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China XLX Reports Financial Results For First Quarter 2009

    SINGAPORE, April 27 /PRNewswire-Asia/ --

    Highlights (for three months ended 31/3/2009):

    -- The Group achieved a net profit of RMB59.1 million and full utilization
       of production facilities in the first quarter despite the impact of
       rising coal costs and the financial crisis
    -- Revenue decreased slightly by 0.4% YoY to RMB480.3 million
    -- The Group continued to focus on enhancing its cost efficiency and
       increasing its size, with the third urea plant commencing operation
       ahead of schedule in April 2009

China XLX Fertiliser Limited ("China XLX" or the "Group"; stock code: CXLX.SG), one of the largest and most cost efficient coal-based producers of urea and compound fertiliser in the PRC, announces the unaudited financial results of the Company and its subsidiaries (the "Group") for the quarter ended 31 March 2009 ("Review Period").

Performance Overview

Revenue for the Review Period amounted to RMB480.3 million, a slight decrease of 0.4% from RMB482.3 million for the same period last year. The reduction was mainly due to a drop in average selling prices of methanol fertiliser and a decrease in sales volume for methanol and compound fertiliser, which was partially offset by an increase in urea revenue by RMB37.9 million.

Net profit attributable to shareholders totaled RMB59.1 million for the first quarter of 2009, a decrease of 47.6% from the corresponding period last year. The decline was primarily attributable to lower average selling prices for methanol and higher costs of raw materials. The board did not recommend the payment of any dividend for the Review Period.

Commenting on the first quarter results, China XLX Chairman and CEO Mr. Liu Xingxu said, "The fertilizer sector was adversely affected by rising prices of anthracite coal during the period under review. However, we remained profitable by focusing on improving cost efficiency, while our production facilities were fully utilized. Moreover, the third urea plant commenced operation well ahead of the original schedule and our production capacities and operating efficiency will thus be further enhanced."

Gross Margin

The average selling price of urea decreased by 0.2% year-on-year to RMB1,718/ton for the first quarter of 2009. The average selling price of methanol dropped by 35.4% year-on-year to RMB1,488/ton while the average selling price of compound fertiliser fell by 10.8% year-on-year to RMB2,081/ton.

Overall gross profit margin for the Review Period was 18.9% compared to 31.8% for the corresponding period last year. Decline in overall gross margin was primarily due to the decrease in gross profit margins for urea, compound fertiliser and methanol.

The gross profit margin of urea for the first quarter declined to 21.4% from 36.5% for the same period last year due to higher coal costs. Anthracite coal prices was about 38% higher in first quarter 2009 as compared to the same period in 2008 because most coal mines remained shut after coal supply was temporarily disrupted when a major coal mine collapsed in Shanxi in February and heightened safety checks of coal mines during the National People's Congress in March 2009.

The gross profit margin of compound fertiliser fell to -3.7% from 20.8% for the first quarter of 2008. This was mainly due to an increase in cost of sales by RMB17 million resulting from higher-priced Mono-Ammonium Phosphate inventory purchased in the previous year.

As average selling prices of methanol decreased on declining oil prices, weaker demand for DME, construction, automotive and other downstream methanol industries and higher production costs incurred due to higher coal prices, the gross margin for methanol dropped to -32.4% from 33.2% for the same period last year.

The Third Urea Plant

Construction of the third urea plant was completed ahead of schedule in the third quarter of 2009 and it commenced operation on 14 April 2009. Annual production capacities of urea and methanol will increase by 400,000 tons and 50,000 tons respectively upon full operation of the plant. Together with ongoing upgrades of the existing two plants, the Group's total annual production capacities are expected to reach 1.25 million tons of urea, 600,000 tons of compound fertiliser and 200,000 tons of methanol, making it the 4th largest coal-based urea producer in the PRC. Management believes that the commencement of operation of the third urea plant, together with technical upgrades at the first plant and building a dedicated railway track to the second plant will help improve the Group's overall cost efficiency.

Financial Position

As at 31 March 2009, non-current assets amounted to approximately RMB1,861.4 million, representing an increase of RMB171 million or 10.1% over the end of last year. The increase in non-current assets was mainly due to the construction of the third urea plant and upgrades of existing plants.

