Engro Chemicals and Fauji Chemicals Project On Ratio Analysis of Engro and Fauji

Project on Ratio Analysis of Engro and Fauji
Qaiser Mehmood
Session (Jan 2007–Dec 2008)
Submitted in Partial fulfillment of the requirements

For the degree of Master of Business
Administration
at
National University of Modern Languages

Islamabad, Pakistan
May 2009
© Copyright by Qaiser Mehmood, 2009

National University of Modern Languages
Faculty of Information Technology and Management Sciences
It is hereby certified that the report has been thoroughly and carefully read and
recommended to the faculty of Management Sciences for acceptance of Final Project
Report by Qaiser mehmood, Roll 7241, Session (Jan 2007 to Dec 2008) Evening, in
partial fulfillment of the requirements for the degree of Master in Business
Administration of National University of Modern Languages, Islamabad.
Date: June20, 2009
Supervisor: _________________________
Observer: __________________________
Head of Department: _______________

ACKNOWLEDGEMENT
By the Grace of Almighty Allah, the most Merciful, the most

Beneficial, I'm today submitting my internship report; I have the pearls of my eyes
to admire the blessings of the compassionate, omnipotent, the Merciful and the
beneficent Allah who is the entire source of knowledge and wisdom
Due to his bounteous blessings, I become able to contribute this comprehensive

assignment toward the deep ocean of knowledge already exists. Heart is warm
with love and thoughts have turned to the city of knowledge – The Holy Profit
(P.B.U.H) His saying “Learn from to Cradle to Grave” inspired the strong desire
in me to under take this course of valuable studies.
It would obviously be injustice not to mention the name of the people involved to
make this assignment possible and helped their utmost to make me understand the
overall operation of the company as of their best knowledge.
Despite of the most hectic schedule, Maa'm saher helped me so much. I'm really
grateful to maa'm for clarifying my concepts and making me learn from her
experience. Whatever I learnt from you will definitely help me in my upcoming
study and the professional life ahead. Thank you so much for being so co-
operative and so helpful every time. I hope maa'm I have been up to your
expectations.
In the end, I'll like to thank all my other colleagues, Mr. Ishtiq, Mr. Qaiser, and all
my other fellow internees, here and in branch, for their unconditional support and
help in making I learn in a good environment.
Dedication
I want to dadicate my this project to following persons
• Hazrat Muhammad (PBUH)
• Qauid-E-Azam Muhammad Ali Janah
• My Teachers
• My Parents
• My Best Friend Qaiser Mehmood Khan
• And All Those Who Are Struggling And Fighting For Islam In Right Directions.
Engro Chemicals Ltd

&
Fauji Fertilizer Co
FOREWORD
　
United we stayed right from the word “go”. Devotion and coordination is what made this
task happen. Though it was tiresome sometimes but it was our eagerness to prove
something which kept us going on and on. And finally we have been able to reach at a
point where we can say with all our enthusiasm that “yes, we did it!”
For a blessed soil like ours, the worth of a fertilizer company became a motive behind our
selection of Engro Chemicals Pvt. Ltd. and Fauji Fertilizer Company for comparison
COMPANY NAME Engro Chemicals Ltd. Fauji Fertilizer Co.
YEARS 2005 2006 2007 2005 2006 2007
CURRENT RATIOS 1.79 1.56 3.11 1.094 .897 0.942
ACID TEST RATIO 1.10 1.31 0.26 1.01 0.81 0.89
DEBT EQUITY RATIO (%) 108.33 31.58 38.9 20.48 8.70 7.53
DEBT RATIO .48 .25 .18 0.76 0.53 0.57
TIME INTEREST EARNED 12.5 7.18 8.92 11.92 14.94 12.22
INVENTORY TURN OVER RATIO 11.1 9.4 10.1 16.41 16.1 22.95
INVENTORY HOLDING PERIOD 32 38 36 21.93 22.36 15.7
NET FIXED ASSETS TURNOVER

RATIO 1.4437 1.5148 1.9397 1.44 1.7 1.54
TOTAL ASSET Turnover RATIO 1.30 1.1 1.45 1.30 1.1 1.45
RECEIVABLES TURNOVER RATIO 34.3 30.2 22.8 44.62 25.57 19
Average Collection Period 11 12 16 8.1 14.41 18.95
Gross Profit Margin (%) 14.45 24.07 21.22 34.6 32.42 35.6
Operating Profit MARGIN (%) 19.15 21.63 20.58 17.6 25 29.93
Net Profit Margin (%) 12.69 14.47 13.61 16.09 15.48 18.86
Earning per share

(Rs./Share) 14.37 15.47 17.17 12.96 9.39 10.86
purposes. Our research revealed to us that Engro Chemicals Ltd. holds a stronger position
as compared to its counterpart. And ratio analysis also supports the fact discussed earlier.
Tables and graphs are also included to make this comparison more clear and to enhance
the understanding of the numerical figures attained from ratio analysis.
We have put our heart and soul to hold a fair comparison but there is always a room for
improvement. So we are quite right to adopt an optimistic approach to believe that Mrs.
Labiba Sheikh will ignore our mere mistakes, if found, because “to err is human”.
Group Members
Abstract
From the whole ratio analysis of Engro chemicals Ltd. And its major rival Fauji Fertilizer
Company, we conclude following results as shown in table below
FOREWORD I
Abstract II
THE ORGANIZATION CONCERNED 6
Engro Chemical Pakistan Ltd. 6
An Overview 6
Vision 7
Our Businesses 8
Engro Chemical Pakistan Limited 8
Engro Vopak Terminal Limited 9
Engro Polymer and Chemicals Ltd. 9
Avanceon 9
Engro Foods Limited (EFL) 10
Engro Energy Limited (EEL) 10
Engro Eximp (Pvt.) Limited 10
Products & Services 11
Fertilizers 11
Nitrogenous Fertilizers 11
Phosphatic Fertilizers 12
Blended Fertilizers 12
PVC Resin 13
Chemical handling & Storage 13
Industrial Automation 13
Industrial Automation 13
Foods 14
Power Generation 14
Quality 15
Packing & Loading: 15
Business practice 16
Principal Operations Committee 16

Corporate Governance 17
Core Values 19
SAFETY, HEALTH & ENVIRONMENT 19
LEADERSHIP 19
QUALITY &CONTINUOUS IMPROVEMENT 20
ENTHUSIASTIC PURSUIT OF PROFIT 20
EXTERNAL & COMMUNITY INVOLVEMENT 20
CANDID & OPEN COMMUNICATIONS 20
ENJOYMENT & FUN 20
INNOVATION 20
INDIVIDUAL GROWTH & DEVELOPMENT 20
TEAMWORK & PARTNERSHIP 21
DIVERSITY & INTERNATIONAL FOCUS 21
Our People 21
The Organization of Comparison 21
Fauji Fertilizer Company 21
An Overview 22
Mission Statement 23
RATIO ANALYSIS 24
(Engro Chemical Pakistan Ltd.) 24
Advantages 24
Types of Ratios Analysis 24
Liquidity Ratios: 25
Leverage ratios: 26
Activity Ratios 29
RATIO ANALYSIS 36
Fauji Fertilizer Company Ltd. 36
INDUSTRY ANALYSIS 48
Activity Ratios 48
Conclusion 57
References 58
THE ORGANIZATION CONCERNED
Engro Chemical Pakistan Ltd.

