs the major marketing
operations. Marketing strategies are also formulated by FFC. FFBL does distribution and
sales as well, but the greater portion of selling is done by FFC.
The Fauji Fertilizer group has a marketing office in Lahore. This is headed by the Group
General Manager Marketing who is responsible for the marketing strategies of products
of both FFC and FFBL. In the regional marketing and sales offices, locals are given
preference as compared to non-locals. This is done to straighten out any
communication/language issues and problems.
these sale districts are spread out. The FF group has divided the country in 3 marketing
and sales zones which are North, Centre and South. FFBL through these marketing
networks engages with the customers. Kashtkar Desk is a facility of FFC which
company personnel and customers (mainly farmers) can interact. Complete information
regarding crops, soil, agricultural reports, cultivation, market rates and weather updates is
given on the kashtkar desk. The Fauji Fertilizer Group has an Agri-services department.
This department in addition to offering agriculture/fertilizer related services also gives a
boost to the farming capacity of farmers. The department has modern and state of the art
soil laboratories and consultation centers which inform the concerned with useful
information about soil quality, soil nutrient deficiencies and other soil related problems,
water problems, general agribusiness advices and modern farming techniques. The AgriServices departments officers, laboratories and Farm Advisory Centers (FAC) (present in
Mandi Bahauddin, Shahkot, Muzaffargarh, Bahawalpur and Sukkur) perform this
invaluable service for the overall betterment of the farmer community and the country as
a whole.
If we analyze the domestic fertilizer market, we come to realize that Punjab has the
highest consumption rate of fertilizers in the country. Punjab is followed by Sindh
(second), KPK (third) and Balochistan (fourth). The following pie-chart shows the
province-wise sales:
It is worth mentioning here that only Punjab and Sindh fall in the companys freight
economic zone while KPK and Balochistan do not.
Sales Performance
The international Urea prices fell from 2013 to 2014. In the early 2013, the per ton price
of Urea was US$ 340. In June 2014 it declined to US$ 245. From July, 2014 the prices
started to increase. By December 2014, the price of Urea per ton was US$ 295. However,
international DAP prices continuously increased. In early 2014, the per ton price of DAP
was US$ 390. This increased to US$ 480 in October, 2014. A slight decrease in price was
seen from October to December 2014 and the price was reduced to US$ 470 by the end
of December 2014. The global demand of fertilizers was satisfactorily met last year. This
is because of increase in overall global production. Out of the total installed capacity, the
fertilizer industry of the world functioned at 78%.
The domestic sales of FFBL can be summarized as follows:
Sona Urea (Granular)
Sales in 2014 = 214 thousand tons
Sales in 2013 = 226 thousand tons
So there has been a 5% decrease in sales. This is attributed to the problem of gas reduction.
The share of FFBL in Urea market is 3.8% which has remained same.
Sona DAP
Sales in 2014 = 709 thousand tons
Sales in 2013 = 773 thousand tons
So there has been an 8 % decrease in sales because of the same problem of gas curtailment.
The share of FFBL in DAP market has declined from 46.4% in 2013 to 41.4% in 2014.
The following information was obtained from the notes to the consolidated financial statements
of the 2014 annual report of FFBL.
We can clearly see that the sales promotion and advertising expenses have increased from
33,424,000 Rupees to 38,160,000 Rupees.
MIS & Technology Issue
At Fauji Fertilizer Bin Qasim Ltd, there is a separate Technology/IT department which is headed
by an IT Manager. The IT manager works in close coordination with the General Manager
Finance (GMF). A proactive approach is used in all aspects of technological matters. FFBL has
employed the latest technology at its plant sites and management offices. The plants of FFBL are
high-tech, using modern technology and they are upgraded constantly as per requirements.
IT Governance Policy
There is an IT Governance Policy (ITG) of the company which serves the following purposes:
1.
2.
3.
4.
5.
FFBL has realized that in order to align itself with the best international practices, a sound IT
policy should be implemented. The business requirements can easily be met by keeping this in
mind. The scope of the IT policy of FFBL spread over on not only the IT department, but all
divisions and departments that use IT.
The basic functioning of the IT department is such that it maintains, updates and aids the overall
IT infrastructure of the company. In addition to this, it assists the corporation to realize its goals
and objectives. So it has both primary and supporting functions. The IT office builds procedures,
formulates programs, designates responsibilities to concerned staff and checks the progress
throughout. The IT Manager and the IT office are also answerable for any disruptions in the IT
processes and to resolve them.
