Migao Corporation
TSX VENTURE : MGO

Migao Corporation

January 15, 2007 07:00 ET

Migao Announces Fiscal 2006 Year-End Financial Results

47% revenue growth and 29% earnings growth

TORONTO, ONTARIO--(CCNMatthews - Jan. 15, 2007) - Migao Corporation, (TSX VENTURE:MGO) a China-based leading specialty potash fertilizer producer, is pleased to report that during the fiscal year ended September 30, 2006, the Company achieved revenues of $58.3 million and net earnings of $8.6 million, or $0.37 per basic share.

For the twelve months ended September 30, 2006, Migao reported revenues of $58.3 million, a 47% increase as compared to the $39.8 million revenues achieved last year. Net income for fiscal 2006 was $8.6 million, or $0.37 per basic share as compared to $6.7 million for the same period last year.

"We are extremely pleased with the revenue and earnings growth achieved this year. Our attention to quality was a key factor in retaining all of our pre-existing customers as well as attracting new ones," said Mr. Liu Guocai, Migao's President and CEO. "During the year, we successfully accelerated our expansion plans and we will continue to increase our production capabilities to capitalize on the opportunities available in one of the fastest growing, and largest markets in the world."

Gross margin as a percentage of revenues was 24% for the year ended September 30, 2006, up from 23% for the same twelve-month period in 2005.

Cash flow from operations was $8.4 million or 170% higher as compared to last year. Cash and cash equivalents totaled $16.3 million at September 30, 2006. Working capital at September 30, 2006 was $19.4 million.

Income tax paid during fiscal 2006 totaled $0.3 million. Each of Migao's wholly owned operating subsidiaries qualify for a favourable tax program whereby the first two profitable years are tax exempt and the next three years' tax rate is half of the prescribed corporate rate. Income tax paid during the year is a result of Sichuan Migao entering its first of the three-year tax reduced rate.

In May 2006, the Company completed a financing for gross proceeds of $18.1 million concurrent with the listing of Migao Corporation on the TSX Venture Exchange under the symbol 'MGO'.

Operationally, Migao produced potassium nitrate or potassium sulphate at its three operating subsidiaries: Sichuan Migao, Guangdong Migao, and Liaoning Migao. Migao ended fiscal 2006 with 120,000 tonnes of design production capacity, and subsequently added 20,000 tonnes of potassium nitrate capacity at Sichuan Migao and 40,000 tonnes of potassium sulphate capacity at Guangdong Migao, for a total of 180,000 tonnes of current design production capacity.

Further expansion activity currently in progress includes an additional 20,000 tonnes of potassium nitrate at Sichuan Migao; 20,000 tonnes of potassium sulphate at Guangdong Migao and recently announced plans to build a new 40,000 tonne potassium sulphate facility in a new industrial park close to Shanghai. The new Shanghai Migao facility will be completed in late 2007.

With the completion of the Shanghai Migao expansion by the end of calendar 2007, the annual design production capacity of potassium nitrate and potassium sulphate will be 260,000 tonnes by the end of calendar 2007. As well, the design production capacity includes an additional 260,000 tonnes per year of by-product at the end of calendar 2007.

Conference Call

Migao will be hosting a conference call to discuss the year-end results at 10:00am Monday January 15, 2007. The details are as follows:
Dial in number: 416-695-6120 or 1-888-789-0150
Taped replay (until January 22, 2007): 416-695-5275 or 1-888-509-0081
Taped replay access code: 638258

Migao Corporation, through its wholly owned subsidiaries owns and operates fertilizer production plants in various strategic locations across China for the production and sales of specialty potash fertilizer (potassium nitrate and potassium sulphate) to the Chinese domestic agricultural market. Please visit www.migaocorp.com.

This press release contains statements that may constitute forward-looking statements, which may include financial and other projections, as well as statements regarding future plans, objectives or economic performance. Forward-looking information involves significant risks, assumptions, uncertainties and other factors that may cause actual future results or anticipated events to differ materially from those expressed or implied and accordingly, investors should not place undue reliance on any such forward-looking statements. Factors that could cause results to vary include those expressed in the Company's filings with Canadian securities regulatory authorities. All information presented herein should be read in conjunction with such filings.



