Letter from the CE&MD

Dear Stakeholders,

The year 2016 witnessed significant strides in sustainability. The world’s first Sustainability Reporting Standards were launched in October 2016 for better reporting of sustainability impacts by organizations and enhancing corporate transparency worldwide. United Nations Global Compact (UNGC) and Global Reporting Initiative collaborated to develop guidance for reporting business contributions towards Sustainable Development Goals.

The alignment around sustainability issues is expected to further increase and this will impact policy decisions in political and business fields. It will lead to calls for better economic, environmental, social performance and enhanced transparency cum accountability in the corporate sector.

Integrating sustainability into our business is fundamental to our corporate strategy. As a result, we have achieved a balanced mix between financial performance, environmental stewardship and social engagements.

As I look back on 2016, I take pride in sharing our exceptional performance in what we do best – producing quality fertilizer to enhance productive potential of lands and support healthy lives. It drives us and enables us to create and share value with our stakeholders as well as ultimately, generating value for our business.

Although conditions were challenging during the year mainly delayed implementation of subsidy mechanism and low international urea prices, we nevertheless managed considerable achievements in securing our targets in spite of certain inexorable factors, particularly price intervention by the government, levy of additional super tax, decline in dividend receipts and delayed subsidy remittances, which were beyond our control.

During the year, our original gas quota was restored resulting in new urea production benchmark of 2,523 thousand tonnes. We also achieved an increased urea market share of 52 % – highest in the last 7 years, compared to 48% last year. However, due to unfavorable market conditions, the sales revenue decreased to Rs. 72.87 billion – 14 % below compared to last year. The profitability was impacted by price constraints and anadditional tax burden resulting in net earnings of Rs. 11.78 billion. However, we are confident that our diversification strategies, operational efficiencies, restoration of fertilizer subsidy by the government and improvement in international fertilizer prices will result in improved profitability and sustained returns for our stakeholders.

We succeeded in managing our environmental footprint through continuous investments in environment friendly technologies, up-gradation and efficient plant management. In 2016, energy consumption at plant sites reduced by 602,552 GJ and water recycling increased to 60.29 % from 59.14 %. However, intake of fresh water increased by 3 % and GHG emissions increased by 1%, due to increased production levels of fertilizer. We are determined to curtail the environmental footprint in line with global standards in the coming years. Our emphasis on health and safety resulted in almost zero health and safety incidents at plant sites during the year.

We see communities as our partners in growth and therefore, remain committed to create a positive impact through our sustainable activities. During the year, we spent over 1 % of after tax earnings on our community welfare activities focused on education, health, poverty alleviation, national cause donations and socio-economic development in rural areas. In line with our commitment of shared value creation and inclusive growth, we are updating supplier selection criteria to effectively manage our supply chain impacts in areas of environment, labor practices, human rights and societal interventions.