Cost Structure

Domestic Fertilizer Industry of Pakistan

Komal Asim

Sales Trend
90,000,000.00
80,000,000.00 2014; 81,240,000.00
2013; 74,481,000.00

70,000,000.00

2012; 74,323,000.00

60,000,000.00 2014; 61,425,000.00

50,000,000.00 2014; 49,445,000.00
40,000,000.00

2011; 55,869,000.00
55,221,000.00

2013; 54,455,000.00
2013; 50,129,000.00

2014; 36,169,000.00

2013; 33,496,000.00

30,000,000.00

2012; 47,911,000.00
2012; 30,627,000.00
2012; 29,519,000.00

20,000,000.00

2011; 16,701,000.00

10,000,000.00
-

2011; 31,353,000.00

2012; 8,136,000.00

2013; 7,428,000.00

2014; 2014

2013
EFERT

FFC

2012
FFBL

Pak Arab

2011; 14,833,000.00

2011

Fatima

We will be analyzing the cost structure of FFC, EFERT, FFBL and FATIMA
FERTILIZERS by comparing the cost incurred with the value of sales

Cost of Sales
90.0%
80.0%

2014; 77.6%

70.0%
60.0%
50.0%

2012; 76.1%

2013; 73.3%

67.8%

2011; 64.0%

As FFBLs production is heavily

weighted towards DAP therefore cost
of raw materials consumed is the
greatest for FFBL.

63.2%

58.3%

55.9%

53.2%

48.3%

45.7%

46.6%

41.2%

40.0% 40.7%
30.0%

26.4%

20.0%
10.0%
0.0%
2014

2013
EFERT

2012
FFC

FFBL

2011
Fatima

EFERT has higher cost of sales

because of greater cost of raw
material consumed per unit of sales
due to import cost of DAP and
highest component of depreciation
expense.
FFC has comparatively lower cost of
sales because of low cost of raw
materials consumed.

Raw Material Consumption

Raw material Consumption as percentage of Sales
70.0%

64.6%
60.6%
56.5%

60.0%

51.8%
50.0%
40.0%

37.8%
30.2%

30.0%

30.0%
30.0%

25.0%

24.9%
20.8%

20.0%
10.0%
0.0%

16.0%

16.3%

22.0%

53.1%

Raw Material Consumption-Benchmark

COMPANY
Industry Benchmark

EFERT

FFBL

Fatima

Maximum 35% raw material consumed of sales

Upper bound
Ranking

FFC

+ 5% depending upon production scenario

Efficient

Efficient

Very high

Very low

FFBL has the highest raw material consumption because it is involved in the
import of DAP and prices of phosphoric acid have increased in the international
market.
Fatima had higher raw material consumption ratio because of lower sales.
Poor sales forecast leading to excessive raw material in production indicate
inefficiency.
Engro and FFC have efficient sales and production planning according to industry
benchmark

Direct Material Compared to Sales

69.3%

66.4%

70.0%

61.1%
55.5%56.4%

60.0%
48.5%
50.0%

39.5%

40.0%
24.3%

30.0%

41.6%

39.2%
34.1%

33.6%
24.2%

31.5%
23.0%

20.0%
10.0%
0.0%

2014

2013
EFERT

2012
FFC

FFBL

Fatima

0.0%
2011

Direct Material-Benchmark
COMPANY

EFERT

Industry Benchmark

FFBL

Fatima

Maximum 45% of sales

Upper bound
Ranking

FFC

+ 5% depending upon production scenario

Upward
skewed

Efficient

Very high

Very low

Direct Material includes raw material consumed and fuel and power cost
FFC has lowest cost of sales when compared to its sales revenue. A major portion
of its revenue is derived from Urea sales and raw material for Urea manufacture
is comparatively cheaper and available at subsidized rate.
EFERT has highest component of fuel and power cost because of GIDC impact.

Wealth Distribution To Employees

Compared To Sales
10.00%
9.00%

8.93%

8.00% 8.20%

7.66%

7.37%

7.00%
6.00%

6.38%

4.90%

5.00%

4.76%

4.00%

6.26%

5.80%

5.02%
4.37%

5.95%

5.00%
4.18%

3.00%

4.20%
3.60%

2.00%
1.00%
0.00%
2014

2013
EFERT

2012
FFC

FFBL

Fatima

2011

Wealth Distribution-Benchmark
COMPANY

EFERT

FFC

FFBL

Fatima

Industry Benchmark

Maximum 7% of sales

Upper/Lower bound

+/- 1% depending upon production scenario

Ranking

low

HighEfficient

low

Efficient

EFERT has lowest component of salaries and wages indicating underutilization of

Human Resources
FFC has highest component of salaries when compared to its sales revenue.

Analysis

EFERT has highest cost of Fuel and Power expenditures per unit of sales

FFC has greatest amount of wealth disbursed to employees and in their

training and recruitment programs.

EFERT has highest amount of depreciation expense per unit of sales because
of accelerated depreciation of plant and equipment

Insurance Expense at EFERT is comparatively higher than FFBL and FFc per
unit of sales.

FFBL has high cost of raw material consumption as it is the only domestic
producer of DAP with rest of the market being supplied by imports

Appendix-Cost Structure
Komal Asim

Cost Of Sales Breakup at Engro

Other Costs;
4% 0%
Staff recruitment,
training;
Depreciation; 12%
2%
Fuel and power; 17%Repairs and maintenance;
Raw materials consumed; 60%

Other Costs; 4%
Staff recruitment, training; 0%
Depreciation; 17%
Raw materials consumed; 54%
Repairs and maintenance; 2%
Salaries, wages and staff welfare; 6%
Fuel and power; 16%

Salaries, wages and staff welfare; 5%

ENGRO FERTILIZERS 2014

Engro fertilizers 2013

Cost of Sales Breakup at FFC

Staff recruitment, training; 2% Other Costs; 5%

Depreciation; 4%
Repairs and maintenance;
3%
Raw materials
consumed; 56%
Fuel and power; 18%

Staff recruitment, training; 2% Other Costs; 8%

Depreciation; 4%
Repairs and maintenance; 4%
Raw materials consumed; 52%
Fuel and power; 19%

Salaries, wages and staff welfare; 12%

Salaries, wages and staff welfare; 11%

FFC 2014

FFC 2013

Cost of Sales breakup at FFBL

Staff recruitment, training; 1%

Staff recruitment, training; 1% Other Costs; 3%

Depreciation; 3%

Other Costs; 6%

Repairs and maintenance; 2%

Depreciation; 3%
Repairs and maintenance; 2%
Fuel and power; 7%

Fuel and power; 6%

Salaries, wages and staff welfare; 4%

Salaries, wages and staff welfare; 5%

Raw materials consumed; 78%

FFbl 2014

Raw materials consumed; 77%

ffbl 2013

Cost of Sales Breakup at Fatima Fertilizers

Other Costs; 18%

Staff recruitment, training; 0% Raw materials consumed; 39%
Depreciation; 10%
Repairs and maintenance; 2%
Fuel and power; 20%
Salaries, wages and staff welfare; 10%

Fatima fertiizer 2014

Other Costs; 20%

Staff recruitment, training; 0%
Raw materials consumed; 40%
Depreciation; 11%
Repairs and maintenance; 2%
Salaries, wages and staff welfare; 9%
Fuel and power; 19%

fatima fertilizers 2013