Internal consultancy, application development and implementation (from top tier to operations)
and providing solutions are part of the IT portfolio. Data centers are present both in Rawalpindi
and Karachi.
Implementation of SAP
For integration of all departments and for sharing information amongst all the employees,
company implemented SAP-ERP system in 2010. FFBL is the first company in the fertilizer
sector to implement SAP in its business operations. FFBL invests much for its IT infrastructure,
IT solutions and overall technology. This guarantees the competitive position of FFBL. These
efforts were recognized at both national and international levels. FFBL has received awards in
this regard such as Best Leadership Award in Pakistan and Bronze Medal from SAP in
Germany.
Company officials believe that SAP is very comprehensive in many regards, which allows them
to have all sorts of information as per requirement. For e.g. maintaining payrolls, inventory
management, accounting records, production operations, supply chain management etc. Initially
there was a communication bridge between different departments. As communication wasnt
fluent hence decision making was taking time. While implementing SAP, there was a focused
approach from the entire organization. After introduction of SAP in their operating system much
of these issues were resolved. With SAP, management can have a look at companys position and
any information they need is in front of them in just a matter of clicks.
IT Related Risks
An increasing dependency of IT systems increases the risks associated proportionally. Some risks
that are faced by the IT department are as follows:
1.
2.
3.
4.
5.
6.
7.
System failure
Loss or misplacement of data
Unintentional errors, lapses and omissions
Virus attacks
Hacker attacks
Leakage of confidential data
Natural disasters
FFBL can and should develop an employee portal, in which employees can interact, can be
delegated work, given announcement/notifications etc.
Fauji
Fertilizer Bin Qasim Ltd produces two products for the market. These are Sona Granular Urea
and Sona DAP. These products are the most widely used fertilizers in the country and have the
largest market share. FFBL is contributing to the agricultural and eventually the economic
growth of Pakistan by meeting the demand of Urea and DAP in the domestic market. The
manufacturing plant of FFBL is located 45 Km south east to Karachi. This plant is connected
with the National Highway and is strategically located since it is near the sea port and the
imported raw materials used in FFBLs production do not have escalating costs due to increasing
distances. This is also an industrial zone so government collaboration is easier, it is a special tax
zone and this area is strategically important for industries. The total cost of the setup was US$
468 Million. This plant was made in collaboration and assistance of Jordanian officials. FFBL
manufacturing facility is an excellent fertilizer complex, with state of the art processes, superior
management and also has an innovative Distributed Control System for efficient operational
procedures, safety at work and overall proficient work ethics.
For any fertilizer company, Ammonia Plant is the heart because it produces Ammonia and
Carbon Dioxide (CO2). Ammonia and CO2 are further used in the manufacturing process of
Urea and DAP. So for FFBL, shutdown of the ammonia plant means the whole companys
shutdown. The inputs of Ammonia formation include steam, air and natural gas. Carbon Dioxide
is formed during the middle of the Ammonia manufacturing process. This Ammonia is then used
as an input for DAP and Urea manufacturing. DAPs inputs include ammonia, phosphoric acid,
sulphuric acid and sand. Whereas Ureas inputs include liquid ammonia and carbon dioxide gas.
FFBL is employing latest technological tools in order to gain a competitive advantage and
minimize competitive disadvantage. The designed capacity of FFBL plant was 1270 metric tons
per day for Ammonia, 1350 metric tons/day for DAP and 1670 metric tons/day for Urea. After
process redesigning and capacity expansion, now the actual production capacity is 1570 metric
tons/day for Ammonia, 2230 metric tons/day for DAP and 1920 metric tons/day for Urea. This
was possible after revamping. The plant is not functioning at its maximum capacity. The reasons
for these are given in detail in this report. Briefly, gas curtailment by the government, power
outages and import of Urea are the reasons which are hindering FFBL to produce at optimum
capacity. The inventory for both raw materials, in process products (such as Ammonia) and
finished goods is maintained both by a physical check and through Management information
systems (mainly SAP).