　
Engro Chemical Pakistan Limited is a fertilizer company which is of their concern that
has been introduced right below. They are going to make a full-fledge financial analysis
of this fertilizer company in order to check its financial situation in the market. The
analysis of each and every major ratio has been involved in this financial analysis. Then
furthermore the interpretation of each and every ratio has been given to elaborate it.
An Overview
Search for oil by Pak Stanvac, an Esso/Mobil joint venture in 1957, led to the discovery
Of Mari gas field situated near Daharki -- a small town in upper Sindh province. Esso
was the first to study this development in detail and propose the establishment of a urea
plant in that area.
The proposal was approved by the government in 1964, which led to a fertilizer plant
agreement signed in December that year. Subsequently in 1965, the Esso Pakistan
Fertilizer Company Limited was incorporated, with 75% of the shares owned by Esso and
25% by the general public. The construction of a urea plant commenced at Daharki the
following year with the annual capacity of 173,000 tons and production commenced in
1968. At US $ 43 million, it was the single largest foreign investment by an MNC in the
country.
A full-fledged marketing organization was established which undertook agronomic

programs to educate the farmers of Pakistan. As the nation’s first fertilizer brand, Engro
(then Esso) helped modernize traditional farming practices to boost farm yields, directly
impacting the quality of life not only for farmers and their families, but for the
community at large. As a result of these efforts, consumption of fertilizers increased in
Pakistan, paving the way for the Company’s branded urea called "Engro", an acronym for
"Energy for Growth".
As part of an international name change program, Esso became Exxon in 1978 and the
company was renamed Exxon Chemical Pakistan Limited. The company continued to
prosper as it relentlessly pursued productivity gains and strived to attain professional
excellence.
In 1991, Exxon decided to divest its fertilizer business on a global basis. The employees
of Exxon Chemical Pakistan Limited, in partnership with leading international and local
financial institutions bought out Exxon’s 75 percent equity. This was at the time and
perhaps still is the most successful employee buy-out in the corporate history of Pakistan.
Renamed as Engro Chemical Pakistan Limited, the Company has gone from strength to
strength, reflected in its consistent financial performance, growth of the core fertilizer
business and diversification into other fields.
Investment in people, process solutions and resource conservation initiatives has reduced
energy use per ton of urea by a third, whilst increasing urea production nearly six-fold
since 1968. Not only does this save money, it stretches non-renewable energy sources
and mitigates the impact of waste. Along the way, a major milestone in plant capacity
upgrade coincided with the employee led buy-out; innovatively optimizing our resources,
Engro re-located fertilizer manufacturing plants from the UK and US to its Daharki plant
site – an international first. Our pioneering spirit continues in our social investments,
exemplified by the only snake-bite treatment facility in the Ghotki region and the first
telemedicine intervention in the country.
　
　
Wing
Vision
"To be the premier Pakistani enterprise with a global reach, passionately pursuing value
creation for all stakeholders."
　
　
Our Diverse Colors of Excellence
Our Businesses
The years since Exxon became Engro have been both exciting and rewarding for the
Organization and its people. Challenges have been overcome, goals achieved and new
goals set. Engro today stands recognized as a successful business operation and a role
model for doing business in Pakistan.
Engro Chemical Pakistan Limited
The Company’s current manufacturing base includes urea name plate capacity of 975,000
tons per annum and blended fertilizer (NPK) capacity of 160,000 tons per year. A
premier brand and nationwide presence ensure sellout production. Additionally, the
company imports and sells phosphatic fertilizers for balanced fertility and improved farm
yields. Engro’s share of Pakistan’s phosphates market mirrors or exceeds its urea market
share.
Expansion plans include a new urea plant of 1.3 million tons annual capacity, also at
Daharki. The US$ 1 billion project is well underway and on track for commercial
production in mid 2010. This addition will increase Engro’s urea market share to 35%
from 19% at present.
　
　
Engro Vopak Terminal Limited
50:50 Joint Ventures with Royal Vopak - a Netherlands based global leader in terminal
operations. EVTL operates a bulk liquid chemical terminal at Port Qasim, Karachi. It has
an impeccable safety record of handling a range of chemicals and LPG for over 10 years.
EVTL is building Pakistan’s first cryogenic Ethylene storage facility and expects to be
ready by early 2009. Given its experience with gasses, cryogenics, a brown field location
and international operating standards, EVTL is well-positioned to build a LNG terminal,
being pursued by the Government of Pakistan.
Engro Polymer and Chemicals Ltd.

EPCL is undergoing expansion involving PVC production increase of 50,000 tones
(current capacity: 100,000 tons p.a. and back integration through setting up of an
EDC/VCM plant and a Chlor alkali plant. These initiatives are expected to conclude in
phases by first half of 2009. At Port Qasim, this 56% Engro owned Company is involved
in manufacturing, marketing and selling Polyvinyl Chloride (PVC).
Avanceon
A 63% owned subsidiary of Engro, EIAL is the leading global automation business,
providing process & control solutions. It also offers Power & Energy Management
software solutions as well as High-End software that integrate production and business
applications. Previously operating in Pakistan and UAE, they have now penetrated in the
USA market with the merger of ENGRO Innovative and Advance Automation. Advance
Automation is an award winning technology solutions provider to manufacturers in North
American and has been awarded as the System Integrator of the Year 2007 by Control
Engineering.
Synchronizing to a single brand worldwide with all the engineering Standards, processes,
brand identity and global brand recognition was a huge task and due to various different
cultural factors it was even complex then perceived.
After days of hard work AVANCEON emerged as the new name and the true Global
Automation Player. The new company name will help to reinforce the single brand
identity that has emerged over the last 16 days as the two formerly separate companies
have successfully worked to become a single global enterprise.
Engro Foods Limited (EFL)
Engro Foods, a wholly owned subsidiary had its first full year of operations in 2007. The
Company continued expanding with additions to brand portfolio, milk production and
distribution capacities.
The portfolio now includes four impressive brands; Olper's milk, Olper’s cream, Olwell
and Tarang. Olper’s market share peaked at 17% during 2007. EFL operates two
dairy processing factories located in Sukkur, and Sahiwal. The company’s milk collection
network now boasts over 700 village milk collectors and 400 milk collection centers.
Covering 2400 villages across Pakistan, the activities of the Company touch the lives of
almost 51,000 farmers.
An exciting new venture is the diversification of dairy portfolio into ice cream. Work has
commenced full throttle for detailed engineering and market study with a view to launch
of first ice cream in 2009. Also on EFL slate is the establishment of a dairy farm with
milking expected to start in second quarter 2009.
Engro Energy Limited (EEL)

　
　
This wholly owned subsidiary is setting up an Independent Power Plant near Qadirpur in
Sindh; Targeting 2009 for commercial operations, the power project will have a net
output of 217 MW. The plant will utilize low heating value permeate gas from Qadirpur
gas field which is currently being flared.
Engro Eximp (Pvt.) Limited

Engro Eximp (Pvt.) Limited is a wholly owned subsidiary in the trading business of
fertilizer imports.
Spectrum of our products & services products & services
Products & Services

