August 2, 2012

China XLX Fertiliser's H1 2012 net profit jumps to US$27.47 million

For the six months ended June 30, 2012 (the "Period"), the net income of China XLX Fertiliser Ltd. attributable to owners of the parent surged 2.5 times on-year to RMB175 million (US$27.47 million).

Basic earnings per share increased approximately two times on-year to RMB14.91 cents (US$0.0234).

Revenue of XLX Fertiliser and its subsidiaries (the "Group") grew 13% on-year to RMB2,031 million (US$318.85 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% on-year to RMB374 million (US$58.72 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 RMB337 million (US$52.91 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 RMB2.2 billion (US$0.35 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 RMB300 million (US$47 million) short-term notes in May 2012, paving a solid foundation for its sustainable business development.

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."

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% on-year to 569,000 tonnes. Revenue from the sale of urea, compound fertilisers and methanol in 1H 2012 reached RMB1,270 million (US$199 million), RMB500 million (US$78 million) and RMB250 million (US$39 million), up 9%, 13% and 44% 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 RMB2,226/tonne (US$349), RMB2,516/tonne (US$394) and RMB2,234/tonne (US$350)respectively, representing an increase of 13%, 12% and 0.4%.