Migao Corporation
TSX : MGO

Migao Corporation

May 13, 2008 08:34 ET

Migao Announces Second Quarter Financial Results

- Gross Profit Margin Improves to 24% - - Keith Attoe to Re-Join Board of Directors -

TORONTO, ONTARIO--(Marketwire - May 13, 2008) - Migao Corporation (TSX:MGO), a China-based leading specialty potash fertilizer producer, today reported sales of $34.5 million for the three-month period ended March 31, 2008 compared to $27.7 million for the comparable quarter in fiscal 2007. The Company reported EBITDA for the first quarter of $5.8 million or 17% of revenue versus $4.2 million or 15% of revenue in the same period last year. Net income of $4.6 million or 13% of revenue for the quarter was achieved compared to $3.3 million or 12% of revenue in the same quarter in 2007. The Company earned $0.12 per basic share outstanding for the quarter, compared to $0.10 per share in the second quarter in 2007.

The Company also wishes to report on the condition of its Sichuan Migao potassium nitrate facility located in the province of Sichuan, which incurred a significant earthquake of a 7.9 magnitude. All companies were shut down in the area for one day as a precaution against aftershocks and for the government to inspect gas pipelines throughout the area. Initial damage reports from Migao's Sichuan facility shows no major structural damage to the plant or equipment. A section of a 2-metre tall storage wall did collapse however it is not to interfere with operations. A small staff of engineers have been using the mandated shutdown day to conduct a thorough inspection of the plant for any damage. The Company will provide an update on Sichuan Migao on a conference call rescheduled for 1:30pm today (originally scheduled for 10:00am) and to also discuss the financial results for the quarter. Call-in instructions for the conference call are below.

Gross margin of 24% reinforces the strong demand environment for Migao's specialty fertilizers. The Company successfully passed through increased raw material prices during the quarter. Potash and sulphuric acid prices rose slightly during the quarter, followed by a large price increase in potash in the current period. The Company recently announced that despite increases to the price of potash imported into China, Migao negotiated customer prices to reflect the rising costs and preserve Migao's stated goal of maintaining gross margin as a percentage of revenue in the range of 22-24%.

"Strong demand for our products continued in the current quarter, and we foresee sustained demand into the future, in light of rising raw material costs," stated Mr. Liu Guocai, President and CEO of Migao. "Farmers realize that Migao's fertilizers are integral to the economic performance of the high value crops they grow and that the costs are relatively small to the end customer."

The gains realized by Migao's high value crop customers allow them to absorb the increased costs of Migao's specialty potash based fertilizers and still be highly competitive. The lack of government intervention and the demand for high value fruits and vegetables, and tobacco by China's growing middle class has created market conditions that are very favourable for Migao's potassium sulphate and potassium nitrate fertilizers.

For the six-month period ended March 31 2008, Migao reported sales of $59.1 million compared to $49.4 million for the comparable period in fiscal 2007. EBITDA for the first half of fiscal 2008 was $9.8 million or 17% of revenue versus $7.3 million or 15% of revenue in the same period last year. Net income was $7.7 million for the first half of fiscal 2008 compared to $5.7 million in the same period in 2007.

As at March 31, 2008, Migao reported cash of $32.9 million and working capital of $74.5 million. At March 31, 2008, long term debt was nil and current bank debt was $4.3 million.



SUMMARY FINANCIAL STATEMENTS

3 months ended 3 months ended
March 31, 2008 March 31, 2007


($'000)
Sales 34,506 27,712
Gross Profit 8,256 6,281
Net Income 4,565 3,338
EBITDA 5,830 4,250
Basic EPS 0.12 0.10
Diluted EPS 0.11 0.10


Weighted average number of
shares (in millions of shares)
Basic 38.2 31.8
Diluted 40.8 32.7


Balance Sheet Highlights
($'000)

3 months ended 3 months ended
March 31, 2008 March 31, 2007


Current ratio 2.84:1 5.10:1
Cash 32,875 25,568
Working Capital 74,513 41,034
Total assets 170,382 89,798
Debt to Equity Ratio 0.31:1 0.13:1


Provision for income tax during the quarter totaled $0.6 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 quarter is a result of certain Migao subsidiaries being in the three-year tax reduced rate.

Highlights for the quarter ended March 31, 2008 include:

On February 15, 2008, the Company announced that it had entered into a long term potash supply contract with JSC Silvinit thereby securing sufficient supply to meet the Company's long term needs.

On March 13, 2008, the Company completed a private placement of 3,593,750 common shares priced at $8.00 per share for gross proceeds of $28.8 million.

Subsequent to the end of the quarter, the Company announced the construction of a 120,000 tonne sulphuric acid production facility. This facility will ensure Migao is able to obtain reliable supplies of this key product while at the same time improving gross profit.

Migao received ISO 9001:2000 certification for its quality management systems for the Liaoning Migao potassium sulphate facility.

Also, on May 6, 2008, Migao announced that its Double Decomposition Process had been awarded a national patent protecting the Company's process for producing potassium nitrate.

The Company is also extremely pleased to announce that Mr. Keith Attoe has been reappointed to the Board of Directors effective immediately. Mr. Attoe resigned from the Board in July of 2007 to focus his energies on a personal health matter. He will also rejoin the Audit Committee as Chairman, having held the position previously.

Conference Call

Migao will be hosting a conference call to discuss the first quarter results at 1:30pm Tuesday May 13, 2008. The details are as follows:

Dial in number: 416-695-9706 or 1-866-902-2211

Taped replay (until May 20, 2008): 416-695-5800 or 1-800-408-3053

Taped replay access code: 3260998#

About Migao

Migao Corporation, through its wholly owned subsidiaries, owns and operates fertilizer production plants in various strategic locations across China for the production and sale of specialty potash fertilizer (potassium nitrate and potassium sulphate) to China's agricultural market. Migao Corporation is subject to, and complies with strict government regulations that govern safety, quality and environmental protection. Migao's Sichuan facility is ISO 14001 certified, an international environmental management standard. Please visit www.migaocorp.com for further information.

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.

To view the Second Quarter Interim Financial Statements and the Second Quarter Management Discussion and Analysis, please view the following link: http://media3.marketwire.com/docs/migaofsandmda.pdf.

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