It is the responsibility of procurement department and supply chain department to procure and
store raw materials. The people of procurement department and supply chain department remain
in connection with the operations and production manager who delegate them the daily
requirement, usage and production statistics. There is a procurement manual which is present for
all concerned and contains the complete code of conduct. The basic procurement procedure is as
follows:
1) The required personnel initiate the purchase requisition. 2) This purchase requisition is sent to
the concerned department heads. An approval is obtained by the department heads. 3) The
purchase order is then reviewed by the procurement department and warehouse managers
(inventory control officers etc.) 4) After approval from the afore mentioned persons, calls of
submitting quotations from various vendors is done. 5) Next, the quotations are opened and
scrutinized by the bid opening committee 6) Generation of comparative statements. 7) The
vendor who offers lowest price and technically correct and approved quotations is approved. 8)
The required material along with its invoice is received by the concerned department. 9) The
inspection unit inspects the material 10) After inspection is done and approval is given, the
disbursement department sends the payment. This marks the end of the procurement procedure.
FFBL has obtained the quality assurance standard of ISO 9001, 14001 and 18001. FFBL has also
achieved the environmental and quality management standard of UKAS (United Kingdom
Accreditation Service) and Pakistan Standards. The maintenance of the plant is done on a
proactive basis and bottlenecks in the manufacturing processes are not allowed to occur
normally. FFBL is commissioning continuous improvement model of Plan, Do, Check and
Act.
If we talk about the production performance of FFBL in 2014 and in the years before this, we can
see that in the first two months i.e. January and February, there is extreme gas curtailment by the
government. This hinders the progress and production. So, the first quarter always shows less
production. With low production, reduced sales and added expenses of maintenance, repair and
quality assurance there is less profitability in first quarter. FFBL has also seen a trend that the
fourth quarter of the year is always highly profitable. This is because the demand of DAP
increases due to Rabi crops sowing season. The year 2014 overall brought lower earnings for
FFBL because the Urea and DAP sales were reduced.
Gas curtailment is the biggest issue for FFBL and the fertilizer industry of Pakistan as a whole.
FFBL faced a 41% increase in gas curtailment in 2014. It was 3% in 2013 and gradually
increased to 41%. Owing to this factor, the ammonia and Urea production reduced by 45% and
66% respectively as compared to the total installed capacity. However, DAP production reduced
by only 6%. This is because of efficient management of low gas load, well-organized operations
and getting constant and unhindered supply of Phosphoric Acid in the plants. This Phosphoric
Acid is obtained from Office Chrifien des Phosphates (OCP) in close coordination with
Pakistan Maroc Phosphore (PMP) Plant in Jorf Lasfar, Morocco.
FFBL conducts regular maintenance of its plants and offices. FFBL conducted a complete quality
check, inspection and turnaround in the first quarter of 2014. Foreign consultants from various
countries were part of this program. The major technical and maintenance jobs that were done
are mentioned in the 2014 annual report of FFBL.
Risk Management
The outcomes and results of a business activity are uncertain. This uncertainty encompasses
elements of risk. These risks include a number of heads, such as strategic/operational/financial
failure of a business/company, disruptions (natural or deliberate) in the market place,
environmental disasters, regulatory risks, law and order etc. In order to tackle risks, risk
management is deployed. Risk management is the management of risks by identifying,
quantifying and handling them. It is quite difficult to completely eliminate risks from an
organization or business activity, however, risks can be mitigated and minimized. This can be
effectively done by recognizing, prioritizing and coping the possible risks that can arise in the
overall corporate strategys context. At FFBL, the prime responsibility of risk management is
held by the relevant management of each department. In addition the managers, the board of
directors as well as the internal and external auditors are also in charge of risk management.
The Board of FFBL has a policy on risk management which comprehends all significant risks
that can be faced by FFBL. The audit committee also works in order to mitigate risk. It reports to
the Board. The internal audit program is periodically reviewed by the audit committee so that it
is made sure that internal auditors are carrying out their responsibilities diligently. The audit
committee gets reports from the internal auditors and the head of internal audit reports directly to
them.
Some important risks that are faced by FFBL are:
1. Volatile security and political situation in the country
2. Gas curtailment. Diversion of gas to other sectors by the government
3. Exchange rate fluctuation is also a risk
4. The outputs (products) and inputs (raw materials) can be imposed of duties and taxes
unexpectedly
5. The legal and regulatory environment in which FFBL operates can change frequently and
can thus become problematic
6. With reference to Sulphur, Phosphate and Nitrogenous products, the international market
scenario is quite unpredictable
7. Fertilizer bombs
8. Natural disasters affecting the overall crop production in the country
9. Use of paper in offices thus a fire or misplacement can be very risky
10. Increasing price of fuel and gas
11. Risks faced due to competition from other firms
PAK-Moroc Phosphare
Fauji Cement Company Limited
Foundation Wind energy
Askari Bank Limited
Arabian Sea Country Club Limited
There are four main components of mission statement that need to be highlighted
First component is about the company aim to be one of the best companies operating in
the market. There are numerous companies working along FFBL in same industry for
example Engro and hence it is one of the objectives of FFBL to be best of them. Compete
continuously grow and its recent entry in dairy and food industry is an example of it.
