PAFL acquires Hazara Phosphate Fertilizers Limited.

Pak American Fertilizers Limited, a 100% owned subsidiary of the Company, successfully completed the acquisition of Hazara Phosphate Fertilizers (Pvt.) Limited from the Government of Pakistan as part of its ongoing privatization initiative. Now the Company (through its subsidiaries) owns and operates the country's newest and most efficient urea plant, Pak American Fertilizers Limited, and also the largest Single Super Phosphate (SSP) manufacturing plant in the country, Hazara Phosphate Fertilizers (Pvt.) Limited. This Completes the Company's vitally important strategic goal to become a diversified manufacturer producing both nitrogenous and phosphatic fertilizers.

Urea prices would increase by Rs. 85/bag to Rs. 605/bag DAP prices would decline by Rs. 275/bag to Rs. 825/bag The domestic usage ratio of DAP to urea is 1:5 (20%: 80%) as against agronomic recommendation of 1:2 (33.3%: 66.7%). The present domestic usage ratio of DAP and urea is adversely affecting the productivity of the arable land which would hamper the agricultural production of the country going forward. In our view, this proposal of ECC is the need of the hour otherwise the country would have to face severe consequences in years to come.

The measure EEC took would be more focused towards provoking the demand for DAP, keeping per acre cost constant and expected to increase the crop yield by 10-15%. Lower urea imports would not hurt the earnings of the domestic fertilizer manufacturers. FFBL, being a sole producer of DAP accounts for 32% market share of DAP, rest of DAP is imported by other fertilizer manufacturers. FFBL would be benefited in the longterm owing to capacity enhancement of its DAP plant which is expected to come online by the end of FY'07. This would increase the total DAP production capacity of the company by 51% to 2046tons per day.

PAFL has had multiple achievements in the last few months. It achieved a Successful turn around for maintenance purposes in less than fifteen days. Since Acquisition of the plant by Azgard 9, PAFL has managed to acquire 8 % of market share within 9 months. This successful penetration of the market resulted in a collection of Rs. 3.0 billion as revenue. In the midst of all this activity a successful Brand Launching was accomplished. The New Brand by the name of TARA was successfully managed to create a place for itself in the market with the help of different Dealer and Consumer Incentive Schemes.

Along with this successful diversification of the Product categories was achieved with the purchase of 30000 Tons of DAP in a scenario of international shortage and this vessel is arriving in June 2007. Moreover, PAFL have also brokered a deal for another fertilizer product namely MOP which is expected to arrive in Jul 2007. Dealer network was increased at a drastic pace from none at the time of acquisition to 250 dealers at this point in time and still expanding. At the same time the Production Efficiency was increased to 108 % from the earlier 100 % production level. Alongside this various cost reduction measures have been taken to make PAFL a more financially efficient organization.

The plant is going through various reengineering processes to enhance its efficiency and output. According to the various plans 15 % enhancement in urea production capacity will be achieved by Dec 2007 and a further 35% increase will

be completed by DEC 2008. Simultaneously 350 tons increase in production in the ammonia plant will be accomplished by Dec 2008. Sales and Marketing department was developed with presence in each key market. Process and system for port logistics are now in place with an independent resource handling the imported fertilizers. Quality improvement activities are in process through various conventional and unconventional methods. Simultaneously PAFL has adopted the attitude of constantreevaluation of the market and intends to follow a policy of constant Research & Development in the various stages involved in fertilizer production and marketing and to achieve a competitive edge in the market.

Various steps are being introduced in the PAFL plant to enhance the product Quality along with the increased quantity. Various mechanical and chemical changes are being introduced to enhance the product quality. Through rigorous market research and with the right creative agency the brand name TARA ' was evolved which was an instant hit in the

market and immediately developed its awareness among farming community. In order to differentiate the packaging from competition a new bag color Blue' was introduced with three color printing on the bag which is first of its kind in the fertilizer industry. Packaging is still under the process of revision to add more colors and to create better perception about the product in the market and to pass on the message of increased concentration on Quality improvement. On the same pattern DAP bag design has also been unique by adopting yet another new color in fertilizer industry i.e. Light Purple with three color printing. MOP bag is under development phase under the similar concept.

Plan for spraying uri-soft and adding to Urea Formaldehyde in the product are also underway to help achieve the quality targets.

Multiple cost saving methods are underway or planned. A Gas turbine of 7.5 MWatts has been successfully commissioned from 31-507. The gas intake has been reduced by 50 % while production has been increased. Along with this Man power has been made more efficient. Number of employees has been

Since Acquisition Production Efficiency has been increased from 100 % to an astonishing 108 % and steps are being taken to take it even further. As a result of this we are now successfully producing1120 MT froman earlier 1050 MT Plans have been generated to increase the production further with the help of plant reengineering / revamping. Since the acquisition PAFL has sold 300,000 tons during the period Jul 16, 2006 to May 31, 2007.

reduced from 1052 to 792 to make it a leaner and more efficient system. Under utilization of its employees has been successfully reduced and further action in this regard is under process. Immediately after acquisition PAFL introduced their own distribution network with new truckers in place resulting in reducing distribution cost from Rs. 1000 per ton before acquisition to Rs. 475 per ton post acquisition. Multiple steps have been taken to improve upon the safety standards set in place. With the consultancy of various professionals rigorous efforts are being made to
PAFL is quickly heading towards becoming one of the best performers in the industry. With its highly qualified and experienced staff and an ever increasing eagerness of becoming the best in the industry, the staff at PAFL is set to take overt the market with a bang. The previously over employed infrastructure with more then 1052 employees has been transformed into

achieve Occupational Safety and Health Administration OSHA Certification. Simultaneously ISO 18001 Certification is targeted to achieved by Dec 07 PAFL is a strong believer of providing a safe working environment for its employees. It is constantly working towards improving its safety standards and adheres strongly to providing a suitable working environment. PAFL is a holder of ISO 9001 and ISO 14001 Certification since 2005 and believes in taking its performance over and beyond these.

a lean and efficient system. The present number of employees totals to 792 people inclusive of management and technical staff. The employees are working as a well knitted team with targets to be the best in the industry.

PAFL with its policy of being a socially responsible

entity, has actively participated in resolving the issues of the community spread around it's plant. It has stepped forward in this field by becoming the single source of clean drinking water supply to the community. The residents have appreciated this tremendously. Along with this their need for medical facilities has also been catered to by the company run hospital in the area.