Directors' Review For the Quarter Ended 31 March 2012

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3 Directors' Review For the Quarter Ended 31 March 2012 The Board of Directors is pleased to present a brief overview of the operational and financial performance of the Company for the quarter ended 31 Mar Severe gas curtailment was faced by the plant this quarter which resulted in 60 days shut down of the plant from10th January to 10th March. Furthermore, in the first 10 days of January only 38 MMSCFD gas was supplied from our quota of 85 MMSCFD. After start up, the supply of gas was restricted to 67 MMSCFD slightly more curtailment than 20% mandated by GOP. The curtailment badly affected the production in the first quarter. Production of DAP at 87 thousand tonnes was lesser by 28% than production of 121 thousand tonnes in the corresponding period. Urea production for the quarter remained at 26 thousand tonnes, lesser than 69% of the corresponding year production of 84 thousand tonnes. Turnaround 2012 completed safely & successfully along with replacement of thermal block for Synthesis Gas Turbine. The overall performance of plants remained satisfactory and no major operational problem faced. Urea remained in low demand during the quarter because of large Urea inventories and more imports during first quarter. Government of Pakistan (GOP) imposed Gas Infrastructure Development Cess (GIDC) on gas supplies to some fertilizer plants from January 01, Consequently the dealer transfer price of Urea was increased from January 01, 2012 by Rs 215 per bag on account of gas price increase and imposition of GIDC. GOP decision of importing additional Urea during the first quarter created an oversupplied Urea market in the country which resulted in downward slide of market prices thus drastically affected the profit margins. Moreover, setting of low transfer price by NFC compared to domestic manufacturer's prices further aggravated the situation. Domestic Urea market is estimated to decline by 16% during Jan Mar 2012 over the corresponding period of During Jan Feb gas supplies from national network remained suspended to the fertilizer sector due to winter load management. Urea production during the first quarter of 2012 is estimated to decline by 6% compared to production of Jan Mar The Urea inventory of 368 thousand tonnes at the beginning of the year was 122% higher than 166 thousand tonnes opening inventory of the year Industry Urea production during Jan Mar 2012 is 1,015 thousand tonnes in 2012 comparing to 1,080 thousand tonnes in Urea import during Ist quarter 2012 are around 464 thousand tonnes. Sales at 1,038 thousand tonnes remained 16% lower than sales of 2011 for the same period. Urea inventory at the quarter end is around 806 thousand tonnes comparing to inventory of 255 thousand tonnes at the end of corresponding quarter. DAP inventory at the beginning of the year was 92 thousand tonnes comparing to 19 thousand tonnes inventory at the start of During the quarter under review, DAP industry sales are 70 thousand tonnes which was lower by 57% against 163 thousand tonnes sales of the same period last year. This significant decline shows lower consumption of DAP by the farming community attributed to higher domestic fertilizer prices and low price of agriculture produce. During Feb Mar, 2012 fertilizer marketing companies decreased the DAP prices by Rs per bag as a result of low sales and depressed market. DAP production during the quarter is about 87 thousand tonnes which is 28% lower than 121 thousand tonnes production of the corresponding quarter. DAP imports during the period remained at 77 thousand tonnes. DAP inventory at the end of Mar 2012 was 184 thousand 2

