COMPANY PROFILE Engro Chemical Pakistan Limited is the second largest producer of Urea fertilizer in Pakistan. The company was incorporated in 1965 and was formerly Exxon Chemical Pakistan Limited until 1991, when Exxon decided to divest their fertilizer business on a global basis and sold off its equity of 75% shares in our company. The Employees of Engro, in partnership with leading international and local financial institutions bought out Exxon’s equity and the company was renamed as Engro Chemical Pakistan Limited.
Engro is a public limited company listed on the Stock Exchanges of Karachi, Lahore and Islamabad. Engro accomplished significant progress not only in its base urea fertilizer business but also in diversification projects. Urea production was increased from an annual capacity of 270,000 tons in 1991 to 850,000 tons in 2001. Further expansion plans are being developed to debottleneck plant capacity to 1. 2 million tons in stages. In addition, Engro has over thirty years of experience of fertilizer marketing in Pakistan with an elaborate dealer network
Vision To be the Premier Pakistani Enterprise with a global reach, passionately pursuing value creation for all stake holders CORE BUSINESS Engro is an agri based company. Our core business is manufacturing and marketing of chemical fertilizers. We are Pakistan’s one of the largest producers of urea fertilizer which is manufactured at Daharki and marketed under brand name Engro. We also produce crop specific NPK fertilizers at our plant at Port Qasim Karachi and these are marketed under the brand name of “Zarkhez”.
Engro also markets imported MAP fertilizer under the brand name of “Zorawar” and imported DAP fertilizer. The company also markets micronutrients Zinc Sulphate branded as “Zingro” and Boron branded as “Zoron” Core Values [pic] Sales Department Structure: National Sale Manager (NSM) Regional sale Manager (RSM) Sale officer (SO) Techniqal Sale officer (TSO) Field Assistants Distribution Officer (DO) Warehouse Incharge Office Communicator Sales Accounting Officer NSM: National sales look after nation wide sales. RSM: Regional sales managers work under national sales officer. here are six regions so six regional mangers working for sales department. SO: Sales officers works under the regional sales mangers and responsible for their sales areas. TSO: Techniqal sales officer provides technical assistant to farmer for cultivating crops. They are specialized in agriculture. every sales area includes one SO and TSO as well. TSO do not sell product but work as missionaries tells about usage of product. Field Assistants: Field assistants are those who help TSO’s in arranging farmer meetings. Work as communicator between farmers and Company TSO’s. DO:
Every region having one distribution officer who look afters warehouse, product handling, ensure product avaliblity and check saftey of warehouses. Warehouse Incharge: Warehouse incharge perform various task in the premises of warehouse. Handle all the shipments from production unit and store stock in safe way. he keeps all shipments record. in one sales area there are many warehouse incharges depends on number of warehouses. Office Communicator: Perform multiple functions like data entery from sales invoices and communicate information between Head office and regional office. Sales Regions Hyderabad |Hyderabad,Thatta,Mirpurkhas,Sanghar,Nawabshah,badin, | |Daharki |Daharki,Sukkur,Khairpur,Jacobabad,Larkana,Dadu | |Bahawalpur |Bahawlnagar,Lodhran,Rahim Yar Khan, Khanpur | |Multan |Dera Ghazi Khan, Muzzafargarh,Layyah,Vehari,Khanewal | |Sahiwal |Okara, chichawatni,Jhang | |Lahore |Fasilabad,gujranwala, shiekhupura | My Activites My area of intrest was sales so they had attached me with SO MULTAN Mr. Awais Paracha.