Third component is to charge customer competitive prices and at the same time produce
quality products. In order to increase or maintain the market share, company do realizes
that it needs to offer customer something special and at a good affordable price. Company
is continuously striving to reduce its cost by bringing efficiency within its department in
Core Values
FFBL has 6 core values. They include integrity of profession, inducing an environment which is
winning, actions accountability, innovations along with creativity, corporate social responsibility
and result focussed approach.
5.
6.
7.
8.
The goal of boosting the agricultural yield of the company is kept in well consideration by
FFBL. If we look at the following table taken from Pakistan Bureau of Statistics, we can see that
the production of important crops has increased over the years. This is mainly due to increase in
efficiency of inputs. FFBL has provided best quality fertilizers over the years since its inception,
thus boosting the agricultural yield:
FFBL has strived hard to lead the fertilizer industry of Pakistan. It is among the top 25 best
performing companies of Pakistan. Karachi Stock Exchanges list of top 25 best companies saw
FFBL as number 5 in 2013. There are a total of 580 companies listed on KSE. Other awards that
have been awarded to FFBL include CSR awards, bronze medal from SAP and best corporate
reporting awards. In addition to these awards, FFBL has also achieved sustained growth over the
years and is among very few companies who have not incurred a loss since inception. FFBL is
the only company in Pakistan that produces DAP, therefore it has a very big edge over its
competitors.
In order to become a socially responsible and environmental friendly citizen, FFBL has taken the
following measures:
1. FFBL is achieved certification for the EMS of ISO i.e. ISO 14001:2004
2. FFBL is the only fertilizer manufacturing company in the country that has chosen a
cooling water treatment program based on Phosphate. It is an environmental friendly
system.
3. The organization has continuously maintained
FFBL SALES
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0
2010
2011
2012
2013
2014
Productivity of FFBL has also been increased. This will be explained below:
In the recent past FFBL has taken on a number of expansion and productivity increasing projects:
1. An Ammonia expansion project was undertaken and completed in 2007. This expansion
project was successful because it achieved the technical parameters of improving plant
reliability and increased efficiency. Its value was of 50 Million Euros. The objective of
this project was to enhance the capacity by 24%. This means it was increased to 1570
tons per day as compared to 1270 tons per day in the past.
2. A DAP expansion project was undertaken and completed in 2008. It was also a successful
project. The DAP expansion project enhanced the plants capacity by 50% i.e. to 670
thousand tons from a previous of 445 thousand tons. The total value of this project was
33 Million US Dollars. Plant reliability and efficiency were improved and plant effluents
and emissions were considerably reduced.
3. In order to ensure a smooth and uninterrupted supply of Phosphoric Acid, a project
known as PMP Morocco was initiated and completed in 2008. The total value of the
project was 250 Million US Dollars. The plant now produces P-Acid and its total
designed capacity is 375 thousand tons. However the requirement of FFBL of P-Acid is
only 325 thousand tons. FFBL has 25% share in PMP, FFC has 12.5% share, FF has
12.5% and OCP has 50%.
Currently FFBL is expanding into new fields and business arenas. In our report, specifically the
SWOT analysis we have mentioned the possible opportunities and threats. We have diligently
devised remedial actions for the weaknesses of the company.
Gas curtailment
Investments payback period
Rising transportation costs
Less short term investments
DAP production management
Askari Bank disinvestment
Lack of lower employees awareness and knowledge about new implemented decisions
Even after the implementation of SAP, paper system is still practiced.
Lack of job satisfaction
Conclusion
In the part two of our Final Year Project of Strategic Analysis of Fauji Fertilizer Bin Qasim
Limited, we have carefully and thoroughly conducted the external, internal and functional
analysis of FFBL. Performance review along with identification and measures to reduce key
issues and problems have been presented. Data for these purposes have been gathered through
interviews of company personnel, FFBLs annual reports, economic survey of government of
Pakistan, newspapers, press releases and relevant websites. This report will be shared with the
Fauji Fertilizer Bin Qasim Limited in order to incorporate their feedback.