Hanfeng Evergreen Inc.

Hanfeng Evergreen Inc.

September 10, 2009 00:47 ET

Hanfeng Announces Financial Results for Fiscal 2009

TORONTO, ONTARIO--(Marketwire - Sept. 10, 2009) - Hanfeng Evergreen Inc. (TSX:HF) ("Hanfeng" or the "Company") today reported its audited financial results for the three and six month transition period ended June 30, 2009. Hanfeng changed its fiscal year-end from December 31 to June 30, effective from June 30, 2009. All amounts are in Canadian dollars unless otherwise noted.

Summary Financial Results
Year ended
(in thousands in $Cdn) Six months ended June 30 December 31
except percentages and ------------------------------------------------
per share data 2009 2008 change 2008

Sales $143,214 $123,530 15.9% $272,978
Gross profit 22,863 21,466 6.51% 44,423
EBITDA 25,606 17,581 45.7% 40,963
Net Income 21,278 14,892 42.9% 35,139
Basic EPS 0.35 0.24 0.11 0.57
Diluted EPS 0.35 0.24 0.11 0.57
Note EBITDA is a non-GAAP financial measure, which the Company believes is
meaningful information for purposes of performance evaluation and it allows
for comparisons of the Company's performance to the industry as it
eliminates the impact of financing decisions, capital structure and the
cost basis of assets.

For the six months ended June 30, 2009, sales, net income and EBITDA decreased compared to year ended December 31, 2008 due to the varying length of periods compared herein. When comparing the six months ended June 30, 2009 with the same period of 2008, sales grew by 15.9 percent to $143.2 million, compared to $123.5 million for the first six month period in 2008. EBITDA in the first six months of 2009 was $ 25.6 million, a 45.7 percent increase compared to the $17.6 million reported in the same period of 2008. Net income grew to $ 21.3 million in 2009 compared with $14.9 million in the first six months of 2008, a 42.9 percent increase. EPS was $0.35 for the six months ended June 30, 2009, compared to $0.24 for the same period of last year.

The increase in top and bottom line performance was driven by the impact of foreign exchange. Approximately 273,548 metric tons (MT) of fertilizer were sold in the first six months, compared to 270,386 MT in the same period in 2008. Also positively impacting the six month results was $4.1 million of income from new product development activities.

Sales for the second quarter of 2009 were consistent with the same quarter of 2008 ($67.4 million for 2009 Q2 vs. $67.7 million for 2008 Q2). This resulted from the slight increase in sales price in Canadian dollars offset by a small decrease in sales volume (136,197 MT in 2009 Q2 versus 142,416 in 2008 Q2) caused by generally weak market and economic conditions. EBITDA in the second quarter of 2009 was $13.4 million, a 46.6 percent increase over the $9.1 million in the same period in 2008. Net income increased by 43.3 percent to $11.2 million for the second quarter of 2009 compared with $7.8 million in the same quarter of 2008 mainly due to income from new product development activities. Earnings per share (EPS) was $0.19 for the second quarter of 2009 compared to $0.13 in the same period in 2008.

In the first six months of 2009, Hanfeng's average selling price decreased to approximately RMB 2,966 per metric ton, compared to RMB 3,319 per metric ton in the year ended December 31, 2008, a decrease of 10.6 percent. The decrease was due to significant decreases in raw material costs, particularly urea, phosphate, and potash (conventional fertilizers) as large producers and distributors liquidated excess inventory. Conventional fertilizers collectively account for approximately 90 percent of Hanfeng's cost of goods sold, but also represent Hanfeng's primary product competition. As a value-added product, Hanfeng's SCR prices closely track the raw material prices. For example, the price of urea decreased by 11.3 percent in the first half of 2009 compared to the year ended December 31, 2008, which corresponds to Hanfeng's 11.9 percent reduction in selling price during the same period.

Gross profit in the second quarter of 2009 was consistent with the same period of the prior year ($10.7 million for 2009 Q2 and 2008 Q2). For the six-month period, gross profit increased to $22.9 million in the first six months of 2009, a 6.5 percent increase from $21.5 million for the first half of 2008 due to increase in the gross profit per ton, mainly due to the impact of foreign exchange. Gross profit on a per metric ton basis in the first six months in 2009 was approximately RMB 473 in the China market, compared with RMB 513 in the year ended December 31, 2008, a 7.8 percent decrease. The decrease in the gross profit per ton was due to lower average selling prices caused by the aforementioned factors.

In the second quarter of 2009, gross profit as a percentage of sales was consistent with the same period of 2008. On a year-over-year basis, gross margin for the China market has increased slightly (16.0 percent for the first six months of 2009 vs. 15.5 percent for the year ended December 31, 2008).

At June 30 2009, there were approximately 14,791 metric tons of finished goods on hand as Hanfeng scheduled extra production in the second quarter to offset regular maintenance shut downs in the first quarter, primarily at its Heilongjiang facility. Hanfeng's annual design production capacity increased from 700,000 metric tons per annum (MTPA) as at June 30, 2008 to 712,500 MTPA as at June 30, 2009, and 762,500 as of the date of this news release.

Throughout 2008 and the first half of 2009, the Chinese Renminbi (RMB) appreciated approximately 16.5 percent to the Canadian dollar. Although Hanfeng earns almost all of its revenue and pays all of its suppliers in RMB, it reports its financial results in Canadian dollars and the appreciation of the RMB has a positive impact on reported revenues.