He is SO1 , as there is ranking of SO’s. My activities was 1) Regular visits to the sales territories: Multan sales area includes • Multan • Qadirpur Rawan • Basti Malook • Adda Band Bosan • Shujabad • Budla Sant • Tatepur • Mattital • Lar • 18 Pull • 32 Pull • Pull Dawa Objectives of visits: • Meetings with Dealers • Warehouse situation • Information gathering about competitors activities Meetings with Dealers: SO meet with dealer exchange information about current and future market situation. get their feedbacks share their problem, issues regarding products and orders generation. Warehouse situation: During his visitit it is necessary to visit that area warehouse so that efore getting orders you should know about the avaliblity of products. Competitors’ activities: SO try to get information aboutcompetitor activities. What they are offering now a day? How much product is avaliable in their warehouses? 2) Handling Bank Guarantees: During my intrenship I worked for BG’s. they assigned me got BG papers from bank and get signs from cutomers. full fill all requirements of BG’s that company demanded. Procedure and objective of BG: These facilities extended to the dealers in order to stimulate and promote sales volume. Essentialy this credit is extended through the bankguarantee by way of two modes Single credit sale Multiple credit sales
The Bank issues the letter of guarantee in local currency and thereby undertakes the responsibility on behalf of the customer for the debt, default or miscarriage by the customer, whether such requirement is domestic. 3) Assigned Projects: They assigned me some projects. My first project name was District Information System for Urea Sales points: Sales points were given of Multan sales district. Target Area: Target areas were also given on which that particular crop will cultivate. EYC: On the basis of given information estimated yearly consumption calculates. Example: Crop: cotton Year: 2007 Sale point: Multan Target Area: 44280 Consumption per acreages: 2bags 1ton= 40 bags 2 * 44280 / 40 = 2214 Sales:
After those sales is calcultated through dealers’ sale in previous year in particular sale point in oparticularcrop season. For example in season of wheat Urea for wheat use in three months December+January+feburary , after caculating these months sale of urea of particular area dealers calculte the sale. Conversion Ratio: When all information provides it’s automatically gives conversion ratio. conversion ratio basically shows that how much sales will be incurred if acerages and EYC is this. Second Project Dealer/Subdealer wise Zinc yearly sales (Carried out for Multan & DG Khan Sales Districts) Dealer: Dealer is one direct purchase from compnay. Subdealers: Subdealers are those who purchase from company dealers, also called dealers of dealers.
On the basis of given inforamtion I fullfilled the given requirements. Document is mentioned at next page. SWOT Strengths: Old is gold: ECPL has a great Pakistani market experience. So they knows market very well that is why engro group is growing day by day Increase in fertilizers usage: The usage of fertilizers is increasing that is good for ECPL. Talented Sales Force: ECPL has very talented sales force that has very good skills. Mostly employees are from the top universteise of the world andfrom Pakistan in particular. Learning Organization: The Key of success is basically learning. ECPL is a learning organiation where people have share their ideas, knowledge andexperience with one another. Flexibilty:
They do not believe to keep distances from lower management and not believe on a very formal structure. Job Satisfaction: Salespeople are fully satisfied with their jobs because good pay and good environment keeps satisfy to them. Farmers Trust: Farmers trust on Engro brand. This trust is a key strength of ECPL. Excellent packging: Engro urea bag is in light green color,bag size is large than anyother fertilizer bag and it is double sewed. so quality packging itself strength for them. Cost benefit: Engro has other subsedaries like engro Asahi & polymers, Engro foods, engro automation and engro energy. Many neccesary things they produce themselves. imilarly they use one warehouse for other subsedaries as well. Through this saved lot of cost. Quality Assurance: Engro always produce quality products. always ensure quality to controll impurities in bags. Weaknesses: Weak Distribution network: ECPL ditribution network is very much limited. they do not focus small cities and villages. they just cover six regions and specified sales districts. Low Production: Currently production of Urea is very low as compare to FFC. So before covering the more territory you should have more stock of commodity. Rigidity: One that I have observed during visit to the market. dealers always claimed about strict ruels that imposed by ECPL. For example Discounts. ther companies sale officer easily offer the discounts to dealers but ECPL SO was unable to give discount to them without getting approval from company. similarly you want to lift up product from warehouse it is necessary to get signature of all partners of business. it was painfull to them. in the absence of one partner they were unable to get product. Unethical practices: Company assign the sales Quota to the sales officer. in out season it is difficult to achive targets. in such situations SO’s themselves spread rumours. That in future price are going to increase. on the basis of this information dealers tried to get advantage and start buying. if prices not increases dealers face a big loss. it creates bad word of mouth. Stress on Sale people: Sometimes sales Quotas are unachiveable.
Sales people are very much in stress situation and they leave the job. as employees are the most valuable asset of any organization. when they leave company faces a big loss. Opportunities: Increasing Demand: Demand of fertilizers is incresing sharply. Company has big opportuity to increase prodution to fuulfill market demand and get maximum market share. Strong Distribution Network: Company can grow more rapidly if they develop strong disrtibution network. Favourable Goveronment Policies: If goveronments announces to subcidies fertilizers, this will boost up the sales because at less price there will be more purchasing power of customer. Threats: Disaters: In disators like floods, plants diseases.
