Cover Story We, at Fauji Fertilizer, understand the importance of resilience, as a team we have had to power through various struggles, and we’re proud to say that we have emerged stronger than ever. With a brighter future ahead, we cherish our place in the world as a team that can play a significant part in providing better opportunities for growth. Our focus is on the future while we work hard to make the present more meaningful. Vision To be a leading national enterprise with global aspirations, effectively pursuing multiple growth opportunities, maximizing returns to the stakeholders, remaining socially and ethically responsible Mission To provide our customers with premium quality products in a safe, reliable, efficient and environmentally sound manner, deliver exceptional services and customer support, maximizing returns to the shareholders through core business and diversification, providing a dynamic and challenging environment for our employees Annual Report 2018 1 Contents Management 4 7 8 9 10 12 13 Product Portfolio Geographical Code of Conduct Core Values Company Profile & Organizational Highlights 2018 Presence Group Structure Chart 14 16 18 20 21 22 27 Strategy and Company How we Evolved Business Model Calendar of Major Profile of the Board Committees Resource Information Events during the Board Allocation Year 30 31 32 34 38 Management SWOT Analysis Stakeholders’ Notice of Annual Committees Engagement General Meeting Board’s Reviews 40 41 42 43 44 49 50 Chairman’s Review CE & MD’s Financial Capital Financial Overview Performance 53 54 55 56 60 61 72 Horizontal & Horizontal Analysis Vertical Analysis Six Year Analysis of DuPont Analysis Quarterly Analysis Key Risks and Vertical Analysis Statement of Statement of Financial Position - 2018 Opportunities Statement of Profit Financial Position Financial Position and Performance or Loss 87 91 93 94 98 110 112 Social and Statement of Value Manufactured Corporate Intellectual Capital Human Capital یامن�اں رطخات اور وماعق Relationship Added Capital Governance Capital 114 116 Forward Looking Statement Sustainability Report 118 122 129 138 146 168 169 Contents Overview Positioned for Creating Value How we Create Forward Looking Appendices Value Creation in a Sustainable and Share Value Statement Manner 2 Management Report Financial Statements 191 194 196 197 200 202 203 Report of the Audit Statement of Review Report to Independent Statement of Statement of Statement of Committee on Compliance with the Members on Auditors’ Report to Financial Position Profit or Loss Comprehensive Adherence to the Listed Companies the Statement of the Members Income Code of Corporate (Code of Corporate Code of Corporate Governance Governance) Governance Regulations, 2017 204 205 206 Statement of Statement of Notes to the Cash Flows Changes in Equity Financial Statements Consolidated Financial Statements 254 255 256 275 276 278 279 Chairman’s Review Directors’ Report Consolidated Horizontal Analysis Vertical Analysis on Consolidated on Consolidated Financial Consolidated Consolidated Financial Financial Performance Statement of Statement of Statements Statements Financial Position Financial Position 280 281 284 286 287 288 289 Horizontal & Independent Consolidated Consolidated Consolidated Consolidated Consolidated Vertical Analysis Auditors’ Report to Statement of Statement of Statement of Statement of Cash Statement of Consolidated the Members Financial Position Profit or Loss Comprehensive Flows Changes in Equity Statement of Income Profit or Loss 290 Notes to the Consolidated Financial Statements Shareholders’ Information 346 353 354 355 356 357 361 Pattern of Financial Calendar Pattern of Definitions & Form of Proxy Shareholdings Shareholding - Glossary of Terms - FFC FFCEL & FFF 363 Annual Report 2018 3 Product Portfolio Principal Activities of the Company The principal activity of the Company is manufacturing, purchasing and marketing of fertilizers and chemicals, including investment in other fertilizers, chemicals, manufacturing and banking operations, energy generation and food processing. Sona Urea P & Sona Urea G Agricultural use: Urea is a concentrated straight nitrogenous fertilizer that contains 46% nitrogen, which is a major plant nutrient. Nitrogen is a vital component of chlorophyll, which is necessary for the photosynthesis. It is applied to promote vegetative growth of crops and orchards in splits (basal & top-dressing). In irrigated crops, mostly, urea is applied on the standing crop followed by irrigation to minimize its losses. In rain fed areas, it is often spread just before rain to minimize losses through volatilization process. “Sona Urea” produced by FFC is in prilled form and at FFBL in Granular form. Granular urea has the advantage of ease of