4 tonnes much higher as compared to 30 thousand tonnes closing inventory of the corresponding period. Sona Urea (Granular) sales during the quarter ended 31 Mar 2012 are 8 thousand tonnes with an achievement of 23% against the target. However, these sales are 89% lower as compared to the sales of 76 thousand tonnes for the same period of Prime reason of low sales was plant shut down for almost two and half months due to gas curtailment from GOP. Sona DAP sales during the quarter are 24 thousand tonnes, showing an achievement of 44% against the target, whereas these sales are 77% lower than 103 thousand tonnes of DAP sales in the corresponding period of the last year. FFBL share in Urea and DAP markets during the quarter remained 1% and 34%, respectively comparing to 6% and 79% respectively during the corresponding period. The difficulties of production and sales reflected in the financial performance of the quarter. The sales during the period were not enough to cover the fixed cost thus resulting in a gross loss of Rs 265 million. Finance cost increased in the quarter due to higher utilization of working capital lines to sustain the business. Other income increased mainly on account of share of profit from PMP by Rs 212 million. Lower production and sales combined with low opening inventory resulted in loss after tax of Rs 387 million translating into loss per share of Rs FFBL has made investment in two wind projects last year with equity participation of 35% each in both projects. Following the signing of EPC contract with M/s Nordex and M/s Descon, later has mobilized their team at the site for geotechnical investigation and topographical survey. Furthermore, Contractor has started test piles work on the site. The overall PMP plant performance remained satisfactory for the year PMP surpassed its designed capacities of both Sulphuric acid and Phosphoric acid plants for the first time in its four years of plant operations. The financial results of PMP have turned positive towards later part of year 2011 mainly due to reduction in the gap of imbalance between input and output prices and favorable/strong parity of $ to MAD which helped PMP being an exporting Company. Gas curtailment will continue to be the biggest challenge facing the industry. However, sales are expected to pick up in the 2nd half of the 2nd quarter. The reduction in DAP prices at the international level as well as local level should result in better sales during the rest of the year. Insha Allah we expect profitability to improve significantly going forward. For and on behalf of the Board Rawalpindi 17 April 2012 Lt Gen Muhammad Mustafa Khan, HI(M), (Retd) Chairman 3

5 CONDENSED INTERIM BALANCE SHEET AS AT MARCH 31, 2012 EQUITY AND LIABILITIES ISSUED SHARE CAPITAL AND RESERVES Share capital 9,341,100 9,341,100 Capital reserve 228, ,350 Statutory reserve 6,380 6,380 Translation reserve 653, ,073 Accumulated (loss) / profit (280,634) 3,375,779 9,949,147 13,635,682 NON CURRENT LIABILITIES Long term loan and deferred Government assistance 5 3,241,002 3,241,002 Deferred liabilities 6 3,621,537 3,640,142 6,862,539 6,881,144 CURRENT LIABILITIES Trade and other payables 7,430,185 10,671,400 Mark up accrued 249, ,389 Short term borrowings 9,046,219 7,476,144 Current portion of long term loan 5 648, ,201 Provision for income tax net 289, ,304 17,663,459 19,659,438 34,475,145 40,176,264 CONTINGENCIES AND COMMITMENTS 7 The annexed notes 1 to 12 form an integral part of these condensed interim financial statements. 4

6 ASSETS NON CURRENT ASSETS Property, plant and equipment 8 14,629,455 14,456,568 Long term investments under equity method 2,932,112 2,710,837 Long term deposits 76,312 76,312 17,637,879 17,243,717 CURRENT ASSETS Stores and spares 1,927,852 1,905,738 Stock in trade 5,567,311 3,406,993 Trade debts 372, ,516 Advances 651, ,050 Trade deposits and short term prepayments 92,815 12,920 Interest accrued 39,289 51,041 Other receivables 635,945 2,180,232 Sales tax refundable 671,341 66,457 Short term investments 1,550,000 8,838,237 Cash and bank balances 5,329,220 5,384,363 16,837,266 22,932,547 34,475,145 40,176,264 CHAIRMAN CHIEF EXECUTIVE DIRECTOR 5

7 CONDENSED INTERIM PROFIT AND LOSS ACCOUNT (UNAUDITED) FOR THE QUARTER ENDED MARCH 31, 2012 Turnover 1,934,303 8,054,479 Cost of sales 9 (2,199,474) (5,306,697) Gross (loss) / profit (265,171) 2,747,782 Selling and distribution expenses (187,877) (364,993) Administrative expenses (154,493) (114,569) (607,541) 2,268,220 Finance costs (306,280) (107,347) Other operating expenses (745) (171,035) (914,566) 1,989,838 Other operating income Share of profit of joint venture and associates net 192,334 3,033 Others 319, , , ,009 (Loss) / profit before taxation (402,317) 2,321,847 Taxation 15,288 (764,091) (Loss) / profit after taxation (387,029) 1,557,756 (Loss) / earnings per share basic and diluted (Rupees) (0.41) 1.67 The annexed notes 1 to 12 form an integral part of these condensed interim financial statements. CHAIRMAN CHIEF EXECUTIVE DIRECTOR 6