In such situations farmers unable to do something. in that particular time period the sale of fertilizers approximately eliminates. Goveronment Regulations: Government regulations sometime very unfavorable for company. For example government imposed that sell Urea at 525 Rs. while prodution and handling cost is more than it. so it is impossible for company to sell at that price. Job turnover: As one SO leave his job and move to other organization within same industry. there is a fear of leakging secret information and customers also moves with that particular sales officer. so it’s a big threat for company. Unstable Prices: In international market prices of fertilizers are very unstable. ometimes compnay imports at high price but due to decrease in prices within a day they bear big losses. Dishonesty: Sometimes sales people tried to give benefit to their favourite dealers. This is very unethical. they also share some secret information about products. this damages the company. Financial Analysis: According to the Format and classification the financial analysis of a particular company includes these types of major ratios. 1) Liquidity of Short-Term Assets related to Debt Paying Ability. 2) Long Term Debt Paying Ability. 3) Analysis of Profitability. 4) Analysis for the Investor. 5) Analysis of Cash Flow Liquidity Of Short-Term Assets | | | | | | |Year |Days Sales in rec |A/R Turnover |A/R Turnover(days) |Day salesin inv |Inv Turnover | | | | | | | | |2006 |33. 305 |14. 851 |24. 577 |43. 864 |11. 276 | |Year |Inv turnover |Opreating Cycle |Working Capital |Current Ratio | | | | | | | |2006 |38. 870 |63. 447 |2042031 |1. 561 | Year |Acid test ratio |Cash ratio |Sales to WC | | | | | | |2006 |0. 729 |0. 558 |8. 276 | Days sales in receivable: in 2006 the ratio increased as the overall sales was increased. A/C Receivable Turnover: in 2006 it had greater account receivable turnover 14. 85 times. Account receivable turnover (days): In 2006 it lost that status and relaxed their credit terms and almost 24. 5 days were required to realize their average gross receivables in cash. Days sales in Inventory: In 2006 it has significantly changed due to the strong competition and new products that is 43. 8 days. Inventory turnover: Increased to 21. 2 times in 2005 but decreased in 2006 to 11. 27 which resulted in inefficiency of the firm but the over all industry was suffering. Inventory Turnover (Days): the management managed to increase it in the year 2005 and 2006 which is as 35. 21 and 28. 87 days, which is not good indicator that the company sales is decreases so do the profits. Generally, short-term liquidity is decreasing. Operating Cycle: It indicates the duration, inventory is realized into cash. Lower is desirable. Working Capital: Decreases in 2006 to 2042031. Current Ratio: It shows that what amount of current liabilities can be satisfied by current assets. Greater than 2 are considered good.
It is having nice current ratio throughout the years i. e. 1. 6 Acid test Ratio: In 2006 it’s good enough as it is having . 729 respectively which is quite acceptable. Cash Ratio: This ratio indicates the portion of current liabilities that can be immediately satisfied by the cash equivalents and the marketable securities being the most liquid forms of current assets. Ratio of company was very good in 2002 as being 1. 010 and then it went on slight decrease in 2003, 2004 and 2005 resulting in . 772, . 457 and . 558 respectively Sales to Working Capital: 2006 it is 8. 276 respectively which gives a poor indication of short term Assets. about Company’s liquidity Times Interest Earned:
It shows that how many times of interest expense, is the earning of a particular organization. In 2006 having ratio11. 293 respectively. Fixed Charge Ratio: This ratio shows that whether the firm will be able to meet its fixed charges, like Interest, employee salary and Rentals etc. in 2006 ratio is 11. 293 respectively. Debt Ratio: This ratio shows that Total liability is what portion of Total Assets. It basically shows the capital structure of an organization. Usually, 60:40 of Debt to Equity is used. Engro’s Debt ratio is decreasing gradually, which means that company is moving towards more equity. This basically costs more. Ratio is 0. 414 in 2006. Debt/Equity Ratio: It shows the relative share of financing sources i. e. ebt and equity. It shows that whether the creditors are protected in case of solvency or not. It must not be greater than 1. 2006 it is . 