Fatima Fertilizer Chairman's Message
On behalf of the Board of Directors of Fatima Fertilizer Company Limited, I welcome you to the Company’s website.
Domestic Fertilizer Market
In 2012 unprecedented gas curtailment on the SNGPL network led to sharp decline in production on all the four plants based on this network. The partial curtailment on the plants on Mari gas field also continued and consequently they were unable to produce to their full potential. The Government continued to import fertilizer above the national requirement costing the country in both foreign exchange outflow and hefty subsidy to mitigate the difference between international and local prices of Urea. By the commencement of Kharif, record inventories had piled up.
The fertilizer market in 2012, however, exhibited a mixed trend. The Nitrogen market continued to decline for the third consecutive year and urea off take further shrank by 12% in 2012 from 5.9 million tons to 5.2 million tons. The major shortfall up to the year end was in Kharif. The lower acreage on BT cotton due to extended winter in early 2012 coupled with high prices of Urea and weakening of cotton prices in mid-year resulted in demand destruction. The Rabi season also commenced with weak demand in October and November but there was a year-end rally following the late announcement of the support price increase for wheat by the Government. This spurred Urea purchasing with significant sales in December. On the other hand the phosphate market for DAP increased by 7% over the previous year primarily due to increased volumes in the first half of 2012-2013 Rabi season. This increase, however, was not sufficient by any measure, to recover the usage decline which commenced in 2010. The marginal improvement in DAP sales was despite the world prices of the fertilizer hovering around the USD600 mark for most part of the year. Softening of DAP prices commenced in the last months of 2012, too late for any advantage to be passed on to the farmer.
The Company sales generally remained in line with the production for the year in the nitrogenous fertilizers. CAN sales at 350 thousand tons were down 3.7% compared to last year (trial production and commercial production combined) and were impacted partially by the decline in the size of the nitrogen market and also by the late wheat sowing in almost all parts of the country and particularly in the cotton belt. Urea sales stood 339 thousand tons where we cleared all production for the year. NP sales showed a significant growth of 275% over 2011 with 295 thousand tons sales. This increase in sales was on the back of improved availability, a strong growth of our retail network, particularly targeting the smaller dealer, supported by an aggressive farmer promotion campaign and a focused technical service program in weak NP usage belts. The Company also benefited partially from the drop in Pakarab Fertilizers production of the same product. The Nitric Acid business launched last year grew significantly in 2012 by almost 250%, and Fatima Fertilizer is now the preferred supplier in the dairy and metallurgy sectors.
The ‘Sarsabz’ brand building strategy launched in 2011 continued with both product specific and portfolio communication throughout the year. Research has confirmed that our recall rates from the target audience are well above the norms for new launches in any category. There was a significant focus on driving NP growth during the year and two successful farmer campaigns were run in Kharif and Rabi with positive impact on sales and brand recognition. We also embarked, for the first time, to promote our Sarsbaz Urea to reinforce our message of providing nutrient solutions for all crops, at all stages and for all types of soils. Our focus on the channel was to strengthen our position in the retail network, targeting the small dealer, whilst continuously growing the overall reach. This has led to consolidation of our position in the channel and establishing positions in regional markets hitherto unattended.
The aggressive targets set to reach the farmer were met at all levels as was the initiative to work with government agricultural institutes. The focus of our technical team was to work with farmers in areas and crops where NP and CAN had low usage. Apart from the traditional farmer visits, seminars and demonstration plots, farmer registration was initiated at the national level to leverage direct contact. Similarly extensive trials were conducted with the Government agencies to demonstrate the unique benefits of our products in increasing yields and seek approval for farmer recommendation.
The Year 2013 has started with minimal inventory of fertilizers with manufacturers though NFML held Urea inventory of 396 thousand tons. The outlook for the Industry looks satisfactory provided the government imports are managed judiciously Your Company has taken measures to avoid production losses and has been able to repay debts significantly. This together with reduction in interest rate would help growth in the profitability of the Company during the Year 2013. Studies for increasing Ammonia capacity from 1500 to 1800 tons per day have been completed. Implementation of these studies is to start soon and is expected to be completed in early 2015. This will help in utilization of full production capacities of Urea, CAN and NP.
The Board has approved an investment of USD 150 million to acquire 31 percent shareholding in Midwest Fertilizer USA over a period of next 3 years. The Company is participating in a global consortium to set up a nitrogen fertilizer plant in the State Indiana, USA. The State has sanctioned USD 1.26 billion worth of Tax Exempt Municipal Bonds to support the project which have since been marketed in the US Bond market.
The plant’s production capacity will be 1.5 million tons annually which will cater for the domestic as well as future international demand. The main investment driver for this project is the long term availability of gas at historical low prices due to the shale gas phenomenon.
In view of above the Company is expected to register growth in short and medium term.
The Board of Directors wish to place on record their appreciation for the assistance, guidance and cooperation that Fatima Fertilizer Company Limited received from all stakeholder including the Government of Pakistan, Financial Institutions, Commercial Banks, SNGPL, Business Associates, Customers and all others whose continued support has been a source of strength to the company. The Directors also sincerely appreciate the devotion and commitment of every employee of the company.
Fatima Fertilizer Company Limited