Our wide spectrum of products and services clearly shows the diversity in our
Businesses, each one designed to make life better for our customers
Fertilizers
by Engro Chemical Pakistan Limited
Aduct line that focuses on balanced crop nutrition and higher yield for the farmer
Nitrogenous Fertilizers
ENGRO UREA is a trusted high grade fertilizer containing 46% Nitrogen (N), with
moderate hydroscopicity. It has a pH value of 6.8 (organic molecule) and is suitable for
all crops on all soils. Engro Urea is an excellent source of Nitrogen for the vast majority
of cultivated soils of Pakistan.
Phosphatic Fertilizers
Engro DAP: contains 46% P2O5 and 18% N. More than 90% of Phosphate (P) is water
soluble. It has a pH value of 7.33 and is a good source of P fertilizer for all crops. It is an
equally good source on problem soils (saline sodic) with coarse texture. On an overall
basis it suits to about 90% soils of the country.
Engro Zorawar: is one of the highest grade phosphatic fertilizers. It is acidic in reaction
(pH >= 3.5) and contains 52% P2O5 of which more than 90% is water soluble, while the
rest is citrate soluble. In addition to P, it contains 12% N, 2% sulphur and 1% calcium. It
is a beneficial fertilizer for all crops on all soils of Pakistan and produces excellent results
on alkaline soils, due to its acidic
the acidic pH of Engro Zorawar also tends to slow down the rapid conversion of soluble
P to water insoluble compounds, keeping it plant available for a longer period of time.
Engro Phosphate: is brown colored mono ammonium phosphate with 11% nitrogen
and 52% phosphorus. It is being marketed as relatively cheaper alternate of DAP.
Blended Fertilizers
Engro Zarkhez: is homogenously granulated fertilizer which maximizes crop yield by

providing balanced nutrition for a wide variety of crops through the uniform availability
of Nitrogen, Phosphorous and Potassium. Engro Zarkhez grades are specially produced to
suit the requirements of individual crops and soils, and provide convenience to the farmer
through ready availability of precise quantities of primary nutrients.
Engro Zarkhez fertilizers have low moisture content, high crush strength; 2mm-4mm
granule size and free flowing nature - attributes which ensure excellent handling and
application characteristics.
Engro NP: it provides 22% nitrogen, and 20% phosphorus. ECPL entered into NP
business in 2005 to cater the need of its customers for this established category. Primary
focus area for ENP marketing is South Zone (Sindh).
Micro Nutrients
Zingro: Zinc Sulphate, a highly effective and potent fertilizer which primarily targets
Zinc deficiency in crops like Rice, Potato, Maize, Sugar cane, Wheat, Cotton, vegetables
and fruits. Zingro increases crop yield and enhances crop appearance.
PVC Resin
a synthetic resin composed of repeating units of vinyl chloride. It is very versatile and is
used in a wide variety of products
Chemical handling & Storage

By Engro Vopak Terminal Limited
A state of the art jetty and terminal at Port Qasim, Karachi for handling and storage of
LPG and bulk liquid chemicals
Industrial Automation
by Avanceon (formerly known as Engro Innovative Automation Pvt. Limited)
Providing process control solutions to your industrial units
Market leader in industrial automation business providing process control solutions to

Industrial units. It offers Power & Energy Management Software solutions as well as
High end Software that integrate production and business application. Providing process
control solutions to your industrial units
Industrial Automation
Market leader in industrial automation business providing process control solutions to
Industrial units. It offers Power & Energy Management Software solutions as well as
High end Software that integrate production and business application.
Providing process control solutions to industrial units and management software solutions
Foods by Engro Foods Limited
Olper’s: Standardized at 3.5% fat, Olper’s is a premium, UHT all-purpose milk.
Olwell HCLF: (High Calcium, Low Fat) Olwell is a premium quality milk for the health
conscience.
Olper’s Cream: UHT Cream standardized at 40% fat
Tarang: Liquid tea whitener

State of the art dairy processing plant
Our 217 MW Power Plant.
Power Generation by Engro Energy Limited
Engro identified a Power Project based on low BTU, high H2S gas from
Qadirpur gas Field. The project is unique as it will convert low BTU high sulphur content permeate gas, which is
currently being wasted and flared, into 217 MW electric power
Converting wasted flare gas into energy at the 217 MW Power Plants
Quality
Improvisation through Six Sigma: the legend leads again
Employee development is one of the pivotal areas for Organizational development. To Organizational competence
levels, new training programs encompassing Performance Management, Leadership, and Competency Development
are introduced.
Engro is among the first Pakistani companies implementing six sigma across all areas and utilizing it as a
management system to execute its strategic objectives. Among the focus areas, employee development is the most
critical and six sigma is leveraged to help bring out the best in our people. Employees will drive improvements in
other areas; speed, innovation, perfection and in becoming world class professionals.
Six Sigma’s robust problem solving methodology and statistical toolkit allows the company to benchmark processes
against global standards in a language that is comparable across any industry or function. It helps ensure that Engro
sustains its promise of delivering high quality products and services to its customers – on time, every time.
Packing & Loading:

The finished product is packed with the utmost care by trained personnel, and loaded directly in to containers for
export purposes. All packing and loading is done under strict supervision, while maintaining maximum quality and
safety standards. To facilitate their customers, they provide yarn packed in 100Lbs and 50Lbs sea-worthy export
cartons. They also have facility to provide customers with polythene film shrink wrapped Pallet packing to specially
accommodate customers in Europe/USA and help them reduce the labor handling costs.
Business practice
Our Advisory Capacity
Principal Operations Committee
The following committees act at the operation level in an advisory capacity to the Chief Executive Officer,
providing recommendations relating to business and employee Matters:
Management Committee is responsible for review and endorsement of long term strategic plans, capital and
expense budgets, development and stewardship of business plans and reviewing the effectiveness of risk
management processes and internal control.
Corporate HSE Committee is responsible for providing leadership and strategic guidance on all Health, Safety and
Environment (HSE) improvement initiatives and has stewardship responsibility for monitoring compliance against
regulatory standards and selected international benchmarks.
COED Committee is responsible for the review of Compensation, Organization and Employee Development
(COED) matters of all people excluding employee Directors and Senior Executives.
Throughout the 40 plus years of Engro’s history, our people have come up with ideas and determination that drove
the company forward in all sorts of times.
Corporate Governance
Engro’s governance structure responds to the industry’s best practices demands Ensuring that all aspects with
respect to economic, environmental and social obligations are fully considered and business decisions are taken
after evaluating their impact on The Company’s triple bottom line - People, Planet and Profits.
Compliance Statement
The Board of Directors has throughout the year 2007 complied with the ‘Code of Corporate Governance’ contained
in the listing requirements of the stock exchanges and the ‘Corporate and Financial Reporting framework’ of the
Securities and Exchange Commission of Pakistan.
Risk Management Process
In 2007, the Management Committee undertook a review of major financial and operating risks faced by the
business.
Internal Control Framework
Responsibility: The Board is ultimately responsible for Engro’s system of internal control and for reviewing its
effectiveness. However, such a system is designed to manage rather than eliminate the risk of failure to achieve
business objectives, and can provide only reasonable and not absolute assurance against material misstatement or
loss.
The Board, whilst maintaining its overall responsibility for managing risk within the Company, has delegated the
detailed design and operation of the system of internal controls to the Chief Executive
Framework: The Company maintains an established control framework comprising clear structures, authority
limits, and accountabilities, well-understood policies and procedures and budgeting and review processes.
The Board establishes corporate strategy and the Company’s business objectives. Divisional management integrates
these objectives into divisional business strategies with supporting financial objectives. All policies and control
procedures are documented in manuals
Review: The Board meets quarterly to consider Engro’s financial performance, financial and operating budgets and
forecasts, business growth and development plans, capital expenditure proposals and other key performance
indicators.
The Board Audit Committee receives reports on the system of internal financial controls from the external and
internal auditors and reviews the process for monitoring the effectiveness of internal controls.
There is a company wide policy governing appraisal and approval of investment expenditure and asset disposals.
Post completion reviews are performed on all material investment expenditure.
Audit: Engro has an Internal Audit function. The Board Audit Committee annually reviews the appropriateness of
resources and authority of this function. The Head of Internal Audit reports directly to the Audit Committee on the
results of its work.
The Internal Audit function carries out reviews on the financial, operational and compliance controls, and reports on
findings to the Chief Executive and the divisional management. All material issues are reported to the Board Audit
Committee which approves the audit program, based on an annual risk assessment of the operating areas. To
underpin the effectiveness of controls, it is Engro’s policy to attract, retain and develop staff of high caliber and
integrity in appropriate disciplines. There is an annual appraisal process, which assesses employee performance
against agreed objectives and identifies necessary training to maintain and enhance standards of performance.
Values that we live by
Core Values
Our employees' performance can only flourish in a sound work environment. That is why ENGRO is committed to
supporting its leadership culture through systems and policies that foster open communication, maintain employee
and partner privacy, and assure
Employee health and safety.
SAFETY, HEALTH & ENVIRONMENT