706 and getting better. Debt to Tangible Net Worth: This ratio gives more conservative information about the company’s creditors protection is case of solvency. 2006 it is improved and 0. 707 respectively. This shows that the firm is convent in the long run for the creditors. Long Term Debt Paying Ability: Following ratios are considered in the analysis of Long Term Debt Paying Ability of the firm: 1. Times interest Earned Ratio 2. Fixed Charge Ratio 3. Debt Ratio 4. Debt/Equity Ratio 5. Debt to Tangible net worth Year |Time intrest earned |Fixed Charge ratio |Debt ratio |Debt Equity Ratio |Debt to Tengible | | | | | | |Networth | | | | | | | | |2006 |11. 293 |11. 293 |0. 414 |0. 706 |0. 707 | Analysis of Profitability: Usually the following ratios are used to calculate and analyse the profitability of the firm. 1. Net Profit Margin 2. Total Asset Turnover 3. Return on Assets 4. Dupont Return on Assets 5. Operating income margin 6. Operating Asset Turnover 7. Return on operating Assets 8. Dupont Return on Operating Assets 9. Sales to Fixed Assets 0. Return on Investment (ROI) 11. Return on Total Equity 12. Return on Common Equity 13. Gross Profit Margin |Year |Net Profit margin |T Asset Turnover |Return on assets |Dupont return on |Oprating income | | | | | |Assets |Margin | | | | | | | | |2006 |0. 145 |1. 170 |0. 169 |0. 169 |11. 276 | Year |Return on Investment |Return on total Equity |Return on common Equity |Gross Profit Margin | | | | | | | |2006 |0. 219 |0. 304 |0. 304 |0. 241 | |Year |Opreating Asset Turnover |Return on Oprating Assets |Return On opreating |Sales to Fixed Assets | | | | | | | |2006 |2. 620 |0. 410 |0. 410 |2. 620 | Profitability Ratios Interpretations
Net Profit Margin: In 2005 and 2006, they increase their efficiency in utilizing their resources and decreased their expenses and improved their profit margin Total Asset Turnover: In 2006, we saw the decrease in the TAT ratio, which shows the company’s less efficient use of assets, but from other sources we have found that Engro was involved in their expansion project and they had to shut down their plant for so many times. Return on Assets: But in 2006, there is a slight decrease in ROA. This shows that in 2006 company’s income before interest and tax was decreased. But the reason can be the expansion project which is under progress. Dupont Return on Assets: 006, the company’s return on assets has decreased as compared to the other years. In 2006, company’s expenses are higher and their productivity is also decreased to some extent. Operating Income Margin: In 2006, there is a significant decrease in OIM Operating Asset Turnover: The OAT is increasing from 2003 to 2006. Continuous increase in OAT shows that company uses its assets efficiently to generate sales. Return on Operating Assets: There was an increasing trend shown by the company. Which is showing that management is utilizing their operating assets at their best level, for the generation of operating income. Dupont Return on Operating Assets: Now in 2006 this ratio has also improved.
This shows that company’s operating assets are being utilized better and company is trying to restrict its CGS. Sales to Fixed Assets: This ratio is also increasing to 2. 62 in 2006, it means, now company is using their fixed assets in more appropriate way and producing larger sale. Return on Investment: Although the ROI is increasing in 2006, that is a positive sign Return on Equity: Is showing an increasing trend, which shows that company is utilizing their equity efficiently in that particular year. Return on Common Equity: Engro have not issued the preferred stocks, so their Return on Equity and Return on Common Equity is same. Gross Profit Margin:
There is a sudden decline in year 2006 which is representing that company’s CGS is higher as compared to previous ones. Analysis for Investors: |Year |Degree of Financial |All-Inclusive Degree |Basic EPS |Price/Earning |Percentage of | | |leverage |of Financial Leverage| |Ratio |R. E | | | | | | | | |2006 |1. 097 |1. 166 |15. 471 |10. 924 |0. 305 | |Year |Dividend payout |Dividend
Yield |Book Value Per Share | | | | | | |2006 |0. 695 |0. 064 |56. 909 | Investors are the people that are interested in contributing their money in any organization in order to get profit out of it. Interpretation Analysis for Investors: Degree of financial leverage: It basically shows the multiplication factor by which the net income changes as compared to the change in EBIT. High ratio is desired. There is a decrease in leverage 2006 ratios is 1. 10 respectively.
