Hanfeng Evergreen Inc.

Hanfeng Evergreen Inc.

May 12, 2011 18:03 ET

Hanfeng Announces Third Quarter Fiscal 2011 Financial Results

- Margins Rebound

- Revenue Increases 22 Percent in the Quarter

- Company Reports EPS of $0.13

TORONTO, ONTARIO--(Marketwire - May 12, 2011) - Hanfeng Evergreen Inc. (TSX:HF) ("Hanfeng" or the "Company") today reported its financial results for the three and nine months ended March 31, 2011. All amounts are in Canadian dollars unless otherwise noted.

Summary Financial Results

In Cdn $. thousands except per share dataFor the three-month period ended Mar 31For the nine-month period ended Mar 31
Gross profit11,66610,47523,73829,551
Net Income8,3457,29810,07619,707
Basic EPS0.
Diluted EPS0.

(1)Earnings before interest, taxes, depreciation, and amortization (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. Hanfeng calculates it by adding (1) net income, (2) interest expense (or deducting interest income), (3) depreciation expense reported as part of cost of goods sold, (4) depreciation expense reported as a line item on the income statements, (5) fixed asset write-down, (6) income tax expense reported on the income statement and, (7) by deducting (adding) foreign exchange gain (loss). This might not be the same definition used by other companies.

(2)Non-GAAP EPS is calculated the same way as basic EPS, except that the net of tax impact of non-cash, fixed-asset write-downs are excluded.

Sales increased to $85.2 million for the quarter ended March 31, 2011, a 22 percent increase over the $70.0 million achieved in the comparative quarter in fiscal 2010. The increase was primarily due to increases in the selling price of the Company's core slow and controlled release fertilizers ("SCR") products and CarbonPower coated urea ("CPU"), and an 84 percent increase in CPU volumes in the quarter.

EBITDA in the third quarter of fiscal 2011 was $11.2 million versus $9.2 million in the third quarter of fiscal 2010 primarily due to an increase in gross margin per tonne in Renminbi (RMB) for SCR (RMB 490 in 2011 vs. RMB 441 in 2010) and offset by a decrease in gross margin per tonne in RMB for CPU (RMB 164 in 2011 vs. RMB 193 in 2010).

Net income increased to $8.3 million for the current quarter versus net income of $7.3 million in the third quarter of fiscal 2010. Earnings per share (EPS) were $0.13 for the third quarter of fiscal 2011 compared to EPS of $0.12 in the third quarter of fiscal 2010.

Sales in the nine-month period ended March 31, 2011 were $193.1 million, a 4 percent increase compared to the $186.5 million generated in the comparable period of fiscal 2010. EBITDA for the nine-month period ending March 31, 2011 was $21.2 million compared to $26.9 million in the comparative period in 2010. Net income was $10.1 million and EPS was $0.16 for the nine–month period ending March 31, 2011 versus $19.7 million and $0.32 in the same period of fiscal 2010. Adjusting for the impact non-cash fixed asset write-downs, non-GAAP EPS for the nine-month periods ending March 31, 2011 and 2010 were $0.23 and $0.33 respectively.

As at March 31, 2011, Hanfeng reported cash and cash equivalents of $40.6 million, net working capital of $171.6 million, long-term debt of $2.9 million, and short term bank loan of $7.0 million. In addition, Hanfeng has undrawn lines of credit in China totaling RMB 660 million (CAD $98 million).

Liquidity and Capital Resources

In thousands of Canadian dollars except for ratiosMarch 31, 2011June 30, 2010
Current ratio (1)13.9 : 141.8 : 1
Cash & cash equivalents40,59151,949
Working capital171,631166,695
Total assets292,516286,781
Total debt (2)9,833nil
Total equity276,248282,596
Total debt / Total equity3.6%n/a
(1)Current ratio = Current Assets / Current Liabilities
(2)Total debt does not include accounts payable, accrued liabilities, advances from customers, income tax payable and future income tax liability.

Mr. Niral Merchant, CFO of Hanfeng, will host a conference call to review the Company's financial and operational performance. Management invites analysts and investors to participate in the conference call.

Date:May 13, 2011
Time:10:00 am, Eastern Time
Dial in Number:1-877-874-1569 or 1-719-325-4771
Taped Replay:1-877-870-5176 or 1-858-384-5517
Taped Replay Pass Code:8311706
Webcast Presentation Link:http://viavid.net/dce.aspx?sid=00008575

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

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. The Company's production facilities are located in prime agricultural regions of China. Hanfeng has recently completed its first production facility outside China. Located in Surabaya, Indonesia, the facility will service the growing South East Asian market. Hanfeng is headquartered in Toronto, Ontario and its shares trade on the Toronto Stock Exchange.

This press release contains forward-looking statements based on current expectations. Forward looking statements include, without limitation, statements evaluating market and general economic conditions, and statements regarding growth strategy and future-oriented projected revenue, costs and expenditures. Actual results could differ materially from those projected and should not be relied upon as a prediction of future events. A variety of inherent risks, uncertainties and factors, many of which are beyond Hanfeng's control, affect the operations, performance and results of Hanfeng and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. Some of these risks, uncertainties and factors include the impact or unanticipated impact of: current, pending and proposed legislative or regulatory developments in the jurisdictions where Hanfeng operates, in particular in China and the Republic of Indonesia; changes in tax laws; political conditions and developments; intensifying competition from established competitors and new entrants in the fertilizer industries; technological change; currency value fluctuation and changes in foreign exchange restrictions; changes in Chinese government support or restrictions on foreign investment; general economic conditions worldwide, as well as in China and South East Asia; Hanfeng's success in developing and introducing new products and services, constructing and operating new manufacturing facilities, expanding existing distribution channels, developing new distribution channels and realizing increased revenue from these channels. This list is not exhaustive of the factors that may affect any of Hanfeng's 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. Hanfeng undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results or for any other reason. Readers are cautioned not to put undue reliance on forward-looking statements.

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