We will manage and utilize resources and operations in such a way that the safety and health of our people, our
neighbors. Our customers and our visitors are ensured. We believe our safety, health and environmental
responsibilities extend beyond protection and enhancement of our own facilities, and we are concerned about the
distribution, use and after use disposal of our products.
ETHICS AND INTEGRITY

we do care how results are achieved and will demonstrate honest and ethical behavior in all our activities. Choosing
the course of highest integrity is our intent and we will establish and maintain the highest professional and personal
standards. A well-founded reputation for scrupulous dealing is itself a priceless asset.
LEADERSHIP
we have leaders of high integrity. Energy and enthusiasm that have the necessary managerial, professional and
people skills to inspire a group or an organization to set high goals and achieve them willingly. We believe that
leadership skills need to be strengthened at all levels within our organization and that managerial and professional
competence is a necessary foundation.
QUALITY &CONTINUOUS IMPROVEMENT

we believe that quality and a relentless commitment to continuous improvement are essential to our ongoing
success. To this end, we define quality as understanding the customer's expectations, agreeing on performance and
value, and providing products and services that meet expectations 100 percent of the time. Our motto is, "Quality in
all we do."
ENTHUSIASTIC PURSUIT OF PROFIT

successfully discharging our responsibilities to our shareholders to enhance the long-term profitability and growth
of our company provides the best basis for our career security and meaningful personal growth. We can best
accomplish this by consistently meeting the expectations of our customers and providing them with value.
EXTERNAL & COMMUNITY INVOLVEMENT

We believe that society must have industrial organizations that it can trust. Trust and Confidence are earned by our
performance, by open and direct communication, and by active involvement in the communities in which we live
and conduct our business."
CANDID & OPEN COMMUNICATIONS

We value communications that are courteous, candid and open and that enable each of us to do our jobs more
effectively by providing information that contributes to the quality of our judgment and decision making. Effective
communication should also provide the means for gaining understanding of the company's overall objectives and
plans and of the thinking behind them.
ENJOYMENT & FUN

We believe that excitement, satisfaction and recognition are essential elements of a healthy, creative and high-
performing work environment. Having fun in our work should be a normal experience for everyone.
INNOVATION
Success requires us to continually strive to produce break through ideas that result in improved solutions and
services to customers. We encourage challenges to the status quo and seek organizational environments in which
ideas are generated, nurtured and developed.
INDIVIDUAL GROWTH & DEVELOPMENT
we strongly believe in the dignity and value of people. We must consistently treat each other with respect and strive
to create an organizational environment in which individuals are encouraged and empowered to contribute, grow
and develop themselves and help to develop each other.
TEAMWORK & PARTNERSHIP

we believe that high-performing teams containing appropriate diversity can achieve what individuals alone cannot.
Consciously using the diversity of style. Approach and skills afforded by teams is strength we must continue
building into our organization.
DIVERSITY & INTERNATIONAL FOCUS

We value differences in gender, race, nationality, culture, personality and style because diverse solutions,
approaches and structures are more likely to meet the needs of customers and achieve our business goals.
Corporate Responsibility Report
Our employees bring expertise and dedication to the workplace
Our People
More than 700 employees bring expertise and dedication to the workplace. We value each employee, value their
input and views. Continuously striving to become employer of choice, we provide a workplace where people feel
confident, valued and inspired.
The Organization of Comparison
Fauji Fertilizer Company
The organization with whom the comparison of Engro Chemical Pakistan Limited is to be done is FFC
Limited. The comparison can only be done by making the financial analysis of this particular Fertilizer
Companies in a similar way in which the analysis of Engro Chemical Pakistan Limited is to be done by
first of all calculating all the major five ratios and interpreting them one by one thereby gaining a position
to make a comparison become their financial situation.
An Overview
With a vision to acquire self - sufficiency in fertilizer production in the country, FFC was incorporated in 1978 as a
private limited company. This was a joint venture between Fauji Foundation (a leading charitable trust in Pakistan)
and Haldor Topsoe A/S of Denmark.
The initial authorized capital of the company was 813.9 Million Rupees. The present share capital of the company
stands at Rs. 3.0 Billion. Additionally, FFC has Rs. 1.0 Billion stakes in the subsidiary Fauji Fertilizer Bin Qasim
Limited (formerly FFC-Jordan Fertilizer Company Limited).
FFC commenced commercial production of urea in 1982 with annual capacity of 570,000 metric tons.
Through De-Bottle Necking (DBN) program, the production capacity of the existing plant increased to
695,000 metric tons per year.
Production capacity was enhanced by establishing a second plant in 1993 with annual capacity of
635,000 metric tons of urea.
FFC participated as a major shareholder in a new DAPS/Urea manufacturing complex with participation
of major international/national institutions. The new company Fauji Fertilizer Bin Qasim Limited (formerly
FFC-Jordan Fertilizer Company Limited) commenced commercial production with effect from January 01,
2000. The facility is designed to produce 551,000 metric tons of urea and 445,500 metric tons of DAP.
This excellent performance was due to hard work and dedication of all employees and the progressive
approach and support from the top management.
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 privatization process of the
Government of Pakistan.
This acquisition at Rs. 8,151 million represents one of the largest industrial sector transactions in
Pakistan
Mission Statement
FFC's mission is to sustain its role as the leader in industrial and agricultural advancement of
Pakistan by setting and achieving new and higher goals and taking initiatives. The Company is
committed to ensuring safe and conducive work environment, providing high quality products
and allied services to its customers and profitable returns to its shareholders.
RATIO ANALYSIS
(Engro Chemical Pakistan Ltd.)
Ratios simply mean a number expressed in terms of another. A ratio is a statistical yardstick by mean of
which relationship between two or various figures can be compared or measured. Thus Ratio Analysis
shows the relationship between accounting data. Ratio can be found out by dividing on number by
another number. Ratio analysis is an important and age old technique of financial analysis. Following are
some of the advantages of ratio analysis.
Advantages:
• It simplifies the comprehension of financial statements.
• Ratios tell the whole story of changes in the financial condition of the business.
• It provides data for inter-company comparison. Makes inter-company comparison

possible
• Ratio analysis also makes possible comparison of the performance of different