8 CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED) FOR THE QUARTER ENDED MARCH 31, 2012 (Loss) / profit after tax (387,029) 1,557,756 Exchange difference on translating a joint venture (30,122) (103,810) Total comprehensive (loss) / income (417,151) 1,453,946 The annexed notes 1 to 12 form an integral part of these condensed interim financial statements. CHAIRMAN CHIEF EXECUTIVE DIRECTOR 7

9 CONDENSED INTERIM STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE QUARTER ENDED MARCH 31, 2012 CASH FLOWS FROM OPERATING ACTIVITIES Cash (used in) / generated from operations 10 (6,253,672) 1,888,015 Income tax paid (370,183) (483,581) Finance cost paid (224,492) (199,448) Compensated absences paid (3,315) (3,058) Payment to Workers' (Profit) Participation Fund (18,162) (71,005) Net cash (used in) / generated from operating activities (6,869,824) 1,130,923 CASH FLOWS FROM INVESTING ACTIVITIES Fixed capital expenditure (507,827) (112,421) Long term investment (59,064) Sale proceeds of property, plant and equipment Investment at fair value through profit & loss 7,801, ,601 Profit received on bank balances 115,950 75,782 Net cash generated from investing activities 7,350, ,849 CASH FLOWS FROM FINANCING ACTIVITIES Long term financing repayment (104,236) Long term murabaha repayment (9,670) Dividend paid (1,806,269) (2,126,738) Net cash used in financing activities (1,806,269) (2,240,644) Net decrease in cash and cash equivalents (1,325,217) (902,872) Cash and cash equivalents at the beginning of the quarter (841,782) 8,309,290 Cash and cash equivalents at the end of the quarter (2,166,999) 7,406,418 CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the cash flow statement comprises the following balance sheet amounts: Cash and bank balances 5,329,220 9,202,489 Short term highly liquid investments 1,550,000 1,700,000 Short term borrowings (9,046,219) (3,496,071) (2,166,999) 7,406,418 The annexed notes 1 to 12 form an integral part of these condensed interim financial statements. CHAIRMAN CHIEF EXECUTIVE DIRECTOR 8

10 CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UNAUDITED) FOR THE QUARTER ENDED MARCH 31, 2012 ( R u p e e s ' ) Balance as at January 01, ,341, ,350 6, ,471 1,949,731 12,210,032 Total comprehensive income Profit for the period after tax 1,557,756 1,557,756 Other comprehensive loss for the period (103,810) Total comprehensive (loss) / income for the period (103,810) 1,557,756 (103,810) 1,453,946 Transactions with owners, recorded directly in equity Distributions to owners Final dividend 2010 (Re per ordinary share) Total transactions with owners Balance as at March 31, ,341, ,350 6, , ,103 10,394,594 Balance as at January 01, ,341, ,350 6, ,073 3,375,779 13,635,682 Total comprehensive loss Loss for the period after tax (387,029) (387,029) Other comprehensive loss for the period (30,122) (30,122) Total comprehensive loss for the period (30,122) (387,029) (417,151) Transactions with owners, recorded directly in equity Distributions to owners Final dividend 2011 (Rs per ordinary share) Total transactions with owners Balance as at March 31, ,341, ,350 6, ,951 (280,634) 9,949,147 The annexed notes 1 to 12 form an integral part of these condensed interim financial statements. CHAIRMAN CHIEF EXECUTIVE DIRECTOR 9

NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED) FOR THE QUARTER ENDED MARCH 31, 2012 1.