All-Inclusive Degree of Financial Leverage: Much conservative approach to find the degree of financial leverage that what is the effect of change in EBIT, Min share holder, Equity Earning and non recur change in earning. Engro’s Leverage was good in previous years and becoming constantly less in the latest years, in 2002 that was 1. 267 and declined to 1. 66 in 2006. Management operational efficiency is decreasing constantly. Percentage of Retained Earning: This Ratio help to check the internal growth of the organization, the preferred value depends upon the intentions of the management. But the ratio was increased in 2006 that was . 305 respectively.
Dividend Payout Ratio: Shows that what portion of Diluted EPS is distributed amongst the stock holders. The Desirability is changed according to the Type of Investor being involved in the analysis. Engro is having a high Dividend payout ratio in the initial years but is the latest years under consideration that was reduced and resulting in a greater retained earning. In 2006 the ratio was . 645. Dividend Yield: Dividend yield shows dividends to the common stock relative to the market price per common stock. It indicates that for 1 dollar of market price, what dividend is received by the common stock. 064 in the year 2006. Book Value per Share:
Shows what amount is contributed by the common stock outstanding in the common equity. Engro is having a greater BVPS value and it is significantly increasing from 2002 onward till 2006 currently at 56. 9. Analysis of Cash Flow: Analysis of Cash Flow basically shows the firms ability to pay through the operating cash flows. Most of the payment obligations are from Cash Dividend. Also see that what portion of out debts can be fulfilled by the Operating Cash Flows of the organization. There are usually four Ratios being calculated for this purpose: 1. Operating Cash Flow/Current Maturity of Long-Term Debt 2. Operating Cash Flow/ total Debts 3. Operating Cash Flow per Share 4.
Operating Cash Flow per Cash Dividend. |Year |Maturity of L-T Debt |Opreating CF/T. Debt |Opreating CF pershare |Opreating CF/Cash Dividend| | | | | | | |2006 |1. 247 |0. 209 |8. 38 |0. 780 | Interpretation Cash Flow Ratios Operating CF to Current Maturity of Long term Debts: It indicates the firm’s ability to meet its current maturities of debt. High ratio is desirable. In 2006 that was 1. 247 Operating Cash flow to Total Debt:
Indicates a firm’s ability to cover total debt with a yearly cash flow. This ratio is desired high. Engro was having a good operating cash flow to Total Debt Ratio in 2006 in 20. 9% Operating Cash flow per Share: Indicates funds flow per common stock outstanding. It’s usually higher than EPS because the depreciation has not been deducted. It is deducted high. Slightly declined in 2006 and ended at 8. 38. Operating CF per Cash dividend: Indicates the firm’s ability to cover the cash dividends with a yearly operating cash flow. but was running short of operating cash flows in the year 2006. Application of class room learning: Marketing implications: Understanding of Market:
It is business market where business buyers buy goods in order to resell a product to others at a profit. PUSH Stragety: Company persuades dealers to place product in their stores. after that dealers themselves sell product by persuading customers. Here SO plays the main role goes to different sale points get orders and negotiate with them. PULL Strategy: By following this startegy company creates demand of product Advertisements: Electronic Media: In season of cotton and wheat ECPL starts advertisements on TV and Radio as well. The objective is to remind customers and retain them. Engro sponsor the Kissan Time program so many times to create goowill. imilarly sponsor some farmers related programs on radio. Print Media: They also heavily use print media. print media includes ? Daily Newspaper ? Specailized agriculture related magzines Outdoor Media: ECPL is also using outdoor media like hoardings that they placed outsidecities near villages. In shop advertisements: Shop decorates with buntings, posters and banners. On Shop advertisement: Outside the shop company advertises through Sign boards’ which is also called shop fascia. also use banners as sun sheet and posters. TSO Role: TSO’s are main tool of this pull strategy. They visits villages with field assistants and give suggestions and recommendations to farmers.