application on standing crops because of large size granules. Its efficiency is relatively better in high water demanding crops like rice. Industrial Use: Raw material for manufacturing of plastics, adhesives and industrial feedstock. Sona Urea (Neem Coated) Agriculture Use: Neem Coated Urea is a slow release concentrated straight nitrogenous fertilizer, which is coated with neem oil. It contains 46% nitrogen, which is a major plant nutrient and a vital component of chlorophyll required for photosynthesis. Coating urea with Neem oil has been proved to be an effective natural alternative to nitrogen inhibiting chemicals. Thus, it leads to gradual release of nitrogen, helping plants to uptake more nitrogen and resulting in higher yields. Neem oil also serves as natural insecticide. It is applied to promote vegetative growth of crops and orchards in splits (basal & top-dressing). Neem coated urea is also environment friendly. FFC DAP & Sona DAP Agricultural Use: Di-ammonium Phosphate (DAP) belongs to a series of water-soluble ammonium phosphates that is produced through a reaction of ammonia and phosphoric acid. DAP is the most concentrated phosphatic fertilizer containing 46% P2O5 and 18% N. It is recommended for all crops as basal fertilizer to be applied at the time of sowing for better root proliferation and inducing energy reactions in the plants. The solubility of DAP is more than 90%, which is the highest among the phosphatic fertilizers available in the Country; due to which it can also be applied post planting through fertigation. Further, on account of its nitrogen content; upon completion of nitrification process, the ultimate reaction of DAP is acidic. Industrial Use: Fire retardant used in commercial firefighting products. Other uses are as metal finisher, yeast nutrient and sugar purifier. 4 Management Report FFC SOP Agricultural Use: SOP is an important source of Potash, a quality nutrient for production of crops, especially fruits and vegetables. FFC SOP contains 50% K2O in addition to 18% sulfur, which is an important nutrient especially for oil seed crops because of its role in increasing the oil contents. It has also an additional advantage of ameliorating effect on salt-affected soils. Sulfur also helps in containing spread of fungal or other soil borne diseases. Potash is an important nutrient for activation of enzymes in the plant body, develops resistance against pests, diseases, stresses like water / frost injury and also helps in increasing sugar / starch contents in plants. It also improves quality and taste of vegetables / fruits. FFC SOP is one of the finest quality products with less than 1.5% Chloride content being imported from European origin and preferred for the high value crops. Industrial Use: Occasionally used in manufacturing of glass. FFC MOP Agricultural Use: Potassium chloride (commonly referred as Muriate of Potash or MOP) is the most common potassium source used in agriculture, accounting for over 90% of all potash fertilizers used worldwide. FFC MOP contains 60% K2O and is used mainly for fertilizing sugarcane, maize, fruit trees, vegetables and other field crops except tobacco. Industrial Use: Used in medicine, scientific applications, food processing etc. Sona Boron Agricultural Use: Sona Boron is a micronutrient fertilizer in the form of Di-Sodium Tetra Borate Decahydrate in 3 kg packing. It is an essential micronutrient required for plant nutrition, which plays a vital role in a number of growth processes especially new cell development, pollination, and fruit / seed setting. Keeping in view increasing boron deficiency in Pakistan soils, FFC is providing superior quality Sona Boron containing minimum 10.5% Boron. It is soluble in water and readily available to plants. It is used as soil application alone or by mixing with other fertilizers. Sona Zinc Agricultural Use: Sona Zinc is a micronutrient fertilizer in the form of Zinc Sulphate Monohydrate (27%) in 3 kg packing. It is an essential micronutrient required for plant nutrition, which plays an important role in number of growth processes especially in chlorophyll synthesis, proteins and activation of enzymes. Zinc also improves uptake of nitrogen and phosphorous by the plants. The zinc deficiency is causing different diseases in humans and livestock. Keeping in view the wide spread deficiency of zinc in Pakistan, FFC is providing high quality Sona Zinc. It is water soluble and can also be used as fertigation i.e. application with irrigation. It can be mixed with other fertilizers for broadcast in the field. Annual Report 2018 5 Product Portfolio Renewable Energy FFC Energy Limited Supply of green / renewable wind energy to the Country, through the Company’s subsidiary - FFC Energy Limited. The company has been incorporated