Fertilizer Industry of Pakistan
- 1. INTRODUCTIONOVERVIEW OF PAKISTAN’SECONOMY
- 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 countrys GOP has grown at a CAGR of 7.55% over the past 3 years Totalagriculture GOP stood at PKR1,095bn
- 10. Fertlizer Consumption Vs. Nominal GDP
- 11. Improvement in yield/hectare Irrigation System Improvement Subsidy to farmers Encouraging use of fertilizer. Above average credit disbursements.
- 12. World Fertilizer Situation Consumptionincreased exponentially between 1959-1990 IncreasedFood Demand – Burgeoning Population
- 13. World High Yield/hectarethrough… Turning more land into arable land through better irrigation Using High Yielding Seeds (HYS) Using fertilizers to improve soil content
- 14. World Fertilizer Surplus
- 15. World’s Fertilizer Situation Decreased Demand in 1990s due to collapse of Soviet Empire Annual Demand in 2011 is 163 mntpa.
- 16. Cereal Demand
- 17. World Consumption
- 18. 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%
- 19. 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
- 20. 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)
- 21. 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.
- 22. Pricing and ManufacturingCosts
- 23. Pricing…
- 24. Selling and Distribution Costs
- 25. Gas Price Hike
- 26. FactorConditions
- 27. Types of Fertilizers DAP Prilled Urea Potash
- 28. Prilled Vs. Granular Fertilizers
- 29. Capital Intensive Industry
- 30. R&D
- 31. 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%
- 32. Natural Gas field Pakistan Sui Gas field mari Gas field Recent Developments1. 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
- 33. 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.
- 34. Natural Gas [Pakistan] 840.2 Billion Cubic meter Shortage of Gas in Pakistan Import of Urea
- 35. Is the future promising ?
- 36. 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.
- 37. DEMAND CONDITIONS
- 38. DEMAND CONDITIONS
- 39. DEMAND CONDITITONSCOMPARISION 10/11
- 40. DEMAND CONDITIONSPAKISTAN VS WORLD AVG.
- 41. DEMAND CONDITIONS (KG/HECTARE CONSUMPTION) Ger Netherl Year man Japan France Egypt Italy USA Russia India Pakistan ands y1993-94 560 221 407 237 – 148 108 – 73 971994-95 554 240 400 242 304 159 103 12 80 1031999-00 – 243 – 248 355 – – – 99 1172000-01 470 232 – 225 – 211 106 – 103 1382001-02 546 217 282 213 436 – – – 88 1332002-03 354 216 270 203 373 – – – 100 1372003-04 438 220 293 216 472 – 122 – 105 1482004-05 510 216 365 210 548 – 113 14 106 1612005-06 601 209 251 191 625 – 109 16 121 1692006-07 419 190 344 178 381 – 143 12 114 1592007-08 1188 191 321 196 450 136 168 14 133 1572008-09 261 158 259 138 566 114 101 16 143 157
- 42. Firms’ Structure& Rivalry
- 43. Urea Market Shares
- 44. Governmentand Chance
- 45. Government – OGDCL
- 46. Environmental Friendly Practices
- 47. Chance
- 48. Chance Record profits due to floods.
- 49. RELATED AND SUPPORTING INDUSTRIES COAL INDUSTRY PESTICIDESAGRICULTURAL MACHINERY AND TOOLS OIL AND GAS EXPLORATION TRANSPORATATION PACKAGING
- 50. Harmful Effects Of Chemical Trace mineral depletion of the soil. Because most Fertilizers chemical fertilizer programs dont 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 worlds 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
- 51. FutureBio Fertilizers
- 52. 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%
- 53. http://www.optidigit.com/TRADEdept/BNbat/PDF/BIOweb-brochure-e-fert.pdf
- 54. 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.
- 55. 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.
- 56. Analysis of Stock Market
- 57. Brief overviewof Stock MarketFFBL, FFC, Engro, Dawood
- 58. Industry 2007 2008 2009 2010 Industry At a GlanceTotalAssets 304,833.3 160,397.70 227,111.90 268,109.70 0PropertyPlant and 232,053.9Equipment 107,865.90 148,040.60 206,452.60 0Stock 17,039.20 17,497.80 20,199.60 20,607.00Inventory 13,218.30 26,851.20 15,952.40 24,042.00 All figures in Millions of Rs
- 59. Significance of Fertilizer 2007 2008 2009 2010revenue 132,656.2 178,832.5 220,102.9 92,063.30 0 0 0 132,656.2 178,832.5 220,102.9Total revenue 92,063.30 0 0 0Total Profit 20,897.20 17,433.00 15,191.70 28,412.10
- 60. Net Margin25%20%15% FFC FFBQ10% Engro Fertilizers5%0% 2007 2008 2009 2010
- 61. ROA Dawood ENGRO FFBL FFC 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% FFC FFBL ENGRO DawoodROA 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
- 62. 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
- 63. Relevance of Stock Market inanalysis 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
- 64. RecommendationsR &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
- 65. 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
- 66. 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
- 67. Thank you Questions & Answers session