Non-current liabilities as at 31 March were RMB647.4 million, up RMB105.8 million or 19.5% from the end of 2008. The increase in non-current liabilities was due to an increase in interest-bearing loans to support capital expenditure requirements.

Current assets decreased by RMB97.3 million or 12.3% to RMB694.4 million at 31 March from the end of last year. The decrease was principally due to a drop in inventories by RMB103.9 million resulting from a lower reserve inventory level required after the winter and stabilized raw materials supply. Coal inventory at 31 March represented about a half month of turnover.

Current liabilities decreased by RMB76.8 million or 15.7% to RMB412.6 million at 31 March from the end of last year. The decrease was mainly due to a net decrease of interest-bearing borrowings amounting to RMB30.0 million and the decrease in other payables and accruals by RMB28.0 million and RMB12.4 million respectively.

As at 31 March 2009, the Group had cash and cash equivalents of RMB225.4 million, up RMB25.2 from the end of last year. The increase was mainly due to cash generated from operations of RMB135.9 million and a net increase in bank loans of RMB72.0 million.

Outlook

Looking ahead, China XLX Chairman and CEO Mr. Liu Xingxu said, "Although the fertiliser industry will continue to face uncertainties, we do see signs of improvement in the market, including the government's supportive measures for the sector, a decrease in anthracite coal prices and an expected rebound in methanol prices in the second quarter.

"The Chinese government announced a number of stimulus measures to support the agriculture sector, including 1) an increase in the budget for the sector from RMB595 billion in 2008 to RMB716 billion for 2009, 2) an increase in direct subsidies/grants to farmers from RMB103 billion in 2008 to RMB120 billion for 2009, 3) legalization of change of land use rights for agricultural land, 4) a plan to commence commercial farming in certain pilot areas and 5) an increase in minimum crop prices to encourage farming. We expect these initiatives will benefit the development of the fertiliser sector.

"Moreover, the Chinese government had announced supportive measures to the fertiliser industry including the continuous provision of subsidies for the industry in the areas of value-added tax, electricity tariff and railway tariff as well as the lifting of urea price cap.

"In addition, anthracite coal prices have started to come down as coal mines that were previously shut down have resumed operation. Moreover, international coal prices have fallen below domestic prices, leading to an increase in coal imports into China.

"Also, we expect methanol prices will continue to rebound in the second quarter as they have increased from their low of RMB1,600/ton in January this year to the current level of RMB2,000/ton.

"The Group will continue to focus on enhancing cost efficiency and increasing our size. The early completion of the third plant will increase the production capacities of urea and methanol this year, laying a solid foundation for sustainable growth."


    Income statements for the First Quarter (3 months) ended 31 March 2009
    together with comparative statement for the respective corresponding
    period of the immediately preceding financial year.

                                                          Group
                                                Unaudited
                                              3 months ended        Increase/
                                          31/3/2009   31/3/2008    (Decrease)
                                           RMB'000     RMB'000          %

    Revenue                                480,329     482,299        (0.4%)
    Cost of sales                         (389,406)   (328,740)       18.5%
    Gross profit                            90,923     153,559       (40.8%)
    Other operating income/(expenses)          860        (622)     (238.3%)
    Selling and distribution expenses       (6,397)     (5,468)       17.0%
    General and administrative expenses    (16,885)    (24,289)      (30.5%)
    Profit from operations                  68,501     123,180       (44.4%)
    Financial income                           652       1,426       (54.3%)
    Financial expenses                        (124)     (6,039)      (97.9%)
    Profit before tax                       69,029     118,567       (41.8%)
    Income tax expense                      (9,923)     (5,866)       52.1%
    Net profit attributable to
     shareholders                           59,106     112,701       (47.6%)



    Balance sheets (for the Issuer and Group), together with the comparative
    statements as at the end of the immediately preceding financial year.

