The document provides an overview of Pakistan's fertilizer industry. It discusses key points such as the industry's significant contribution to Pakistan's agrarian economy and employment. It also outlines major players in the industry, types of fertilizers, factors influencing demand, and the industry's structure. Additionally, it notes opportunities for industry expansion through potential exports and low valuations compared to other countries.

1. INTRODUCTION
OVERVIEW OF PAKISTAN’S
ECONOMY

2. Please Note
 We have made our presentation keeping
in mind that you have some prior
knowledge regarding the Sector. Hence
our presentation will not include points
that are know to you all
 Thank you

3. Overview and Importance
 Agrarian based economy of Pakistan
 Significant Contribution to Output
 Employment Opportunities

4. Plantfood…
 3.5 million malnourished
 Replenishes nutrients
 Prevents soil erosion

5. Plantfood…
 Types include :
 (a) Nitrogenous (Protein, Color, Growth)
 (b) Phosphorous (Root Development,
Synthesis of Energy)
 (c) Potassium: Resistance to disease

6. Major Players
 Fauji Foundation
 Pak China Fertilizer
 Engro Chemical
 Lyallpur Chemicals & Fertilizer
 Dawood Hercules
 Pak- Arab Fertilizer
 Pak- American Fertilizer

7. Overview…
 LowPenetration of Fertilizers Expected to
Improve
 Excess Demand Situation-Seller is the King
 Low Resource Costs Result in High
Profitability

8. Overview
 Expansions
May Open Up Attractive
Export Avenues
 Attractive
investment Portfolios-Trading at
a Discount
 Regional Comparison-Valuations are Low

9.  Fertilizer
Consumption correlated with
macroeconomic growth (r=0.9841)
 The country's GOP has grown at a CAGR
of 7.55% over the past 3 years
 Totalagriculture GOP stood at
PKR1,095bn

11. Fertlizer Consumption Vs. Nominal GDP

12. Improvement in yield/hectare
 Irrigation System Improvement
 Subsidy to farmers
 Encouraging use of fertilizer.
 Above average credit disbursements.

13. World Fertilizer Situation
 Consumptionincreased exponentially
between 1959-1990
 IncreasedFood Demand – Burgeoning
Population

15. World High Yield/hectare
through…
 Turning
more land into arable land
through better irrigation
 Using High Yielding Seeds (HYS)
 Using fertilizers to improve soil content

16. World Fertilizer Surplus

17. World’s Fertilizer Situation
 Decreased Demand in 1990s due to
collapse of Soviet Empire
 Annual Demand in 2011 is 163 mntpa.

21. Cereal Demand

22. World Consumption

23. Pricing Analysis
 Initiation
of Gas Provision for ENGRO;
Buoyant Demand to Allow Price Pass-
through
 We foresee excess demand of 0.41mn
tons for urea and 0.76mn tons of DAP
 Applicabilityof GST is likely to increase
Urea prices by ~13% and DAP prices by
~16%

24. Pricing Analysis
 Main reasons for minimal impact on
fertilizer companies stem from improved
prices of farm output and substantial
differential between imported and locally
manufactured urea
 With ENGRO finally starting to receive gas
for its new urea plant, trial production is to
start in the next few days which is to act
as a trigger for the stock

25. Pricing Analysis… Sales Tax
 17% ---- likely to take ex-factory urea
prices to PKR1,149/bag from current levels
of PKR1,020/bag whilst DAP price is
estimated to increase to the tune of
PKR497/bag (expected to take DAP ex-
factory price to PKR3,597/bag)

26. Pricing -- Subsidies
 GoP provides a subsidy of PKR393/bag
which effectively results in industry
provided subsidy to the tune of
PKR361/bag
 GSTis an ‘add on tax’, it is unlikely to have
an impact on profitability.

28. Pricing and Manufacturing
Costs

29. Pricing…

30. Selling and Distribution Costs

31. Gas Price Hike

32. Factor
Conditions

33. Types of Fertilizers
DAP Prilled Urea Potash

34. Prilled Vs. Granular Fertilizers

35. Capital Intensive Industry

36. R&D

37. Feed Stock & fertilizers
 190,163 billion Cubic meters
 Current Supply 240 711 thousand tones
 Current Demand 216 019 thousand tones
 World population Growth Rate is 1.14%
 Pakistan population growth rate is 2.1%
 India Population growth rate 1.3%
 Chine Population Growth Rate 0.5%

38. Natural Gas field Pakistan
 Sui Gas field
 mari Gas field
 Recent Developments
1. enhancement of field production
capacity to 500 MMSCF/Day
 Makori Gas Field (Under investigation )
Estimated reserves of hydrocarbon
reserves with upside touching tens of
trillion cubic feet of natural gas

39. Recent Developments
 Thediscoveries of Bhit, Badhra Sawan,
Zamzama, Miano, Chanda, Manzalai and
Rehmat have been developed, adding
around 1.4 BCF per day of new gas into
the system and enhanced recoverable
gas reserves by 6.8 trillion cubic feet.

