CSR

PPRA SECP INITIAVES

April 04

Assignme nt # 3

Prepared By: Ayaz Ashraf (MBOFA12-007) Submitted To: Mr. Uzair Farooq

Fauji Fertilizer Company Limited (FFC) is the largest chemical fertilizer producer of Pakistan with biggest market share in the country. It was established by the Fauji Foundation which holds a controlling interest. FFC was established in 1978 as a joint venture of Fauji Foundation and Haldor Topsoe. The first urea complex was commissioned in 1982. Plant-1 was improved in 1992, and a second plant was built in 1993. In the year 2002, FFC acquired ex Pak Saudi Fertilizers Limited (PSFL) Urea Plant situated at Mirpur Mathelo, District Ghotki from National Fertilizer Corporation (NFC) through a privatisation process of the Government of Pakistan. This acquisition at Rs. 8,151 million represents one of the largest industrial sector transactions in Pakistan. FFC now has three plants with a combined capacity of 5770 MTPD of prilled urea. Fauji Fertilizer Bin Qasim Limited, Karachi, Pakistan (FFBL) is another company where FFC has controlling shares it produces 1670 MTPD of granular urea plus 2250 MTPD DAP after revamping (1350 MTPD before revamp) DAP. Ammonia and urea plants capacity factors right from the plants start-up have been 100% or more. Today, FFC is also involved manpower training and turnaround services provider, especially within Pakistan and in the Middle East. Overall performance was outstanding, with production of 2.485 million tonnes of urea utilising 121% of combined nameplate capacity of 2.048 million tonnes, higher by 20 thousand tonnes compared to last yearsproduction. This was possible by extensive Balancing, Modernisation and Replacements and untiring efforts of our experienced and committed technical staff. A major production challenge was the gas curtailment imposed by the Government of Pakistan from 2nd quarter of the year, limiting gas offtake at all three plants, which resulted in a urea production loss of 35 thousand tonnes during the year. PAT Add Depreciation Amortization Traditional Cash Flow Add Existing Interest Add Tax EBITDA Less Taxes Less CAPEX Add Decrease in NWC 2012 20839723000 1370050000 9467000 22219240000 999457000 10181000000 33399697000 10181000000 8000000 211834000 2011 22492053000 1189678000 23681731000 785825000 10674000000 35141556000 10674000000 5000000 2314175000

Free Cash Flow Existing Interest Expense Interest Expense on proposed debt Principal on existing debt Principal on proposed debt Total debt services Excess cash flow available for common dividends, acquisitions, share repurchase etc FCF/DS

23422531000 999457000 6250000 1433750000 14746554 2454203554 20968327446 9.543842018

22148381000 785825000 1615655000 2401480000 19746901000 9.222804687

CASD/DS is a metric that compares total available cash assets to outstanding principal and interest payments. The higher the ratio, the more funds are available. A ratio of 1 indicates the company is covering payments with no cash assets remaining afterward. Investors generally prefer a company to have a high CASD/DS ratio. The higher a company's CASD/DS ratio, the less likely the company will be to default on its debts, making owning its shares much safer for shareholders. As FFC CASD/DS ratio is 9.39 which is pretty much a healthy one. So we can grant a loan of 50 Million rupees to FFC. Periods 0 1 2 3 Repayments 20996554 20996554 20996554 Interest 6250000 4406680.75 2332946.594 Principal 14746554 16589873.25 18663572.75 Balance 50000000 35253446 18663572.75 0

Free cash flow (FCF) is a measure of how much cash a business generates after accounting for capital expenditures such as buildings or equipment. This cash can be used for expansion, dividends, reducing debt, or other purposes. It is important to note that free cash flow relies heavily on the state of a company's cash from operations, which in turn is heavily influenced by the company's net income. Thus, when the company has recorded a significant amount of gains or expenses that are not directly related to the company's normal core business (a one-time gain on the sale of an asset, for example), the analyst or investor should carefully exclude those from the free cash flow calculation to get a better picture of the company's normal cash-generating ability. The FFC has FCF/DS ratio 9.22 in 2010 and 9.54 in 2011 which shows that company can pay back its loan easily to it is considered to b a safe loan

Cash flow from operations is a solid measure of a company's profits because it refers to actual cash made from operations and is thus hard to manipulate. In recent years, cash flow has gained in popularity as a financial measure because it is more difficult to manipulate than certain other metrics, such as revenues. A company could make its revenues look bigger by, for example, postponing rebates (which would lower revenues) until the next reporting period, thus creating the appearance of a business that's more prosperous than it really is. However, because operating cash flow deals with actual money, it's much harder for a company to "massage the numbers" into saying what management wants them to say. This is why it's such a key financial metric, despite its seeming simplicity. As FFC operating cash is positive which shows that its business operations have enough capacity to generate positive cash flow which a good for us to grant a loan. So we can grant a loan to FFC. Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between a firm's short-term assets and its short-term liabilities. The goal of working capital management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing shortterm debt and upcoming operational expenses. As NWC is positive in both years that shows it has capability to repay its debts timely which is in favor of us if we grant loan to FFC.