divisions of the company. The ratios are helpful in deciding about their efficiency or
otherwise in the past and likely performance in the future.
• Ratios highlight the factors associated with successful and unsuccessful company.
They also reveal strong companies and weak company’s, over-valued under-valued
companies.
• It helps in planning and forecasting. Ratios can assist management, in its function of
forecasting, planning, co-ordination, control and communications.
• It helps in investment decisions in the case of investors and lending decisions in the
case of investors and lending decisions in the case of bankers’ etc.
Types of Ratios Analysis
Let us now have a detailed analysis of all the following four ratios for Engro chemicals Pakistan Ltd:
• Liquidity Ratios
• Leverage Ratios
• Activity Ratios
• Profitability Ratios
Liquidity Ratios:
Current Ratio:
Current Ratio is equal to current assets divided by current liabilities
Current Ratio = Current Assets
Current Liabilities
2006 – 2007:
Current Ratio = 16397198000
5264674000
Current Ratio = 3.11
2005 - 2006:
3642415000
2004 - 2005:
2800094000
Comparison over the years / Interpretation:
Current ratio is a general and quick measured of liquidity of company. It represents the margin of safety
or cushion available to the auditor. It is the index of the company’s financial stability. It is also an index of
the financial solvency and index of strength of working capital.
The current ratio of the company is increasing over the years right from 2004-07 constantly, that is, it was
1.79 in 2004-05 and it is 3.11 in 2006-07.
Acid Test (Quick) Ratio:
Acid Test (Quick) ratio is equal to Current assets fewer inventories divided by current liabilities. It gives
more liquid amount of assets to cover your liabilities.
Quick Ratio = Current assets – Inventories
Current liabilities
2006 – 2007:
Quick Ratio = 16397198000–2690153000
5264674000
Quick Ratio = 0.26
2005 - 2006:
Quick Ratio = 5684446000– 923448000
3642415000
Quick Ratio = 1.31
2004 - 2005:
Quick Ratio = 5011555000– 1922982000
2800094000
Quick Ratio = 1.10
The quick test ratio is a very useful measuring of the liquidity position of the company. It means that
company’s ability to pay its short-term obligations or current liabilities immediately and is a more rigorous
test of liquidity than the current ratio.
The quick ratio of the company as is shown by the above calculations is not consistent, and decreasing
with large percentage that is, the company is getting lesser and lesser liquid current assets to cover its
current liabilities.
Leverage ratios:
Debt Equity Ratio:
Debt equity ratio is equal to long term debts divided by stockholder’s equity.
Debt Equity ratio = Long Term Debts
Stockholder’s equity
2006 – 2007:
Debt equity ratio = 17410060000
1934692000
Debt equity ratio = 1.5348
2005 - 2006:
Debt equity ratio = 370,501,304
233,187,729
2004 - 2005:
Debt equity ratio = 316,314,578000
190,255,511000
This ratio indicates the proprietor’s claims of owners and outsiders against the company’s assets. The
purpose is to get an idea of the cushion available to outsiders and the liquidity of the company. The
interpretation of the ratio depends upon the financial and business policy of the company.
The debt ratio of the company has decreased gradually over the years right from 2004-07 which is
actually a positive sign for the company.
Debt Equity ratio increment is a negative point to management that the more of their business is financed
by debts this will increase their financial charges or interest expense and company’s liquidity and hence
decreasing the company’s profit. The lower the ratio the higher the company’s financing that is provided
by the shareholders and larger the creditors cushion (margin of protection) in the extent of shrinkage of
assets values or outright loss.
Debt Ratio:
Debt ratio is equal to total liabilities divided by total assets.
Debt Ratio = Total Liabilities
Total Assets
2006 – 2007:
Debt Ratio = 7005734000
38156651000
Debt Ratio = 0.18
2005 - 2006
Debt Ratio = 3939349000
15980816000
Debt Ratio = 0.25
2004 - 2005
Debt Ratio = 6736064000
14111630000
Debt Ratio = 0.48

It can be defined as how much sufficient our assets are in retrieving the total debts. The debt ratio of the
company has been decreasing quite intensively almost over the last three years as shown clearly by the
above calculations.
Times Interest Earned (Coverage Ratio):
It briefs that how many times the company has earned the interest. Or how many times the company has
user it's earning before interest and taxes to cover the interest expense.
Times Interest Earned = Profit before Interest and Taxes
Interest Expense
2006 – 2007:
Interest coverage Ratio = 4770535000
535023000
Interest Coverage Ratio = 8.92 times
2005 - 2006:
362551000
2004 - 2005:
280070000

The interest coverage ratio is a very important from the lender point of view. It indicates the number of
times interest is covered by the profit available to pay interest charges. It is an index of the financial
strength of the enterprise. A high ratio assures the lender a regular and periodic interest income. But
weakness of the ratio may create some problems for the company’s financial manager in raising funds
from the debts sources.
The no. of times the company earns interest has fluctuated dramatically, that is, it was 12.5 in 2005,
decreased down to 7.18 in 2006 and to rise up to 8.92 in 2007.
Activity Ratios
Inventory Turnover Ratio:
Inventory Turnover Ratio is equal to Cost of Goods Sold divided by Average Inventory.
Inventory Turnover ratio = Cost of Goods Sold Avg. Inventory
2006-2007
Inventory Turnover Ratio = 18262793000 1808192327
Inventory Turnover Ratio = 10.1 times
2005 – 2006
Inventory Turnover Ratio = 13364524000
1421757872
2004 - 2005:
Inventory Turnover Ratio = 14332824000
1291245405

Inventory turn over ratio measures the velocity of conversion of stock into sales. In other words how
rapidly inventory is turning into receivables through sales.
In 2006 it was 9.4 times and in 2007 it was 10.1 times. In 2006 the ratio was low because of over
investment in inventories. In year 2007 it is better that is 10.1 times in the year, which is quite good
because of good management.
Inventory Holding Period in days:
Inventory holding period in days is equal to number of days in a year divided by inventory turnover ratio.
Inventory Holding Period in Days = No. of days in a year
Inventory Turnover ratio
2006 – 2007:
Inventory turnover in days = 360
10.1
Inventory turnover in days = 36 days
2005 - 2006:
9.4
2004 - 2005:
11.1
In 2006 it was 38 days times and in 2007 it was 36 days. In year 2006 it was quite good and in 2007 it is
better that is 36 days in a year to move inventory through sales, which is quite good because of good
management and polices.
Net Fixed Assets Turnover Ratio:
Net Fixed assts turnover ratio is obtained by dividing sales with net fixed assets, where,
(Net fixed assets = Total fixed Assets – Accumulated Depreciation)
Net Fixed Asset Turnover Ratio = Sales
Net Fixed assets
2006 – 2007:
Fixed asset turnover ratio= 23183222000
21759453000
Fixed asset turnover ratio = 1.939 times
2005 - 2006:
Fixed asset turnover ratio = 17601783000
600,565,280
2004 - 2005:
Fixed asset turnover ratio = 18276277000
480,566,483
Fixed asset turnover ratio measures sales productivity and plant and equipment utilization. It is clear that
this ratio is rising from 2006 which is 1.5 to 1.93 in 2007
Total Asset Turnover:
Total asset turnover ratio measures that how much sales are generated through the total assets of the
organization.
Total Asset Turnover Ratio = Sales
Total assets
2006 – 2007:
Total asset turnover ratio= 23183222000
15980816000
Total asset turnover ratio = 1.45 times
2005 - 2006:
Total asset turnover ratio = 17601783000
15980816000