40. Natural Gas [Pakistan]
 840.2 Billion Cubic meter
 Shortage of Gas in Pakistan
 Import of Urea

41. Is the future promising ?

44.  Total 725 exploratory wells (since inception) have
been drilled till December, 2008 (710 onshore and
15 offshore)
 219 oil and gas fields (54 oil and 165 gas and
gas/condensate) have been discovered in various
basins
 Pakistan has a drilling density of 1.99 wells per
1,000 sq.km
 and success rate of 1:3.3
 Global drilling density of 10 wells per 1,000 sq. km,
 the success rate of Pakistan compares favorably
with international success rate of 1:10.

45. DEMAND CONDITIONS

46. DEMAND CONDITIONS

47. DEMAND CONDITITONS
COMPARISION 10/11

48. DEMAND CONDITIONS
PAKISTAN VS WORLD AVG.

49. DEMAND CONDITIONS
(KG/HECTARE CONSUMPTION)
Ger
Netherl
Year man Japan France Egypt Italy USA Russia India Pakistan
ands
y
1993-94
560 221 407 237 - 148 108 - 73 97
1994-95 554 240 400 242 304 159 103 12 80 103
1999-00 - 243 - 248 355 - - - 99 117
2000-01 470 232 - 225 - 211 106 - 103 138
2001-02 546 217 282 213 436 - - - 88 133
2002-03 354 216 270 203 373 - - - 100 137
2003-04 438 220 293 216 472 - 122 - 105 148
2004-05 510 216 365 210 548 - 113 14 106 161
2005-06
601 209 251 191 625 - 109 16 121 169
2006-07 419 190 344 178 381 - 143 12 114 159
2007-08
1188 191 321 196 450 136 168 14 133 157
2008-09
261 158 259 138 566 114 101 16 143 157

50. Firms’ Structure
& Rivalry

51. Urea Market Shares

52. Government
and Chance

53. Government - OGDCL

54. Environmental Friendly Practices

55. Chance

56. Chance
 Record profits due to floods.

57. RELATED AND SUPPORTING INDUSTRIES
 COAL INDUSTRY
 PESTICIDES

AGRICULTURAL MACHINERY AND TOOLS
 OIL AND GAS EXPLORATION
 TRANSPORATATION
 PACKAGING

58. Harmful Effects Of Chemical Trace mineral depletion of the soil. Because most
Fertilizers

chemical fertilizer programs don't these elements in the
 Loss of fertile topsoil soil, they gradually get depleted by crops. Iron and Zinc
 Loss of organic humus content in soil deficiencies are common in soil over-loaded with non-
dissolving P. Various diseases in livestock including Grass
 Reduced porosity of top soil Tetany, Milk fever, Grass staggers, Scouring, Ill Thrift and a
whole range of metabolic disorders
 Nitrate pollution of waterways  Excessive energy consumption. 2% of the world's entire
energy consumption is used to make ammonia, much of
 Phosphate pollution of waterways which is used to make N fertilizers
 Desertification  Depletion of non-renewable natural resources.
Phosphorous comes from rocks which are limited in
 Poisoning of people eating plants supply. Nitrogen is made from fossil fuels.
Eutrophication of Waterways
containing excessive levels of 
Loss of biodiversity in the ocean
inorganic salts

 Soil Acidification
 Blue-baby syndrome  Toxic persistent organic compounds -
Dioxins, polychlorinated dibenzo-p-dioxins (PCDDs), and
(methemoglobinemia) and polychlorinated dibenzofurans (PCDFs) have been
miscarriage in pregnant women detected in fertilizers and soil amendments
caused by nitrate pollution of drinking  Radioactive poisoning. Highly-radioactive Polonium-210
in phosphate fertilizers
water  Increased Greenhouse Gases. Nitrous Oxide is the 3rd
most important GHG because of the excessive use of
 Heavy metal pollution of soils causing chemical N fertilizers
poisoning and cancer -  Increased pest problems caused by excessive nitrogen
mercury, lead, cadmium and fertilizer applications
Death, injury and environmental damage caused
uranium 
directly by the manufacture of chemical fertilizers
 Fertilizer burn - caused by too much
fertilizer being applied, resulting in a
drying out of the roots and damage
or even death of the plant
 Higher than normal rates of Cancer in
humans living close to phosphate
mining operations

59. Future
Bio Fertilizers

60. What are Bio Fertilizers
 Bio fertilizers are 100% organic nutrition for all crops and products
 Advantages
 environment friendly, unlike chemical fertilizers that damage the
environment
 They are comparatively low on cost inputs
 Their use leads to soil enrichment and the quality of the soil
improves with time Though they do not show immediate results,
 Microorganisms convert complex organic materail into simple
compounds, so that the plant can easily take up the nutrients
 These fertilizers harness atmospheric nitrogen and make it directly
available to the plants
 They increase the phosphorous content of the soil by solubilising
and releasing unavailable phosphorous Bio-fertilizers improve root
proliferation due to the release of growth promoting hormones
They help in increasing the crop yield by 10-25%