Ultimate objective is to create deamand. Application from Sales Force Management: Sales people involve in following actvities • Sales • Sales Forecasting • Maintainence of sales record • Sales territories visits Learning from ECPL: Sales: A sale is actually “ART OF TOUNGE” or “MAGIC OF WORDS”. I developed my interpersonal skills by my observation. How they deal with customers? • Spaek language of dealers • Show him you are his well wisher • Get information about his business routine • Get information about his recent business activities • Try to devolp close realationship like a family or friends How to resolve conflicts? Conflict can be arises in different ways like Challenge ECPL policies • Price Discounts • Cancellation of Dealership These are the conflicts that SO faces on daily basis. In such conditions SO always try to cool down and try to develop their understanding about company policices and tell them his limited roll in organization. he tried his best to satisfy customer. How to Handel different situations? As sales officer you face different situations like customer mood is off or competitors’ sales officer is also sitting in front of you. How to get information about competiotrs activities? They use different ways to get information like wise Dealers provide information about recnt policies of competitors.
Field assistant also knows how much product is avaliable in competitors’ warehouse. Use competitors own people to get information while it is unethical. How to manage your time? Time amngement is most curel part of sales job. Travelling time Dealers meetings required time Boss has required some time from you Sales record amintainenece time How to diversify Risk? Sales job is very attractive but it is having more risk as well. you can reduce risk by getting aproval from top management at various steps e. g credit authorization to customers etc. What manners we adopt when working in organization? I have attended some official dinners and meetings. learnt the manners of having dinner. how they listen each other? How they participate in meetings? How they avoid negative attitude from theis colleagues? PEST: Political: Political and legal envioronment plays a vital role. goveronment make policies and impose to general public. If we draw a one sight on political and legal environment we vill see instability in political environment, rules and policies are there but no practical implications. so that is why companies do not take care of customers they are just earning profits. goveronment is not regulating theses companies that is why they having monoplistic behavior. goveronment unable to control prices. akistan is an agricultural country but farmers position is very much weak main reason is companies never take care of end users. They have just their own intrest. Economy: The economic environment consists of factros that affect consumer purchasing power and spending patterns. the farmers’ purchasing power has increased because they earn good profit margins from wheat. they are ready to buy fertilizers for next cropcultivation. But unavalibilty of BT cotton seeds looks a major problem for farmers. if in given time span of sowing they unable to get seeds this will be very dangerous for whole economy ultimately all business related to agriculture get effected. Techonology:
Technology is a Force that creates new technologies, creating new product and market opportunities. in recent years due to the rapid technonlogical advancement ECPL introduce Zingro and Zoron. ECPL also provides technical assistance to farmers like Soil testing,water testing etc. they want to keep pace with farmers. farmers earn more ECPL will earns more. recently ECPL implements the Teleconference infrastructure nationwide in regional offices. through this no need to visit headoffice again and again but from your premises you can arrange meetings. by implenting this ECPL save R. s 1. 5million each year. Society: ECPL is running hundreds of social welfare projects for well being of society. One project is HOPE.
ECPL is providing medicial facilities in to rural areas where these facilities not prevails. other project is ENGRO Education. through this program ECPL devloped many schools in rural areas with the help of local community. In Daharki ECPL look after 6 schools. ECPL also doing various programs for safety and healthy environment. Suggestions Structural change: Sales structure base on regions which is not very effective. In order to gain more efficency and effectivness they should devlop structure on the basis of zones. this will lead to more controll. Do not neglect ECPL is main Power: As ENGRO group has also other business like automation, energy, foods and polymers. ompany top mangement not focusing on ECPL these days butthey are concentrating on EFL. ECPL is facing shortages of Finances. they should not forget that at grass root level ECPL is main power or main source of their earnings. Reduce job turnover: ECPL should focus to decrease job turnover. As sales job is very tough especially of this industry because you have to cover long travelling distances to rural areas. in recuritment process there is need to keenly analysis of applicants he is able to do this job or not. Need to eliminate Disccrimination: What I have observed is mentioning here they are promote people who are from IBA or LUMS students. hey should avoid such practices. they should apply equal employment opportunities. Heavy workload: Sometimes sales officers face heavy workload. in such conditions they feel very much job dissatisfaction. in such situation RSM should feel resposibilty is to share their workload. Avoid Unethical practices: To achieve sales quotas sales officers sometimes use unethical means e. g spread rumors in the market that next week prices will increases, on behalf of this information dealers give orders to get benefit but actually it does not happens. Similarly they sell product less than company price in case of bank guarantee. These practices destroy the market and trust of dealer.