11 NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED) FOR THE QUARTER ENDED MARCH 31, Fauji Fertilizer Bin Qasim Limited ("the Company") is a public limited company incorporated in Pakistan under the Companies Ordinance,1984, and its shares are quoted on the Karachi, Lahore and Islamabad stock exchanges in Pakistan. The registered office of the Company is situated at Rawalpindi, Pakistan. The Company is domiciled in Rawalpindi, Pakistan. The principal objective of the Company is manufacturing, purchasing and marketing of fertilizers including investment in fertilizer raw material manufacturing operations. The Company commenced its commercial production effective January 1, The Company is a subsidiary of Fauji Fertilizer Company Limited (the holding company) with shareholding of 50.88%. 2. These condensed interim financial statements of the Company for the quarter ended March 31, 2012 have been prepared in accordance with the requirements of International Accounting Standard 34 Interim Financial Reporting and provisions of and directives issued under the Companies Ordinance, In case where requirements differ, the provisions of or directives issued under the Companies Ordinance, 1984 have been followed. The disclosures in the condensed interim financial statements do not include the information reported for full annual financial statements and should therefore be read in conjunction with the financial statements for the year ended December 31, Comparative balance sheet is extracted from annual financial statements as of December 31, 2011 whereas comparative profit and loss account, statement of comprehensive income, cash flow statement and statement of changes in equity are extracted from unaudited condensed interim financial statements for the quarter ended March 31, The condensed interim financial information is unaudited and is being submitted to the members as required under Section 245 of the Companies Ordinance, 1984 and the listing regulations of the Islamabad, Karachi and Lahore Stock Exchanges. 3. The accounting policies adopted for the preparation of these financial statements are the same as those applied in preparation of financial statements for the preceding year ended December 31, Certain new standards, amendments and interpretations of approved accounting standards are either not relevant to the Company's current operations or are not expected to have significant impact on the Company's condensed interim financial statements other than certain additional disclosures. 4. Status of significant shareholding as at March 31, 2012 is given below: Shares Percentage Fauji Fertilizer Company Limited 475,232, Fauji Foundation 161,501, Un audited Audited March 31, December 31, (Rupees '000) 5. LONG TERM LOAN AND DEFERRED GOVERNMENT ASSISTANCE Government of Pakistan (GOP) loan 3,089,673 3,089,673 Less: Current portion shown under current liabilities 648,201 2,441, ,201 2,441,472 Deferred Government assistance 799,530 3,241, ,530 3,241,002 10

12 6. DEFERRED LIABILITIES The balance of deferred tax is in respect of the following major temporary differences: Accelerated depreciation Provision against doubtful advances Share of profit of associates Provision for inventory obsolescence Compensated leave absences 3,474,515 3,489,403 (18,734) (18,734) 48 2,034 (64,243) (65,828) 3,391,586 3,406, , ,267 3,621,537 3,640, CONTINGENCIES AND COMMITMENTS Contingencies i) Indemnity bonds and undertakings given to the customs authorities for the machinery imported by the Company for installation at plant site. 119, ,650 ii) Guarantees issued by banks on behalf of the Company. 144, ,489 iii) iv) v) Company's share of contingent liabilities of Fauji Cement Company Limited as at December 31, Company's share of contingent liabilities of Foundation Wind Energy I Limited as at December 31, Company's share of contingent liabilities of Foundation Wind Energy II (Pvt) Limited as at December 31, ,242 37,656 7,595 7,595 7,595 7,595 Commitments i) Capital expenditure contracted. 362, ,689 ii) Letters of credit for purchase of stores, spares and raw materials. 3,133,601 1,099,260 iii) Commitments with Fauji Foundation for investment in wind power projects. 4,705,651 4,764,715 iv) Company's share of commitments of Fauji Cement Company Limited as at December 31, ,774 28,860 v) Company's share of commitments of PMP as at December 31, ,067 8,784 vi) Company's share of commitments of Foundation Wind Energy I Limited as at December 31, ,430,000 1,627,214 vii) Company's share of commitments of Foundation Wind Energy II (Pvt) Limited as at December 31, ,290,000 1,779, PROPERTY, PLANT AND EQUIPMENT Opening written down value 14,456,568 14,706,760 Additions 507,827 1,089,895 Disposals (2,864) (25,595) Depreciation (333,990) (1,333,099) Depreciation on disposed off items 1,914 18,607 Closing written down value 14,629,455 14,456,568 11

