Migao Corporation
TSX : MGO

Migao Corporation

August 11, 2009 07:00 ET

Migao Reports Fiscal 2010 First Quarter Financial Results

- $59 million quarterly revenues - $9.6 million net profit - 25% gross profit margin

TORONTO, ONTARIO--(Marketwire - Aug. 11, 2009) - Migao Corporation (TSX:MGO), a China-based leading specialty potash fertilizer producer, today reported quarterly sales of $58.9 million for the three-month period ended June 30, 2009 compared to $49.7 million for the comparable quarter last year, representing a 19% increase. The Company reported net income of $9.6 million or 16% of revenue for the quarter compared to $6.8 million in the quarter ended June 30, 2008. The Company earned $0.21 per basic share outstanding for the quarter, compared to $0.16 per share in the similar quarter in 2008.

Gross profit of $14.6 million or 24.8% of revenue reflects the impact of favourable raw material purchases, variable production costs, and customer contract negotiations in a period of slightly depressed selling prices for fertilizers. Raw material purchases are heavily weighted towards potash purchased from Russian and Chinese suppliers.

Revenues for the quarter ended June 30, 2009 decreased by 30% compared with the previous quarter ended March 31, 2009, due to maintenance shutdowns, slightly lower selling prices, and a stronger Canadian dollar. The annual run rate for the core products was at 320,000 tonnes as of June 30, 2009, compared with 260,000 tonnes as of June 30, 2008. Actual tonnes sold during the period were approximately 65,000.

Selling expenditures for the quarter ended June 30, 2009 decreased by 70% to $0.7 million compared with the same period last year. The decrease was a result of lower freight-out costs as some customers picked up finished products for transport at their own cost.

The Company reported EBITDA for the first quarter of $12.6 million versus $8.2 million in the same period last year. Earnings for the quarter ended June 30, 2008 were reduced by stock-based compensation expense of $0.6 million or $0.01 per share.

"Migao's operations and financial performance for the quarter were, as is typical, influenced by the price of potash," said Mr. Liu Guocai, President and CEO of Migao. "The price of potash has been volatile recently and we were able to secure supply at favourable prices from both international and domestic sources. In the first half of the year, like all companies related to the potash industry, we saw demand and prices decline from the very high levels experienced in 2008. Our continued strong profit margin reflects the convincing economic benefit of our specialty fertilizers for the high value crops we serve. We are pleased to see that our customer demand is much healthier than the recent global slowdown in potash and related industries."

The Company also announced it has retained KPMG LLP to assist in Internal Audit and Internal Controls review and implementation, other support services, and continued compliance under NI52-109. These services will be critical for the development of three new planned production facilities, a joint venture production facility, and in developing international expansion.

As at June 30, 2009, Migao reported cash of $4.4 million and working capital of $142 million. Receivables and inventory make up the vast majority of working capital. Accounts receivables increased as a result of the Company extending credit terms for long-term customers who have typically paid in advance or cash on delivery. This program was put in place to maintain margin and demand during a time of uncertainty with potash pricing. Average inventory cost of raw potash for the period was $570 per tonne, a decrease in value of $50 per tonne from the previous period. Long-term debt was nil and current bank debt was $18.5 million.



SUMMARY FINANCIAL STATEMENTS

3 months ended 3 months ended
June 30, 2009 June 30, 2008

($'000)
Sales 58,928 49,681
Gross Profit 14,608 12,320
Net Income 9,558 6,767
EBITDA 12,607 8,222
Basic EPS 0.21 0.16
Diluted EPS 0.20 0.15

Weighted average number of shares
(in millions of shares)
Basic 46.5 42.6
Diluted 46.9 44.7


Balance Sheet Highlights
($'000)
June 30, 2009 March 31, 2009

Current ratio 3.78:1 5.40:1
Cash 4.4 42.2
Working Capital 142.1 146.2
Total assets 268.6 275.2
Debt to Equity Ratio 0.15:1 0.14:1


Conference Call

Migao will be hosting a conference call to discuss the first quarter results at 10:00am Tuesday August 11, 2009. The details are as follows:

Dial in number: 416-641-6144 or 1-866-303-7746

Taped replay (until August 25, 2009): 416-695-5800 or 1-800-408-3053

Taped replay access code: 22489#

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.

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