                                       Group                   Company
                                     Unaudited                Unaudited
                               31/3/2009   31/12/2008   31/3/2009   31/12/2008
                                RMB'000      RMB'000      RMB'000     RMB'000
    ASSETS
    Non-current assets
    Property, plant
     and equipment            1,787,478    1,616,011          --           --
    Land use rights              73,941       74,197          --           --
    Investment in
     subsidiary                      --           --     800,000      800,000
                              1,861,419    1,690,208     800,000      800,000

    Current assets
    Inventories                 131,070      234,965          --           --
    Prepayments                 303,735      304,469          --           --
    Trade receivables            11,747        7,667          --           --
    Bills receivable
     from banks                  11,070       18,580          --           --
    Derivatives                   5,523       19,807       5,523       19,807
    Other receivables             2,844        6,094         150        1,509
    Due from subsidiary              --           --     310,029      307,536
    Fixed deposits               14,594       10,685      14,594       10,685
    Cash and bank
     balances                   213,763      189,429       1,941       12,352
                                694,346      791,696     332,237      351,889

    TOTAL ASSETS              2,555,765    2,481,904   1,132,237    1,151,889


                                        Group                     Company
                                      Unaudited                  Unaudited
                               31/3/2009   31/12/2008   31/3/2009   31/12/2008
                                RMB'000      RMB'000     RMB'000      RMB'000
    Current liabilities
    Deferred grants              10,540        9,740          --           --
    Income tax payable            2,908          220          --          220
    Interest-bearing loans
     and borrowings             115,000      145,000          --           --
    Trade payables               33,071       47,760          --           --
    Bills payable to bank         3,000           --          --           --
    Other payables              126,306      154,302          --           --
    Due to related parties        3,535        1,676          --           --
    Accruals and other
     liabilities                118,267      130,709       8,121       10,563
                                412,627      489,407       8,121       10,783
    NET CURRENT ASSETS          281,719      302,289     324,116      341,106

    Non-current liabilities
    Interest-bearing loans
     and borrowings             537,793      432,974     307,557      307,557
    Loan from related party      90,000       90,000          --           --
    Deferred tax liabilities     19,617       18,617          --           --
                                647,410      541,591     307,557      307,557

    TOTAL LIABILITIES         1,060,037    1,030,998     315,678      318,340

    NET ASSETS                1,495,728    1,450,906     816,559      833,549

    Equity attributable to
     equity holder of the
     Company
    Share capital               772,328      772,328     772,328      772,328
    Statutory reserve fund       77,770       77,770          --           --
    Hedging reserve               5,523       19,807       5,523       19,807
    Accumulated profits         640,107      581,001      38,708       41,414
    Total shareholders'
     equity                   1,495,728    1,450,906     816,559      833,549

    TOTAL EQUITY AND
    LIABILITIES               2,555,765    2,481,904   1,132,237    1,151,889


Company Profile

China XLX Fertiliser Limited is listed on the Singapore Stock Exchange under stock code "CXLX". The Company is the 6th largest coal-based producer of urea in terms of production capacity in the PRC. Headquartered in Xinxiang, Henan Province, its manufacturing plants are equipped with advanced technologies for optimal production efficiency, making them the 4th lowest cost coal-based producer of urea in the PRC. For more information, please visit the Company's website: http://www.chinaxlx.com.sg .

Teleconference Call

China XLX's management will host a global conference call at 7 p.m. Singapore Time on 27 April 2009 (12:00 a.m. London Time or 7:00 a.m. New York Time) to share their perspectives on the results and answer questions from analysts.

    To access the teleconference, please dial:

    852 3005 2050  (International)
    800 852 3576   (Singapore Toll Free)
    800 701 1223   (China Toll Free)

    Pass Code: 541356#

    *Please dial in approximately 10 minutes before the scheduled call time.

Disclaimer

This press release includes forward-looking statements. All statements, other than statements of historical fact that address activities, events or developments that China XLX expects or anticipates will or may occur in the future, are forward-looking statements. China XLX's actual results or developments may differ materially from those indicated by these forward-looking statements as a result of various factors and uncertainties. In addition, China XLX makes the forward-looking statements referred to herein as of today and undertakes no obligation to update these statements

    Investor and media enquiries:

    China XLX Fertiliser Limited
     Jeremy Cheah
     Tel:   +65-9635-5441
     Email: [email protected]

    PRChina Limited
     Jane Liu
     Tel:   +852-2522-1838
     Email: [email protected]

    PRChina Limited
     Henry Chik
     Tel:   +852-2522-1838
     Email: [email protected]

SOURCE China XLX Fertiliser Limited

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