13 9. COST OF SALES Raw materials consumed 4,553,018 4,497,926 Packing materials consumed 50, ,680 Fuel and power 337, ,085 Chemicals and supplies consumed 32,381 54,080 Salaries, wages and benefits 322, ,942 Rent, rates and taxes 1,842 4,728 Insurance 25,922 25,880 Travel and conveyance 30,285 28,219 Repairs and maintenance 439, ,622 Communication, establishment and others 17,363 26,558 Depreciation 328, ,592 Opening stock work in process 40,956 29,493 Closing stock work in process (32,204) (40,382) Cost of goods manufactured 6,147,355 6,137,423 Opening stock finished goods 337, ,595 Closing stock finished goods (4,285,099) (1,079,321) Cost of sales 2,199,474 5,306, CASH GENERATED FROM OPERATIONS (Loss) / profit from ordinary activities before taxation (402,317) 2,321,847 Adjustment for: Provision for gratuity 13,206 14,362 Exchange loss / (gain) 35,522 (22,126) Provision for compensated absences 31,723 Provision for Workers' (Profit) Participation Fund 124,608 Provision for Workers' Welfare Fund 45,705 Depreciation 333, ,099 Finance cost 270, ,473 Profit on bank balances (104,197) (81,066) Share of profit of joint venture and associates net (192,334) (3,033) Surplus on remeasurement of investments to fair value through profit or loss (212,928) (242,601) Loss / (gain) on sale of property, plant and equipment 298 (107) Operating (loss) / profit before working capital changes (258,003) 2,651,884 Changes in working capital net (5,995,669) (763,869) Cash (used in) / generated from operations (6,253,672) 1,888,015 12

14 Transaction with the holding company Services and material acquired 19,493 37,988 Commission charged to the Company 631 3,596 Dividend paid 1,663,315 1,663,315 Balance receivable unsecured 621,079 2,124,704 Transaction with associated undertakings due to common directorship Goods sold 614 Rent charged to the Company Dividend paid 565, ,255 Repayment of principal portion of long term finance 9,669 Financial charges 328 Investment 59,064 Transaction with joint venture company Purchase of raw materials 1,806,736 3,520,875 Expenses incurred on behalf of joint venture company 8,089 7,078 Balance payable secured 1,753,421 5,947,347 Balance receivable unsecured 14,464 25,262 Other related parties Contribution to Provident Fund 10,626 9,322 Contribution to Gratuity Fund 13,206 14,362 Remuneration including benefits and perquisites of Chief Executive Officer and executives. No of persons 2012 : 1 and 253. ( 2011 : 1 and 204 ) 386, ,363 Payment to Workers' (Profit) Participation Fund 18,162 71,005 Balance payable unsecured 650, ,985 Balance of accounts appearing as comparatives are as at December 31, GENERAL 12.1 Figures have been rounded off to the nearest thousand rupees These financial statements were authorized for issue by the Board of Directors of the Company in their meeting held on April 17, CHAIRMAN CHIEF EXECUTIVE DIRECTOR 13

PLANTSITES Goth Machhi, Sadikabad (Distt: Rahim Yar Khan) Tel No Fax No

PLANTSITES Goth Machhi, Sadikabad (Distt: Rahim Yar Khan) Tel No Fax No FAUJI FERTILIZER COMPANY LIMITED BOARD OF DIRECTORS Lt Gen Muhammad Mustafa Khan, HI(M) (Retired) Chairman Lt Gen Naeem Khalid Lodhi, HI(M) (Retired) Chief Executive and Managing Director Mr Qaiser Javed