As at June 30, 2009, Hanfeng reported cash and cash equivalents of $92.3 million and net working capital of $148.8 million. Total inventory and advances to suppliers decreased to $77.8 million at June 30, 2009, compared with $117.5 million at 2008 year end as the Company undertook initiatives to better manage working capital in the current market environment. As at June 30, 2009, Hanfeng had bank loan of $39.1 million and had no long-term debt.

Balance Sheet Highlights
(In CAD$ thousands except for ratios) June 30, 2009 December 31, 2008
Current ratio (1) 4.4:1 5.4: 1
Cash & cash equivalents 92,342 26,439
Working capital 148,786 131,077
Total assets 317,266 295,713
Total debt 39,146 25,130
Total equity 273,777 266,194
Debt / Equity 14% 9%
(1) Current ratio equals Current Assets / Current Liabilities
(2) Total debt does not include accounts payable, accrued liabilities,
advances from customers and income tax payable.

2009 Business Highlights:

- Hanfeng is pleased to report that the initial 100,000 MTPA joint venture ("JV") facility in Shandong Province with Shandong Mingshui Great Chemical Group ("Mingshui") has begun commercial operations in July 2009. Construction of the announced 100,000 MTPA expansion began in August 2009 and is scheduled for completion in September of 2010. To further expand production at the JV facilities, Hanfeng and Mingshui entered into an agreement to merge Mingshui's existing 40,000 MTPA sulfur coated plant with the newly constructed JV facility. When completed, the Shandong Mingshui JV facility will have design capacity of 240,000 MTPA. The Shandong province is a key market for Hanfeng products and consumes approximately 15 million MTPA of fertilizers annually, the largest of any province in China.

- Hanfeng completed its previously announced joint venture agreement with PT. Matahari Kahuripan Indonesia, the largest producer of palm oil and tobacco in Indonesia, and PT. Sumber Agrindo Sejahtera, Indonesia's largest agricultural distributor, to build and operate the 150,000 MPTA initial phase of a slow and controlled release fertilizer facility. Construction commenced in May 2009 and is expected to be completed by June 2010.

- In August 2009, Hanfeng was selected by the Standardization Administration of the People's Republic of China to establish the National Compulsory Standard for sulphur coated urea ("SCU"), as well as the standards for blended fertilizers where SCU is used. Hanfeng will team with the National Quality Supervision and Test Center of Chemical Fertilizer (National Quality) to further refine and improve the specifications and provisions provided in the Chemical Industry Standard for SCU, which Hanfeng and the National Quality Center established previously, to form the national standard to be enforced nation-wide, no later than 2011. The SCU National Compulsory Standard will control technical specifications including the amount of nitrogen and sulfur contained in SCU, as well as the dissolution criteria for its slow-release characteristics. The application and enforcement of the new standard is expected to improve the quality of the SCU market in China, and further enhance Hanfeng's first mover advantage.

- The Chinese government announced reduced export tariffs on most fertilizers beginning July 1, 2009. Based on the new guidelines, the existing tariff will be reduced to 35 percent in the busy season (i.e., January to September) and 10% during the slow season (i.e., October to December). In addition, the special tariff for a number of fertilizers has been reduced from 75 percent to Nil. It is expected that the reduction in tariffs will create new opportunities for Hanfeng's SCR products in the international market.

- The Company repaid its outstanding loans as at June 30, 2009 of $39.1 million from cash on hand and obtained two new credit facilities for an aggregate of RMB 730 million (Cdn $124.2 million). As at September 9, 2009, Hanfeng did not utilize any of the line of credits.

Hanfeng Evergreen Inc. will host a conference call to discuss its first quarter 2009 financial results. Robert Beutel, Chairman of the Board, will host the call.

Date: Thursday, September 10, 2009

Time: 11:00 am, Eastern Time

Dial in Number: 416-695-6616 or 1-800-766-6630

Taped Replay: 416-695-5800 or 1-800-408-3053

Taped Replay Pass Code: 3148215

Webcast Presentation Link:

Hanfeng will hold its Annual General Meeting of Shareholders at 4:00 pm on November 12, 2009 at the Ontario Heritage Center, 8 Adelaide Street, Toronto, Ontario.

Hanfeng's 2009 financial statements and MD&A have been filed and will be available at www.sedar.com.

About Hanfeng Evergreen Inc.

Hanfeng is a leading provider of slow and controlled release fertilizers to blenders, the agriculture market and the urban greening market. Hanfeng was the first to introduce the concept of slow and controlled release fertilizers into China's agriculture market with its establishment of the first commercial scale slow-release fertilizer production in China. All production facilities are located in prime agricultural regions of China. The Company is headquartered in Toronto, Ontario and its shares trade on the Toronto Stock Exchange. For more information, please visit: www.hanfengevergreen.com.

This press release contains forward-looking statements based on current expectations. These forward-looking statements entail various risks and uncertainties that could cause actual results to differ materially from those reflected in these forward-looking statements. Risks and uncertainties about Hanfeng's business are more fully discussed in the Company's disclosure materials, including its annual information form and MD&A, filed with the securities regulatory authorities in Canada.

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