Challenging Business Environment Ahead

April 2021

Agriculture is the largest sector of the national economy in terms of labour participation, and has an overall multiplier effect on the GDP. Besides having a huge impact on national food security, it is also the main driver behind the country’s exports. It is heartening to finally see some positivity in this sector – even amid the challenge of the COVID19 pandemic. This resilience of Pakistan’s agri-sector is in part attributed to self-sufficiency in production of fertilizers – one of the main inputs for agriculture. The excellent operational and financial performance of Pakistani fertilizer companies has afforded the country a chance to save and revive its agriculture, and large scale manufacturing sectors simultaneously.

One company at the forefront is Fauji Fertilizer Company Ltd.

The company is top ranked in the PSX Top 25 Companies list since 2010, which is a testimony to FFC’s exceptional performance in such areas as Strategic Planning, Risk Management, Financial Performance, Transparency, Corporate Governance, Investor Relations, and Compliance. FFC attributes its success to the constant pursuit of operational excellence and a firm belief in the nobility of its ultimate business objective to serve the nation under the banner of its welfare initiatives.

In 2018 and 2019, the Company maintained highest standards of operations and employees’ health and safety. Urea production (2018: 2,522KT 2019: 2,492KT) remained well above capacity and the Company was able to market (2018: 2,527KT 2019: 2,467KT), almost the entire production during these years. Imported fertilizer market (2018: 503 KT - 2019:253KT), however, witnessed a steep decline during 2019 due to adverse market conditions.

Operating costs of the Company increased mainly due to increase in raw material prices by the Government in addition to inflationary factors. Sharp decline in the value of Pakistani Rupee, besides increase in interest rates, also impacted Company margins.

In 2020, the pandemic, locust attacks, and climatic disruption posed tremendous challenges. FFC once again played a key role in mitigating these challenges by proactively working with the government to ensure minimal disruption of the agri-sector value chain. The company also continued all its business operations during the pandemic without compromising the health and safety of its employees, business partners, or the customers, while successfully meeting all its operational targets in 2020.

The optimism of the company for its future is evident from its new initiatives, like formation of a new wholly owned subsidiary company “OLIVE” to target the technical services market. Over the years, FFC has transitioned from a fertilizer business to a conglomerate having a diversified portfolio comprising fertilizers, chemicals, renewables, banking, food, and cement. The company is now eying the services sector as well. FFC is also geared to further expand and diversify its business. The company’s growth strategy critically focuses on local and international diversification through leveraging synergies and fostering strategic partnerships.

FFC’s view of the current business climate in Pakistan is positive but the company is also pragmatic and cognizant of the challenges that lie ahead. The pace of industrial development in Pakistan is dangerously slow as compared to fast-paced global transformations and technological disruptions. Various financial, economic, and environmental regulations driven by strategy changes at the international level may also affect the country.

Pakistan also needs to modernize its agriculture, making it more cost-efficient, and environmentally sustainable. A lot also needs be to done to improve synergy between the stakeholders in the agri sector. FFC is now spearheading the establishment of “FACE - Food Security & Agriculture Centers of Excellence”, designed as one pitstop solution for a wide array of farmers’ needs.

FFC forecasts a challenging business environment ahead. Embracing it would take strategic alignment, financial discipline, innovative technological prowess, prudent governance, and greater collaboration between all stakeholders.

With the efforts of management and stakeholders, FFC has made tremendous achievements and has received the following awards:

    First among the Top 25 Companies on PSX for 10th consecutive year since 2010, besides 26th successive placement in Top Companies List
    Best Corporate Report Award – 2019 by ICAP / ICMAP by securing 13th time overall top position in Chemical & Fertilizer Sector and 16th time in the Best Corporate Report Award competition
    Best Presented Annual Report Award (Manufacturing Sector) – 2019 by SAFA
    Best Sustainability Report Award – 2019 by ICAP / ICMAP for 5th consecutive time
    Management Excellence Award by Management Association of Pakistan (MAP) for 6th consecutive year
    “Industry Stewardship Champion” Award for 2nd consecutive year by the International Fertilizer Association (IFA)

These awards are a testimony to FFC’s performance in Strategic planning, Risk Management, Financial Performance, Transparency, Corporate Governance, Investor Relations and Compliance.