Economists believed that the fertilizer is the most significant and expensive agricultural input in any economy. In Pakistan the Ministry of Finance mentioned in the report that fertilizer contribution to increase in crop yield is from 30 to 50 percent. Almost all of our soils are deficient in nitrogen, 90 percent soils have deficiency of phosphorus while 40 percent are deficient in potash.
The local production of fertilizers during 2016-17 (July-March) declined slightly by 0.3 percent over the corresponding period of last fiscal year. The imported fertilizer also declined by 5.8 percent. Various researchers’ statistics show that our country has one of the highest costs of production of fertilizers, which is uncharacteristic of an agriculture-driven economy. With a gas cost of $4.65 per MMBTU (including GIDC) in dollar terms, Pakistan ranks higher than the region from where imports are made in the country.
|World and regional growth in fertilizer demand, 2014 to 2018|
|Region||Annual growth rate (compound)|
|Latin America & Caribbean||3.3%||3.6%||3.0%||3.3%|
|East Europe & Central Asia||3.3%||4.5%||3.7%||3.6%|
In Pakistan gas prices presently have gone high because of the imposition of GIDC (Gas Infrastructure Development Cess) and the fertilizer industry’s output and products are also subject to sales tax. The fertilizer manufacturers are of the view that by not offering any relief in taxes, the further financial costs will ultimately lead to higher costs of production and will have a direct impact on the higher input cost to the farmers in Pakistan.
The fertilizer manufacturers urged that the Government of Pakistan should come up with effective measures in a bid to reduce the cost of input so that fertilizer prices may be made internationally competitive and the country’s agricultural economy be developed. The fertilizer manufacturers have also highlighted on numerous platforms with need for reducing the Cess and Sales Tax on natural gas, re-gasified liquefied natural gas and other raw material like phosphoric acid and phosphate rock.
In Pakistan, the Fatima Fertilizer Company Limited is committed to play its major role in offering required nutrients to the farms by more productivity, availability of inventories of all the products, and improved plant efficiency and sustainability.
The fertilizer complex is a completely integrated production facility, capable of producing 2 intermediate products, i.e., Ammonia and Nitric Acid and 4 final products which are Urea, Calcium Ammonium Nitrate (CAN), Nitro Phosphate (NP) and Nitrogen Phosphorous Potassium (NPK) at Sadiqabad, Rahim Yar Khan.
The management of the company is committed to continuing improvements in its production site already a world class manufacturing facility with highest degree of cost efficient and sustainable operations. The complex has a 56MW captive power plant in addition to off-sites and utilities. With continuity of farmer friendly government strategies, fertilizer off take situation is predicted to enhance during 2018.
Fertilizer prices both in domestic and foreign markets are predicted to remain stable to firm. Sustained earning of the company coupled with its focused approach towards exploring opportunities to have additional streams of income are predicted to enhance earnings and values for the stakeholders in 2018 and onwards.
The year 2017, the company attained its first ever exports and highest ever profitability and volume of sales. Due to continuous process improvements in production and technical operations, the company productively extended its turnaround cycle beyond the customary 12 months period. In the annual report 2017, the financial experts of the company calculated that the highest ever sales volumes garnered highest ever sales revenue as well. Revenue rise was, however, restricted to 11 percent due lower rates of fertilizer owing to stiff market competition through most of the year, coupled with reduction of Rs56 per bag on urea subsidy by the government.
In the financial statement 2017, it is also mentioned that NP was the main contributor to the revenue with 37 percent share while Urea and CAN contributed 35 percent and 27 percent respectively. Despite 22.5 percent increase in sale volumes, the cost of sales increased by only 9 percent.
Resultantly, the management of the company attained strong gross profit amounting to Rs20.34 billion posting growth of 13 percent over Rs17.98 billion earned previous year.
Fatima’s net profit attained is the highest ever in company’s history clocking in at Rs10.59 billion, growing by 8 percent over last best of Rs9.78 billion attained last year. The financial experts of the company also mentioned that the Earnings Per Share (EPS) crossed the Rs5 per share mark for the first time ever to close at Rs5.05 per share against last year’s Rs4.66 per share. Furthermore, because of fierce competition in the market and stagnant product prices during the first half of the year 2017, 22.5 percent rise in volumes could translate into revenue rise of 11 percent only.
However, due to improvement of plant efficiency, efficient utilization of resources and reduction in cost of some input materials, the company attained 13 percent increase in Gross Profit Margin.