Hanfeng Evergreen Inc.

Hanfeng Evergreen Inc.

May 05, 2008 22:23 ET

Hanfeng Announces Record Sales and Continued Growth in the First Quarter of 2008

--Sales increase 131%-- --Operating income increases 109%-- --Net Income grows to $7.1 million- --EPS of $0.12 per share--

TORONTO, ONTARIO--(Marketwire - May 5, 2008) - Hanfeng Evergreen Inc. ("Hanfeng" or the "Company") (TSX:HF) today reported its financial results for the first quarter of fiscal 2008. All amounts are in Canadian dollars unless otherwise noted.

The first quarter of 2008 marks the fifth consecutive quarter record sales and earnings growth as demand continues to increase for Hanfeng fertilizers. Sales grew to $55.8 million in the first quarter ended March 31, 2008, compared to $24.2 million in the same quarter of 2007. EBITDA from continuing operations in the first quarter of 2008 was $8.4 million, compared with $4.3 million in the same period in 2007. Net income from continuing operations was $7.1 million for the quarter compared with $3.2 million in 2007. Earnings per share ("EPS") from continuing operations were $0.12 for the first quarter compared $0.07 for the same period in 2007.

"Hanfeng's net income increased on both a year-over-year and consecutive quarter basis despite significant increases in input costs beginning in the summer of 2007," stated Xinduo Yu, Hanfeng's President and CEO. "We continue to experience high demand for our products, as our brand is synonymous with high efficiency and improved yield. Hanfeng's growing reputation and brand acceptance have allowed us to increase our average price per tonne by 16 percent since December 2007, offsetting the effects of rising input costs and stabilizing our margins."

Gross profit increased 126 percent in the first quarter of 2008 compared to the same period in 2007 while gross profit as a percentage of sales decreased slightly. During the quarter, international sales grew to 14.8 percent of total sales versus an historical average of approximately 5 percent, due to higher demand internationally for fertilizer. International sales are typically higher margin, lower volume sales of specialized fertilizer blends for specific applications, as opposed to the high volume domestic China sales to the agriculture market. Hanfeng's gross profit percentage on domestic China sales in the quarter was 16.7 percent, a slight improvement over the fourth quarter of 2007, but lower than the first quarter of 2007. Due to a recently adopted 100 percent export duty by the Chinese government on all types of fertilizers, for the period from April 20 through September 30, 2008, Hanfeng expects international sales for 2008 to be at historic levels. Hanfeng also anticipates that the policy will help to further stabilize or potentially decrease raw material prices in China. Hanfeng sources nearly all its raw materials from China.

As at March 31, 2008, Hanfeng reported cash and cash equivalents of $19.5 million and working capital of $101 million versus $28.7 million and $91.1 million respectively at December 31, 2007. At March 31, 2008, long-term debt was $nil and current bank debt was $19.1 million.

Business Highlights

- Significant field trials results In January 2008, the results of extensive field trials using Hanfeng's SCU were announced. The field trials were carried out in 20 provinces over a two-year period by Dr. Yuan Longping, who is internationally recognized as a leader in the development of hybrid rice. The field trials demonstrated that sulfur coated urea ("SCU"), used in numerous regions, in varying soil conditions, and with various types of hybrid rice, generated higher crop yields while using less nitrogen. In many cases, the effectiveness of the fertilizer was increased by more than 50 percent and the nitrogen requirement reduced by as much as 30 percent. Moreover, the field trials provide that SCU eliminated the need for multiple fertilizations, reduced the incidence of disease, and enhanced the quality of the rice crop.

- Completion of new plant At the end of February 2008, Hanfeng completed commissioning of the second phase of its 100,000 tonnes per annum ("tpa") expansion of the Heilongjiang facility in China. The 50,000 tpa polymer/sulfur coated compound plant was completed on budget and ahead of schedule. This coating technology, developed by Hanfeng's own R&D team provides more precise control of the release periods for nutrients at an affordable cost for farmers in China. Hanfeng's annual production design capacity is now 700,000 tonnes.

- Expansion into distribution in China In March 2008, Hanfeng announced its plan to expand its product distribution and fertilizer blending capabilities in China. Due to increasing demand for slow release fertilizer, Hanfeng has been forced to limit sales to immediate regions surrounding its facilities. With the expansion into distribution, Hanfeng will have the opportunity to rapidly increase its sales tonnage and market share by leveraging the blending of its products with production from local conventional fertilizer producers. On average, roughly 10 to 30 percent of coated slow release fertilizer can be blended with conventional fertilizer to provide the best economic return for farmers. Hanfeng has selected five initial regions for the distribution expansion and expects to begin to roll out of its distribution network in 2008 and the third party blending model in 2009.

- Production expansion Construction of the 50,000 tpa joint venture SCU plant at Shanxi Fengxi Fertilizer Group Ltd. in Shanxi Province remains on schedule. Hanfeng expects to complete the construction before July 2008. The 50,000 tpa joint venture SCU plant with Anhui Linquan Industry Chemical Co., Ltd. ("Anhui"), located in the Anhui Province is still waiting for government approval before construction can begin. Hanfeng is currently reviewing further expansion projects.

Summary Financial Results
For the 3 month period ended March 31
(in thousands in $Cdn) except
percentages and per share 2008 2007 change

Sales $55,795 $24,169 131%
Gross profit 10,744 4,758 126%
19.3% 19.7% (0.4%)
Gross profit (% of sales)
EBITDA 8,444 4,268 98%
Net Income $7,072 3,223 119%
Basic EPS 0.12 0.07 0.05
Diluted EPS 0.11 0.07 0.04

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.

Balance Sheet Highlights
(In thousand except for ratios) March 31, 2008 December 31, 2007
Current ratio(i) 3.9 : 1 3.8 : 1
Cash 19,532 28,690
Working capital 101,156 91,089
Total assets 229,025 207,641
Total debt 34,889 32,793
Loans payable (current portion) 19,058 26,383
Total equity 194,136 174,848
Debt /Equity (ii) 18% 19%
(i) Current ratio equals Current Assets / Current Liabilities
(ii) Debt to Equity equals Total Debt / Total Equity

Hanfeng Evergreen Inc. will host a conference call to discuss its first quarter 2008 financial results. Ms. Madeline Yu, CFO and Robert Beutel, Chairman of the Board, will host the call.

Date: Tuesday, May 6, 2008
Time: 10:00 am Eastern
Dial In Number: 416-641-6123 or 866-300-7687or
Taped Replay: 416-695-5800 or 800-408-3053or (available for 7
Taped Replay Passcode: 3260432

Live webcast link: http://events.onlinebroadcasting.com/hanfeng/050608/index.php.

Hanfeng will hold its Annual General Meeting of Shareholders at 4:30 pm on May 6, 2008 at the Ontario Heritage Centre, 8 Adelaide Street East, Toronto, Ontario.

About Hanfeng Evergreen Inc.

Hanfeng is the largest producer of slow and controlled release fertilizers in China. It was the first company to introduce the concept of slow and controlled release fertilizers into China's agriculture market with its establishment of the first commercial scale 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. 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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