2004 - 2005:
Total asset turnover ratio = 18276277000
14111630000
It shows that company must manage its total assets efficiently and should generate maximum sales
through their proper utilization. As the ratio, increases there are more revenue generated per rupee of
total investment in asset. The company ability to produce a large volume of sales on a small total asset
based is an important part of the company’s overall performance in terms of profits. In 2007, 2006. The
ratio was 1.1, 1.45 times respectively. In 2007, the ratio indicates that it is producing RS 1.45 sales per
Rupees of investment in total assets. So as time is going by this ratio is increasing which means
company performance is up to mark in terms of profits.
Receivables Turnover Ratio:
Receivables turnover ratio is equal to net credit sales divided by average receivables.
Receivables Turnover Ratio = Net credit Sales
Avg. Receivables
2006 – 2007:
Receivables Turnover Ratio = 23183222000
1016807982
Receivables Turnover Ratio = 22.8 times
2005 - 2006:

5828404967
2004 - 2005:
532836064
Receivables turnover ratio measures the average length of time it takes a company to collect credit sales
in percentage terms. So Receivables turn over ratio is becoming worse as it was 30.2 in 2006 as
compare to 2007 which is 22.8 times. So the company is not performing well and showing not good
management.
Average Collection Period in days:
Average collection period in days is equal to days in year divided by Receivables turnover ratio.
Average Collection Period in days = No of days in a year
Receivables turnover ratio
2006 – 2007:
Receivables turnover ratio in days = 360
22.8
Receivables turnover ratio in days = 16 days
2005 - 2006:
Receivables turnover ratio = 360
30.2
Receivables turnover ratio = 12 days
2004 - 2005:
34.3
Receivables turnover ratio = 11 days
Average collection period shows the average length of time it takes a company to collect credit sales in
days. From above analysis it is clear that average collection period is 16 days respectively in year
an2006. But it is best was in 2005 which is 11 days.
Profitability Ratios:
Gross Profit Margin:
Gross profit margin is equal to the ratio of gross profit to sales.
Gross Profit Margin = Gross Profit
Sales
2006 – 2007:
Gross profit margin = 4920429000 X 100
23183222000
Gross profit margin = 21.22 %

2005 - 2006:
17601783000
2004 - 2005:
18276277000
Gross profit margin or gross profit ratio is the ratio of gross profit to net sales expressed as percentage.
From Gross profit the company adjusts its operating and administrative expenses. In 2006 it increased
heavily but in 2007 it decreased to 21.22 %. The gross profit is sufficient to recover all operating
expenses and to build up reserve after paying all fixed interest charges and all dividends.
Operating Profit Margin:
Operating Profit Margin is equal to earning before interest and tax divided by sales.
Operating Profit Margin = EBIT/Operating Profit
Sales
2006 – 2007:
Operating Profit Margin = 4770535000 X 100
23183222000
Operating Profit Margin = 20.58 %

2005 - 2006:
17601783000
2004 - 2005:
18276277000
This used to show the profitability without concern for taxes and interest. In 2006 the operating profit ratio
was 21.63% and in 2007 the net profit ratio is 20.58 %. In 2006 operating profit ratio increased by 2.4 %
and decreased by 0.8% in 2007, relative to 2006 ratio Shows Company’s inability to with stand adverse
economic condition without caring taxes and interest.
Net Profit Margin:
Net Profit Margin is equal to net profit divided by sales.
Net Profit Margin = Net Profit
Sales
2006 – 2007:
Net Profit Margin = 3154583000 X 100
23183222000
Net Profit Margin = 13.61 %

2005 - 2006:
17601783000
2004 - 2005:
18276277000
This used to show the overall profitability and hence it useful to the proprietors. Higher the ratio betters for
the organization .It shows the company’s ability to turn each rupee of sale into profit. In 2006 the net profit
ratio was 14.47 % and in 2007 the net profit ratio is 13.61%. In 2006 net profit ratio increased by 1.7 %
relative to 2005. But in 2007 it decreased slightly and remained 13.61 %.
Earning per share:
This ratio shows that how much amount per share does a common stock holder attains.
Earning per share = Earning Available for Common Stock Holders
No. Of Common Stock Shares
2006 – 2007:
Earning per share = 3154583000
183737000
Earning per share = Rs. 17.17 / share

2005 - 2006:
164650000
Earning per share = Rs.15.47 /share
2004 - 2005:
1161350000
Earning per share = Rs. 14.37 /share
This ratio shows the worth of the share. As we can see that the worth of the shares of Engro Chemical
has increased. EPS is increasing at a constant rate, which are good signs for the investors.
Price earning ratio:
It equals to the ratio of market price per share divided by earning per share.
Price Earning Ratio = Market price per share
Earning per share
2006 – 2007:
Price Earning Ratio = 265.79
17.17
Price Earning Ratio = Rs. 15.48
2005 - 2006:
15.47
2004 - 2005:
14.37
In 2006 the situation, slightly become worse as compared to 2005. But in 2007, these ratios results
Rs.15.48 were to be spent in order to earn Rs.1 profit.
RATIO ANALYSIS
Fauji Fertilizer Company Ltd.
Types of Ratios Analysis:
Let us now have a detailed analysis of all the following four ratios for Fauji Fertilizer Company Limited
Liquidity Ratios
Leverage Ratios
Activity Ratios
Profitability Ratios
Liquidity Ratios:
Current Ratio:
Current Ratio = Current Assets
Current liabilities
2006 – 2007:
Current Ratio =
10,811,435000
11,476,393000
2005 - 2006:
Current Ratio = 9,764,587000
10,883,988000
Current Ratio = .897
2004 - 2005:
Current Ratio = 20,463,506000
18,707,783000
Current ratio is a general and quick measured of liquidity of company. It represents the margin of safety
or cushion available to the auditor. It is the index of the company’s financial stability. It is also an index of
the financial solvency and index of strength of working capital.
Company's Current ratio has been decreasing gradually over the year’s right from the 2005 to 2007.
Acid Test (Quick) Ratio:
Quick Ratio = Current assets – Inventories
Current liabilities
2006 – 2007:
Quick Ratio = 10, 811, 435000-642, 836000
11,476,393000
Quick Ratio = 0.89
2005 - 2006:
Quick Ratio = 9, 764, 587000-952, 905000
10,883,988000
Quick Ratio = 0 .81
2004 - 2005:
Quick Ratio = 20, 463, 506000- 1,583,429000
18,707,783000
Quick Ratio = 1.01
The quick test ratio is a very useful measuring of the liquidity position of the company. It means that
company’s ability to pay its short-term obligations or current liabilities immediately and is a more rigorous
test of liquidity than the current ratio.
The calculations above clearly show that the quick ratio of the company has been not constant over the
years due to the changes in pre paids and inventories. But it increased in 2007 as compared to 2006,
which is positive point for the company.
Leverage / Debt ratios:
Debt Equity Ratio:
Debt Equity ratio = Long Term Debts
Stockholder’s equity
2006 – 2007:
Debt Equity ratio = 216,171,622
51,741,235
Debt Equity ratio = 108.33
2005 - 2006:
62,565,620
2004 - 2005:
53,055,841

