Chairman's Message

Fatima Fertilizer Company Limited has a bright future and the company looks forward to growth in volume and return for its investors.

On behalf of the Board of Directors of Fatima Fertilizer Company Limited, I welcome you to the Company’s website.

Fatima Fertilizer Company Limited has delivered sustained operating results in the year 2015 in respect of production however; sales were lower due to a difficult period in Pakistan’s agricultural sector. The Company’s overall performance is a matter of satisfaction for the management. The Plant successfully undertook a De-Bottlenecking project and other efficiency measures during the year, which will have a positive impact on our daily production and related operating indicators going forward. As a result, the Company is positioned for sustainable growth in years to come. I am confident that based on the diversified products mix of Fertilizers, the Company will be a leader in the Fertilizer industry in terms of profitability and returns to Stakeholders.

Market Overview

The year 2015 was marked by mixed sentiments in the international fertilizer market which finally culminated in an overall slowdown as commodity prices softened continuously and there was a steady decline in the oil prices creating further uncertainty. Urea price in Arabian Gulf was $320 per MT FOB and $290 per MT FOB in China at the start of the year. Chinese prices were supported by demand from India but over supply continued to loom and while buyers were attracted to lower prices, continual weakening also deterred them. Prices in the first quarter had dropped to as low as $260 per MT FOB in China and $270 MT FOB in the Arabian Gulf but the market recovered as prices steadily improved and stabilized around May. This was due to Chinese determination to hold the prices firm as the demand in India and the Middle East was better than forecasted. However, in July prices began to soften due to lack of demand. By early October, prices dropped to $250-255 MT FOB in the Arabian Gulf and China and in December prices slipped further to as low as $225 MT FOB. Chinese prices were under huge pressure even after sales in India. There were very few buyers. Similarly, in the Middle East values deteriorated as US and Brazil remained under pressure. Brazilian imports continued to fall short of anticipated demand. In Pakistan, the Urea market decreased by 1% to 5.596 million tons in 2015 as compared to 5.627 million tons in 2014. This was partially triggered by poor crop prices for rice, sugarcane and potato and more importantly created by a significant jump in prices of Urea following increase in gas prices by the Government. The Phosphates market remained stable in the first half of 2015 on the back of positive demand from India and the Americas. International prices remained steady at $490-495 MT CFR due to stability in Chinese production and healthy demand in key markets such as India, Pakistan and Bangladesh. With the poor forecast of monsoon rainfalls in the Indian continent and softening of demand in China, prices began to decline in Q3. Global decline in crop prices, poor currency issues and economic slowdown in China further aggravated the situation. By December prices had fallen to $415-420 MT CFR. Heavy imports, insufficient monsoons and weaker rupee stifled demand in India. Lack of credit continued to hamper end user demand in Brazil. In Pakistan, the DAP market increased by 4% to 1.802 million tons in 2015 from 1.735 million tons in 2014. This was primarily on account of the subsidy announcement; heavy imports were booked in the last quarter of the year in anticipation of robust demand with the decrease in prices and also trader speculation.

Company Performance

After a strong start in 1H 2015, due to continuous drop in crop prices, increase in fertilizer prices to mitigate impacts of gas price increase, delay in implementation of the Farmer Relief Plan and “Kissan Package” announced by Government and rumors of reversal of Urea price increase to the level prior to gas price increase, farmers' sentiment turned bearish in 2H 2015 leading to lower application of fertilizers and buildup of inventories of Urea and DAP with the fertilizer companies. After announcement of subsidy on Phosphate Fertilizers by Government on 15th October 2015, fertilizer sales picked up gradually by the end of last quarter of 2015. Resultantly, overall sales of the Company, in particular CAN and NP, declined in 2015 by 18% from 1,153,917 MT to 942,403 MT over the year 2014.

Acknowledgements

The Board places on record its gratitude for the hard work and dedication of every employee of the Company. The Board also appreciates and acknowledges the assistance, guidance and cooperation of all stakeholders including the Government of Pakistan, financial institutions, commercial banks, business associates, customers and all others whose efforts and contributions strengthened the Company.

Arif Habib
Chairman
Fatima Fertilizer Company Limited

Page Last Updated: Sunday, May 01, 2016