61. http://www.optidigit.com/TRADEdept/BNbat/PDF/BIOweb-brochure-e-fert.pdf

63. Progress in India & china
 Rhizonik: All types of Rhizobium species infecting cultivating crops. There are
seven cross inoculation groups all are available for sale used for legume
crops.
 Azonik (Azotobacter chroococcum): It is non-symbiotic bacteria used for all
cereals.
 Spironik (Azospirillum brazilense) : It is associative symbiont and most useful for
grasses and similar type of crops.
 Phosphonive (Phosphate solubilizing inoculant): This includes bacteria as well
as fungi under field condition they solubilize "P" and provide to plants.
 Sulphonik (Sulphur oxidising inoculant): This biofertilizer includes bacteria and
also fungi. The inoculant enhances the availability of sulphur under field
condition. Phospho-Sulphonik: In this unique type of biofertilizer both the types
are equally mixed thereby crops are benefited.
 Niku-2000- (Decomposing culture): This inoculant degrades all cellylolytic and
lignolutic organic matter thereby releasing nutrients to plants.
 Trichonik (Trichoderma viridi): It is biological control agent. This biofertilizer
restricts the growth of disease producing organism under field condition.
 Vermiculture: Best quality vermiculture is produced and it is mixed with N-
fixing inoculant and ‘P’ solublizers so that nutrient value is increased.

64. Pakistan
 India started production of it in 1997
 Pakistan has a small factory producing 5000 bags a day
 Pakistan Agricultural Scientists Chairman Jamshaid Iqbal
Cheema said that “ bio-fertilizer will enhance the efficiency
of DAP and other fertilizers, as most of their quantity is
wasted in the fields. “
 He said that DAP or phosphorus efficiency is 15 to 20
percent. In the same way urea
 nitrogen effectiveness is up to 40 percent,
 Bio fertilizers increasing the production up to 70 percent.
 He revealed that when a farmer uses DAP, 80 percent
quantity is wasted in the soil.

65. Analysis of Stock Market

66. Brief overview
of Stock Market
FFBL, FFC, Engro, Dawood

67. Industry
2007 2008 2009 2010
Industry At a Glance
Total
Assets
304,833.3
160,397.70 227,111.90 268,109.70 0
Property
Plant and 232,053.9
Equipment 107,865.90 148,040.60 206,452.60 0
Stock 17,039.20 17,497.80 20,199.60 20,607.00
Inventory 13,218.30 26,851.20 15,952.40 24,042.00
All figures in Millions of Rs

68. Significance of Fertilizer
2007 2008 2009 2010
revenue 132,656.2 178,832.5 220,102.9
92,063.30 0 0 0
132,656.2 178,832.5 220,102.9
Total revenue 92,063.30 0 0 0
Total Profit 20,897.20 17,433.00 15,191.70 28,412.10

69. Net Margin
25%
20%
15%
FFC
FFBQ
10% Engro Fertilizers
5%
0%
2007 2008 2009 2010

70. ROA
Dawood
ENGRO
FFBL
FFC
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
FFC FFBL ENGRO Dawood
ROA 26.3% 20.2% 5.9% 5.2%
Debt-Equity
Dawood
ENGRO
FFBL
FFC
0 50 100 150 200 250 300 350
FFC FFBL ENGRO Dawood
Debt-Equity 59.5 78.4 327.4 25.2

71. facts
 The industry profits have increased even
though there was a financial crunch
 Expansion was carried out
 Assets and profits have increased
overtime
 Shareholders wealth been maximized

72. Relevance of Stock Market in
analysis
 The stock markets reflect performance of
the companies
 Due to good returns ,private investor will
be motivated to invest in the sector
 Attracts capital to Pakistan
 The structure can change

73. Recommendations
R &d needs to be focused upon
 The world is shifting its attention towards
Bio fertilizers
 Government should encourage off shore
drilling & drilling in Baluchistan
 Pakistan still can diversify into different
fertilizers
 Training of Farmers

74.  Alternatives energy source
 Due to inflation ,governments should
lower the GST on fertilizers
 Government should have a conscious
effort in establishing a tractor industry
.(cheap and affordable tractors )
 Technology should be used in Farms

75. Things that can be improved
 Fertilizer companies should initiate a change
in production process.(interviewer negative
response)
 Fertilizer effect on Indus Dolphin
 Elimination of Creeks(Breeding grounds ) and
damage to fishing industry
 Firms and government should now turn their
attention towards KP new gas field .
 Alternative Energy Source should be found

76. Thank you
 Questions & Answers session