This ratio indicates the proprietor’s claims of owners and outsiders against the company’s assets. The
purpose is to get an idea of the cushion available to outsiders and the liquidity of the company. The
interpretation of the ratio depends upon the financial and business policy of the company.
Debt Equity shows the relationship between the external equities or outside funds and internal equities
and shareholder’s funds. The debt equity ratio of the company has been decreasing over the years from
2005 to 2006 but in 2007 it increased, with maximum in the year 2004-05 thereby decreasing in the next
year and increasing finally.
Debt Equity ratio increment is a negative point to management that the more of their business is financed
by debts this will increase their financial charges or interest expense and company’s liquidity and hence
decreasing the company’s profit. The lower the ratio the higher the company’s financing that is provided
by the shareholders and larger the creditors cushion (margin of protection) in the extent of shrinkage of
assets values or outright loss.
Debt Ratio:
Debt Ratio = Total liabilities
Total assets
2006 – 2007:
Debt Ratio= 16511169000
29,241,214000
Debt Ratio= 0.57
2005 - 2006
Debt Ratio= 14473738000
27,430,281000
Debt Ratio= 0.53
2004 - 2005
Debt Ratio= 36392141000
48,010,511000
Debt Ratio= 0.76
It can be defined as how much sufficient our assets are in retrieving the total debts. We can observe in
our analysis that the debt ratio of the company is decreasing over the year which is a good sign for the
company, that is, the company uses less of its total liabilities for its current assets.
Times Interest Earned (Coverage Ratio):
Times Interest Earned = Profit before Interest and Taxes
Interest expense
2006 – 2007:
696,407000
2005 - 2006:
501,241000
2004 - 2005:
585,816000
The interest coverage ratio is a very important from the lender point of view. It indicates the number of
times interest is covered by the profit available to pay interest charges. It is an index of the financial
strength of the enterprise. A high ratio assures the lender a regular and periodic interest income. But
weakness of the ratio may create some problems for the company’s financial manager in raising funds
from the debts sources.
The no. of times the company earns its interest fluctuates from over the year’s right from 2005 to 2007.
The times interest earned by the company in 2007 returned a lot to the level where it was in 2005.
Activity Ratios:
Inventory Turnover ratio = Cost of Goods Sold
Avg. Inventory
2006 – 2007:
Inventory Turnover Ratio = 18,311,525000
797870500
2005 - 2006:
126817000

2004 - 2005:
1,583,429000
In 2006 it was 16.1 times and in 2007 it was 22.95 times. In 2006 the ratio was low because of over
investment in inventories. In year 2007 it is better that is 22.95 times in the year, which is quite good
because of good management and polices.
Inventory Holding Period in days:
Inventory Holding Period in days = No of days in a year
Inventory turnover ratio
2006 – 2007:
22.95
Inventory turnover in days = 15.7 days
2005 - 2006:
16.1

2004 - 2005:
16.41
In 2005 it was 21.93 days and in 2007 it was 15.7 days. In year 2007 it is quite good and in 2006 it was
better that is 22.36 days in a year to move inventory through sales, which is quite good because of good
management and polices.
Net Fixed Assets Turnover Ratio:
Net Fixed Asset Turnover Ratio = Sales
Net Fixed assets
2006 – 2007:
Fixed asset turnover ratio= 28,429,005000
18429779000
2005 - 2006:
Fixed asset turnover ratio = 29,950,873000
17665694000

2004 - 2005:
Fixed asset turnover ratio = 39,757,510000
27547005000
Fixed asset turnover ratio measures sales productivity and plant and equipment utilization. It is clear that
this ratio is increasing from 1.44 times in 2005 to 2006 which is 1.7and decreased to 1.54 in 2007
Total Asset Turnover:
Total Asset Turnover Ratio = Sales
Total assets
2006 – 2007:
Total asset turnover ratio= 28,429,005000
29,241,214000
Total asset turnover ratio = .97 times
2005 - 2006:
Total asset turnover ratio = 29,950,873000
27,430,281000
2004 - 2005:
Total asset turnover ratio = 39,757,510000

48,010,511000
It shows that companies must manage its total assets efficiently and should generate maximum sales
through their proper utilization. As the ratio, increases there are more revenue generated per rupee of
total investment in asset. The company ability to produce a large volume of sales on a small total asset
based is an important part of the company’s overall performance in terms of profits. In 2007, & 2006 the
ratio was 0.97, 1.10 times respectively. In 2007, the ratio indicates that it is producing RS .97 sales per
Rupees of investment in total assets. So as time is going by this ratio is fluctuating which means
company performance is not up to mark in terms of profits.
Receivables Turnover Ratio = Net credit Sales
Avg. Receivables
2006 – 2007:
Receivables Turnover Ratio = 28,429,005000
1497076500
Receivables Turnover Ratio = 19 times
2005 - 2006:
1171132000 Receivables Turnover Ratio = 25.57

times
2004 - 2005:
890,874000
Receivables turnover ratio measures the average length of time it takes a company to collect credit sales
in percentage terms. So Receivables is better in 2006 is 25.57 times as compare to 2007, which is 19
times
Average Collection Period in days:
Average Collection Period in days = Days in a year
Receivables turnover ratio
2006 – 2007:
Receivables turnover ratio in days = 360
19 Receivables turnover ratio in days = 18.95 days
2005 - 2006:
25.57 Receivables turnover ratio = 14.41 days
2004 - 2005:
44.62 Receivables turnover ratio = 8.1 days

Average collection period shows the average length of time it takes a company to collect credit sales in
days. From above analysis it is clear that average collection period was 14.41 days in2006. But it was
best in 2005 which is 8.1 days. So these ratios show that company is doing well in this particular case.
Profitability Ratios:
Gross Profit Margin:
Gross Profit Margin = Gross Profit
Sales
2006 – 2007:
Gross profit margin = 10,117,480000X 100
28,429,005000
2005 - 2006:
Gross profit margin = 9,708,679000 X 100
29,950,873000
2004 - 2005:
Gross profit margin = 13,770,310000 X 100
39,757,510000

Gross profit margin or gross profit ratio is the ratio of gross profit to net sales expressed as percentage. In
2006 it increased slightly to 7.73 % and in 2007 it increased to 10.22 %. The gross profit is sufficient to
recover all operating expenses and to build up reserve after paying all fixed interest charges and all
dividends.
Operating Profit Margin = EBIT/Operating Profit
Sales
2006 – 2007:
Operating Profit Margin = 8511360000X 100
28,429,005000
2005 - 2006:
29,950,873000
Operating Profit Margin = 25 %
2004 - 2005:
39,757,510000

This used to show the profitability without concern for taxes and interest. In 2006 the operating profit ratio
was 25%, and in 2007 the operating profit ratio is 29.93 %. In 2006 operating profit ratio was increased by
7.4 % and increased by 5% in 2007. The operating profit is increasing gradually at a decreasing rate but it
shows company’s capacity to with stand adverse economic condition without caring taxes and interest.
Net Profit Margin:
Net Profit Margin = Net Profit
Sales
2006 – 2007:
Net Profit Margin = 5,360,953000 X 100
28,429,005000
Net Profit Margin = 18.86
2005 - 2006:
Net Profit Margin = 4,636,144000X 100
29,950,873000
2004 - 2005:
Net Profit Margin = 6,395,259000X 100
39,757,510000
This used to show the overall profitability and hence it useful to the proprietors. Higher the ratio betters for
the organization .It shows the company’s ability to turn each rupee of sale into profit. In 2006 the net profit
ratio is 15.48 % and in 2007 the net profit ratio is 18.9%. In 2006 net profit ratio decreased by .61 %
relative but increased in 2007 by 3 %.
Earning per share:
Earning per share = Earning Available for Common Stock Holders
No. Of Common Stock Shares
2006 – 2007:
Earning per share = 5,360,953000
493,474000
Earning per share = Rs. 10.86/share
2005 - 2006:
493,474000
Earning per share = Rs. 9.39/share
2004 - 2005:
493,474000
Earning per share = Rs. 12.96 /share
This ratio shows the worth of the share. As we can see that the worth of the shares of Fauji fertilizer
Company has decreased. The EPS is almost fluctuating but still in favorable condition.
Price earning ratio:
Price Earning Ratio = Market price per share
Earning per share
2006 – 2007:
10.86
2005 - 2006:
9.39
Price Earning Ratio = Rs.11.24
2004 - 2005:
Price Earning Ratio = 137
12.96
These ratios results show that in 2007 Rs.10.93 were to be spent in order to earn Rs.1 profit. But in year
2006 the position was comparatively good as shown that Rs.11.24 has to be spent in order to earn Rs.1
of profit.
INDUSTRY ANALYSIS
(Comparison through graphical interpretation)

