China XLX Fertiliser's 1H 2012 net profit soared 2.5 times to RMB175 million

HONG KONG, July 29, 2012 /PRNewswire-Asia/ --

Financial Highlights for 2012 interim results:

• Revenue rose 13% year-on-year to approximately RMB2,031 million.
• Net profit attributable to owners of the parent increased 2.5-fold year-on-year to approximately RMB175 million.
• Overall gross profit margin advanced six percentage points to 18% from a year ago.
• Net cash inflows from operating activities more than tripled to RMB337 million when compared with the same period last year.

China XLX Fertiliser Ltd. ("China XLX Fertiliser" or the "Company") (HKSE: 01866.HK; SGX: B9R.SI) announces that net profit attributable to owners of the parent for the six months ended 30 June 2012 (the "Period") soared 2.5 times year-on-year to RMB175 million. Basic earnings per share increased approximately two times year-on-year to RMB 14.91 cents.

Revenue of the Company and its subsidiaries (the "Group") grew 13% year-on-year to RMB 2,031 million in 1H 2012 due to an increase in average selling prices of urea and compound fertilisers and considerable improvement in sales volume of methanol. Gross profit for the Period climbed 81% year-on-year to RMB 374 million as cost of sales grew by merely 5%.

Underpinned by robust business expansion, net cash inflows from operating activities for the Period jumped more than 200% to RMB 337 million from the same period in 2011. The Group maintained a sound financial position. As at 30 June 2012, it had net assets of approximately RMB 2.2 billion, up 7% from the end of 2011, while its gearing ratio dropped one percentage point to 43% from the end of 2011. It completed the issue of RMB 300 million short-term notes in May 2012, paving a solid foundation for its sustainable business development.

Mr. Liu Xingxu, Chairman and CEO of the Group, commented, "China's nitrogen fertiliser industry experienced a boom in the first half of this year, with both of production and sales volume growing significantly. Producers were lured to expand production as urea prices rallied and coal prices softened leading to remarkable improvement in their profitability. We took advantage of these favourable market conditions to reinforce our cost leadership through enhanced operating efficiency and stringent cost management. With the support from our staff and business partners, the Group achieved outstanding operating results in the first half of this year."

Business Review

The Group sold 201,000 tonnes of compound fertilisers and 113,000 tonnes of methanol in 1H 2012, representing an increase of 0.4%, 43.2%, respectively, from the same period in 2011. Meanwhile, sales volume of urea for the Period slightly decreased by 4% year-on-year to 569,000 tonnes. Revenue from the sale of urea, compound fertilisers and methanol in 1H 2012 reached RMB 1,270 million, RMB 500 million and RMB 250 million, up 9%, 13% and 44% year-on-year respectively. Overall gross profit margin improved from 12% in 1H 2011 to 18% in 1H 2012, mainly due to higher gross profit margins of urea and methanol.

The gross profit margin of urea soared from 14% in 1H 2011 to 24% in 1H 2012 higher urea average selling prices and lower coal prices. As coal costs accounted for approximately 60% and 80% respectively of total production costs of urea and methanol, the Group's cost pressure was greatly alleviated, leading to higher profitability. During the Period, the gross profit margin of methanol improved from -10% in 1H 2011 to -2% in 1H 2012. Meanwhile, the gross profit margin of compound fertilisers remained stable and slightly improved from 15% in 1H 2011 to 16% in 1H 2012. The increase is attributable to higher average selling prices and locked-in input costs as the Group purchased raw materials before their prices rose.

The average selling prices of urea, compound fertilisers and methanol were RMB 2,226/tonne, RMB 2,516/tonne and RMB 2,234/tonne respectively, representing an increase of 13%, 12% and 0.4%.

Outlook

Going forward, Mr. Liu Xingxu said, "Despite severe challenges facing the global economy, we are cautiously optimistic about the future development of domestic fertiliser sector. China's food self-sufficiency ratio is still far behind the government's target. In the first half of 2012, crop imports jumped more than 40%, highlighting the severity of the issue. On the global front, in spite of an increase in corn plantation areas in the U.S., the ongoing drought there has wrecked havoc on corn production, triggering off the spiraling of international food prices. We believe that the Chinese government will further support the agriculture industry and put in more resources to address the Three Rural Issues to boost crop output and farmers' income. Domestic demand for fertilisers is set to flourish under the government's supportive measures, thereby creating favourable market conditions for us. We will carry out various measures to strengthen our competitiveness and market leadership, including optimization of product mix, persistent enhancement of production technology and better cost control. Our compound fertiliser production capacity increased significantly after a new production facility with annual capacity of 150,000 tonnes commenced operation in the first half of this year. In addition, we entered into a long-term strategic cooperation agreement with Shanxi Asian American-Daning in May 2012 to secure stable supply of anthracite coal in the coming three years. The development of the fourth urea plant is going smoothly and will start operations in the second half of next year as planned. Meanwhile, the expansion plan of Complex Plant V in Xinjiang was approved by shareholders at the extraordinary general meeting in July and detailed planning of its development was underway. We have formed a joint venture with Sinoagric Chain, a national distributor of agricultural products with chain stores across China, to actively expand compound fertiliser operations. Besides, we forged a closer strategic partnership with Anhui Huilong Agri Products, the biggest regional distributor in Anhui Province,to drive business growth. The Group will step up marketing efforts to increase brand awareness in the market, thereby creating greater demand for our products. Management firmly believes that our operations will move to a fast track upon the implementation of these measures and deliver fabulous returns to shareholders."

About China XLX Fertiliser Ltd.
China XLX Fertiliser Ltd., one of the largest and most cost efficient coal-based urea producers in China, is mainly engaged in the production and sale of urea, compound fertiliser and methanol. Its current production capacity of urea, compound fertiliser and methanol is 1.25 million tonnes, 750,000 tonnes and 200,000 tonnes, respectively. The Group is developing its fourth urea plant in Xinxiang City, Henan Province. Upon its completion in the second half of 2013, the Group's annual production capacity of urea will increase to over 2 million tonnes. Meanwhile, it forged a strategic partnership with Primavera Capital, an internationally renowned private equity fund, at the end of 2011. The Group will lever its extensive experience and resources network in the capital market to drive continuous business growth. The Company's shares are dually traded on the main boards of the Stock Exchange of Hong Kong Limited (stock code: 01866.HK) and the Singapore Stock Exchange (stock code: B9R.SI).

SOURCE China XLX Fertiliser Ltd.

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