Migao Corporation
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Consolidated Balance Sheets
(in Canadian dollars)
September 30, 2006 and 2005
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2006 2005
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Assets
Current assets
Cash and cash equivalents (note 14) $ 16,315,835 $ 2,455,571
Accounts receivable 4,435,769 3,747,496
Prepayments, deposits and other
receivables (note 3) 4,891,382 3,004,872
Inventory (note 4) 3,947,193 2,434,816
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29,590,179 11,642,755
Plant and equipment (note 6) 13,464,499 8,758,541
Construction in progress 6,203,587 2,664,321
Land use rights (note 7) 7,828,983 4,893,638
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$ 57,087,248 $ 27,959,255
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Liabilities
Current liabilities
Bank indebtedness (note 8) $ 1,410,000 $ -
Accounts payable and accrued
liabilities (note 7) 5,213,106 4,970,922
Customer deposits 2,965,101 467,513
Due to related parties (note 5) 530,672 261,864
Income tax payable 109,308 -
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10,228,187 5,700,299
Due to related parties (note 5) - 15,676,613
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10,228,187 21,376,912
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Shareholders' equity
Share capital (note 9) 28,729,591 1,538
Contributed surplus (note 9) 2,955,592 -
Cumulative translation adjustment (146,877) (142,388)
Retained earnings (note 11) 15,320,755 6,723,193
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46,859,061 6,582,343
Commitments and contingencies (note 14)
Subsequent events (note 17)
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$ 57,087,248 $ 27,959,255
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The accompanying notes are an integral part of these consolidated financial
statements.

Approved on behalf of the Board of Directors

Signed by "Guocai Liu" Signed by "Keith Attoe"
Director Director

Migao Corporation
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Consolidated Statements of Operations and Retained Earnings
For the periods ended September 30, 2006 and 2005
(in Canadian dollars)
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Year Ended Nine Months Ended
September 30, 2006 September 30, 2005
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Revenues $ 58,349,473 $ 32,503,436
Cost of goods sold 44,599,078 24,574,792
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Gross profit 13,750,395 7,928,644
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Operating expenses
Selling expenses 2,019,132 899,054
General and administrative 1,883,841 1,018,787
Stock-based compensation 370,305 -
Professional and consulting 499,651 193,525
Pre-operating costs - 142,294
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4,772,929 2,253,660
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Income from operations 8,977,466 5,674,984
Other income 50,246 7,295
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Income before income taxes 9,027,712 5,682,279
Provision for income taxes
(note 12) 430,150 -
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Net income for the period 8,597,562 5,682,279
Retained earnings, beginning
of period 6,723,193 1,040,914
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Retained earnings, end of
period $ 15,320,755 $ 6,723,193
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Income per share: (note 10)
Basic $ 0.37 $ -
Diluted $ 0.37 $ -
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Weighted average number of common
shares outstanding: (note 10)
Basic 23,539,842 -
Diluted 23,555,094 -
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The accompanying notes are an integral part of these consolidated financial
statements.

Migao Corporation
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Consolidated Statements of Cash Flows
For the periods ended September 30, 2006 and 2005
(in Canadian dollars)
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Year Ended Nine Months Ended
September 30, 2006 September 30, 2005
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Cash flow from operating
activities
Cash receipts from customers $ 60,158,788 $ 31,484,132
Cash paid to suppliers and
employees (51,454,033) (28,455,491)
Cash repaid by related party
for supplies - 59,995
Income taxes paid (320,842) -
Interest paid (55,813) -
Interest received 50,246 7,295
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8,378,346 3,095,931
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Cash flow from investing
activities
Purchase of plant and
equipment (5,580,367) (1,979,848)
Construction in process (3,539,266) (1,489,590)
Payments for land use rights (2,946,440) (1,960,260)
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(12,066,073) (5,429,698)
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Cash flow from financing
activities
Proceeds from bank loan 1,410,000 -
Capital injections from owners - 3,726,122
Advances from related parties,
net 268,808 2,425,359
Issuance of common shares, net 15,869,183 1,538
Repayment of related parties
advances - (2,113,218)
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17,547,991 4,039,801
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Increase in cash and cash
equivalents 13,860,264 1,706,034
Cash and cash equivalents,
beginning of period 2,455,571 749,537
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Cash and cash equivalents, end
of period $ 16,315,835 $ 2,455,571
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Cash and cash equivalents
consist of:
Cash on hand $ 12,112,572 $ 2,455,571
Term deposit 40,000 -
Bank notes 4,163,263 -
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$ 16,315,835 $ 2,455,571
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The accompanying notes are an integral part of these consolidated financial
statements.


The TSX Venture Exchange has in no way passed upon the merits of the transaction and has neither approved nor disapproved the contents of this press release.

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