Activity Ratios
Current Ratio:
2004-05 2005-06 2006-07
ECL 1.79 1.56 3.11
FFC 1.094 .897 0.942
Quick Ratio:
2004-05 2005-06 2006-07
ECL 1.10 1.31 0.26
FFC 1.01 0.81 0.89

2004-05 2005-06 2006-07
ECL 11.1 9.4 10.1
FFC 16.41 16.1 22.95
Inventory Holding Period:
2004-05 2005-06 2006-07
ECL 32 38 36
FFC 21.93 22.36 15.7
2004-05 2005-06 2006-07
ECL 34.3 30.2 22.8
FFC 44.62 25.57 19

Average Collection Period:
2004-05 2005-06 2006-07
ECL 11 12 16
FFC 8.1 14.41 18.95
2004-05 2005-06 2006-07
ECL 1.4437 1.5148 1.9397
FFC 1.44 1.7 1.54
Net Fixed Assets

Total Assets Turnover:
2004-05 2005-06 2006-07
ECL 1.30 1.1 1.45
FFC 0.833 1.1 0.97
Debt Ratio:
2004-05 2005-06 2006-07
ECL .48 .25 .18

FFC 0.76 0.53 0.57
Debt Equity Ratio:
2004-05 2005-06 2006-07
ECL 1.6625 1.5888 1.5348
FFC 5.1316 4.0654 4.177
Times Interest Earned:

2004-05 2005-06 2006-07
ECL 12.5 7.18 8.92
FFC 11.92 14.94 12.22
G.P. Margin:
2004-05 2005-06 2006-07
ECL 14.45 24.07 21.22
FFC 34.6 32.42 35.6

2004-05 2005-06 2006-07
ECL 19.15 21.63 20.58
FFC 17.6 25 29.93
N.P. Margin:
2004-05 2005-06 2006-07

ECL 12.69 14.47 13.61
FFC 16.09 15.48 18.86
Price Earning Ratio:
2004-05 2005-06 2006-07
ECL 10.85 11.02 15.48
FFC 10.57 11.24 10.93

2004-05 2005-06 2006-07
ECL 14.37 15.47 17.17
FFC 12.96 9.39 10.86
Earning Per Share
Conclusion
So, in the light of all the details given above about the financial analysis of both the industries, i.e. debt, activity,
liquidity, & profitability of Engro chemicals ltd. And Fauji fertilizer company , we come to know that in this
situation of agriculture recession and down fall in the economy the ECL has performed well and it maintained its
fianancial position and faced the tough competitors.
Presented to:
Mrs. Labiba Sheikh

Presented by:
M Fahim Arshed MBA2007-01
Ammara Asghar MBA2007-23
Kanwal Munir MBA2007-24
Awais Ahmed MBA2007-32
Umer Daraz MBA2007-44
Hafiz Asad MBA2007-87
References
th edition
• Gitman, J. Lawrence (2005), Managerial Finance, Addison Wesely, New York, 11
• Business Recorder, Lahore
• Financial Reports, Engro Chemicals Pakistan Ltd., for years 2005, 2006 and 2007
• Financial Reports, FFC Ltd. for years 2005, 2006 and 2007
•
www.google.com
www.ffc.com.pk
www.engrochemicals.com.pk
• www.wikipedia .com
•
www.investopedia.com
www.parenhall.com
www.kse.com
www.lse.com

Engro Chemicals and Fauji Chemicals Project On Ratio Analysis of Engro and Fauji

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Engro Chemicals and Fauji Chemicals Project On Ratio Analysis of Engro and Fauji

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Project on Ratio Analysis of Engro and Fauji

Submitted in Partial fulfillment of the requirements

National University of Modern Languages

© Copyright by Qaiser Mehmood, 2009

Faculty of Information Technology and Management Sciences

recommended to the faculty of Management Sciences for acceptance of Final Project

partial fulfillment of the requirements for the degree of Master in Business

Administration of National University of Modern Languages, Islamabad.

Date: June20, 2009

Head of Department: _______________

By the Grace of Almighty Allah, the most Merciful, the most

Due to his bounteous blessings, I become able to contribute this comprehensive

I want to dadicate my this project to following persons

• Hazrat Muhammad (PBUH)

• Qauid-E-Azam Muhammad Ali Janah

• My Best Friend Qaiser Mehmood Khan

Engro Chemicals Ltd

YEARS 2005 2006 2007 2005 2006 2007

CURRENT RATIOS 1.79 1.56 3.11 1.094 .897 0.942

ACID TEST RATIO 1.10 1.31 0.26 1.01 0.81 0.89

DEBT RATIO .48 .25 .18 0.76 0.53 0.57

TIME INTEREST EARNED 12.5 7.18 8.92 11.92 14.94 12.22

INVENTORY HOLDING PERIOD 32 38 36 21.93 22.36 15.7

NET FIXED ASSETS TURNOVER

RECEIVABLES TURNOVER RATIO 34.3 30.2 22.8 44.62 25.57 19

Average Collection Period 11 12 16 8.1 14.41 18.95

Operating Profit MARGIN (%) 19.15 21.63 20.58 17.6 25 29.93

Earning per share

THE ORGANIZATION CONCERNED 6

Engro Chemical Pakistan Ltd. 6

Engro Chemical Pakistan Limited 8

Engro Vopak Terminal Limited 9

Engro Polymer and Chemicals Ltd. 9

Engro Foods Limited (EFL) 10

Engro Energy Limited (EEL) 10

Engro Eximp (Pvt.) Limited 10

Products & Services 11

Chemical handling & Storage 13

Packing & Loading: 15

Principal Operations Committee 16

SAFETY, HEALTH & ENVIRONMENT 19

QUALITY &CONTINUOUS IMPROVEMENT 20

ENTHUSIASTIC PURSUIT OF PROFIT 20

EXTERNAL & COMMUNITY INVOLVEMENT 20

CANDID & OPEN COMMUNICATIONS 20

ENJOYMENT & FUN 20

INDIVIDUAL GROWTH & DEVELOPMENT 20

TEAMWORK & PARTNERSHIP 21

DIVERSITY & INTERNATIONAL FOCUS 21

The Organization of Comparison 21

Fauji Fertilizer Company 21

(Engro Chemical Pakistan Ltd.) 24

Types of Ratios Analysis 24

Fauji Fertilizer Company Ltd. 36

THE ORGANIZATION CONCERNED

Engro Chemical Pakistan Ltd.

A full-fledged marketing organization was established which undertook agronomic

Our Diverse Colors of Excellence

Engro Chemical Pakistan Limited

Engro Vopak Terminal Limited

Engro Polymer and Chemicals Ltd.

Engro Foods Limited (EFL)

Engro Energy Limited (EEL)

Engro Eximp (Pvt.) Limited

Spectrum of our products & services products & services

Products & Services