Migao Corporation

Migao Corporation

November 14, 2011 13:44 ET

Migao Reports Fiscal 2012 Second Quarter Financial Results

TORONTO, ONTARIO--(Marketwire - Nov. 14, 2011) - Migao Corporation (TSX:MGO), a China-based leading specialty potash fertilizer producer, today reported financial results for the three and six-month periods ended September 30, 2011.

For the second quarter ended September 30, 2011 Migao reported revenues of $66.0 million as compared to revenues of $68.5 million for the three-month period ended September 30, 2010. For the quarter, the Company reported net income of $6.0 million or $0.11 per basic share as compared to net income of $8.2 million or $0.16 per basic share for the same period one year ago. The decrease in revenue for the quarter ended September 30, 2011 is mainly due to market conditions resulting in lower sales volumes of potassium chloride and value added potassium chloride, and potassium nitrate. As expected, there were no sales of low grade potassium sulphate, compared to the second quarter of last year. The decrease in net earnings is due to the same factors as those impacting revenue for the quarter.

3 months ended
Sept. 30, 2011
3 months ended
Sept. 30, 2010
Sales 66,028 68,455
Gross Profit 14,123 16,286
Gross Profit (% of revenue) 21.4 % 23.8 %
Net Income 5,956 8,153
EBITDA 10,316 12,448
Basic EPS 0.11 0.16
Diluted EPS 0.11 0.16
Weighted average number of shares (in millions of shares)
Basic 52.7 52.2
Diluted 52.7 52.6
Balance Sheet Highlights
Sept. 30, 2011 March 31, 2011
Current ratio 2.91:1 2.44:1
Cash 4,904 26,007
Working Capital 217,936 116,734
Total Assets 465,603 386,762
Total Debt 118,234 83,326
Total Equity 347,369 303,436
Long Term Bank Debt to Equity Ratio 0:1 0:1

"Our core products performed well this quarter with Guangdong Migao, Liaoning Migao, Changchun Migao, and Sichuan Migao producing at full capacity. We even exceeded design capacity as there was very little maintenance or repair work required during the quarter," said Mr. Liu Guocai, CEO of Migao. "We look forward to Shanghai's contribution to operations starting in the third quarter, as well as the completion of construction at Changchun Migao for the second 40,000 tonnes of potassium sulphate annual capacity and Zunyi Migao's first 50,000 tonnes of capacity for specialty compound fertilizer. We expect sales to start before December at Changchun with Zunyi to follow early in the new year."

For the six months ended September 30, 2011 Migao reported revenues of $166.5 million as compared to revenues of $134.7 million for the six-month period ended September 30, 2010. For the first half of fiscal 2012, the Company reported net income of $13.7 million or $0.26 per basic share as compared to net income of $16.9 million or $0.32 per basic share for the same period one year ago.

Migao's gross profit margin improved to 21.4% for the quarter from the previous quarter's gross margin of 17.1%. The quarter's margin was slightly below target, which is a result of increased raw material pricing not fully being passed through to the Company's potassium sulphate customers during the quarter as well as decreased selling prices for hydrochloric acid. Gross margin for potassium nitrate was strong and above expectations at 26.0%, which includes the impact of the SQM joint venture's potassium nitrate operation that is ramping up to full production and profitability. The hydrochloric acid selling prices have been impacted by global economic pressure, which has resulted in weaker export sales of finished goods that consume hydrochloric acid as a raw material.

Currently, Migao's production capacity is 480,000 tonnes annually of combined core products and specialty compound fertilizers. Announced projects under construction will bring online an additional 40,000 tonnes of potassium sulphate capacity by the end of calendar 2011 as well as 100,000 tonnes per year of specialty compound fertilizers to be built in two phases during calendar 2012. The Shanghai Migao facility is complete with all production units successfully completing their test phases. The facility is currently awaiting final approvals to commence full-scale operations, which is anticipated to occur before the end of the current quarter.

During the quarter, the Company sold 22,355 tonnes of potassium nitrate, 56,888 tonnes of potassium sulphate, 9,200 tonnes of compound fertilizer, 3,433 tonnes of potassium chloride, and at the end of the period, the Company had $12.6 million (51,948 tonnes) of finished goods on hand, including co-products. At the end of the quarter, the Company had $50.9 million (101,006 tonnes) of potassium chloride inventory with an average delivered price of $504 per tonne.

At September 30, 2011, Migao reported cash of $4.9 million and working capital of $217.9 million. During the quarter Migao received $31.4 million as the first of three refunds from Potash Export Company. Subsequent to the end of the quarter, the second refund of $34.3 million was received and the final refund of approximately $35 million is to be received on schedule by December 31, 2011.

For the quarter and six months ended September 30, 2011, the capital expenditure for expansion projects as well as plant and equipment additions was $13.8 million and $21.9 million respectively. For fiscal 2012, the approved capital budget is approximately $20 million, including maintenance capital expenditures and excluding carry forward projects from prior periods.

Conference Call

Migao will be hosting a conference call to discuss the year-end results at 10:00am, Eastern Time, Tuesday November 15, 2011. The details are as follows:

Dial in number: 416-695-6616 or 1-800-952-6845

Taped replay (until November 28, 2011): 905-694-9451 or 1-800-408-3053

Taped replay access code: 6677237#

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 news release may include forward-looking statements within the meaning of certain securities laws, including the "safe harbour" provisions of the Securities Act (Ontario) and other provincial securities laws in Canada. These forward-looking statements include, among others, statements with respect to our objectives and goals, and strategies to achieve those objectives and goals, as well as statements with respect to our beliefs, plans, objectives, expectations, anticipations, estimates and intentions. The words "may", "will", "could", "should", "would", "suspect", "outlook", "believe", "plan", "anticipate", "estimate", "expect", "intend", "forecast", "objective", and "continue" (or the negative or grammatical variations thereof), and words and expressions of similar meaning, are intended to identify forward-looking statements.

By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, which give rise to the possibility that predictions, forecasts, projections and other forward-looking statements will not be achieved. Certain material factors or assumptions are applied in making forward-looking statements and actual results, performance or achievements may differ materially from those expressed or implied in such statements. We caution readers not to place undue reliance on forward-looking statements as a number of important factors, many of which are beyond our control, could cause actual results, performance or achievements to differ materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements. These factors that relate to our company include, but are not limited to: risks related to raw materials; execution of the business plan; expansion plans; dependence on key personnel; key relationships; dependence on key customers; dependence on key suppliers; competition; market factors and volatility of commodity prices; environmental risks and hazards; operating risks; proprietary rights; infrastructure; future capital requirements; technical substitution; exchange rate fluctuations; insurance; foreign operations; tobacco industry considerations; weather conditions and natural disasters; control by management; seasonality; dividends; conflicts of interest; global financial conditions; and the implementation of the Labour Contract Law in the People's Republic of China in 2008. In addition to the foregoing risk factors, there are also risks related to doing business in China which include, but are not limited to: state ownership; government sector intervention; foreign investment; repatriation of profit and currency conversion; tax; shareholders' rights and enforcement of judgements; developing legal system; protection of intellectual property rights; permits and business licenses; appropriation; and availability of land. Should one or more of these factors materialize, or should our estimates or underlying assumptions prove incorrect, actual results, performance or achievements may vary materially from those described in forward-looking statements.

We caution that the foregoing list of important factors that may affect our future results, performance or achievements is not exhaustive. When reviewing our forward-looking statements, readers should carefully consider the foregoing factors and other uncertainties and potential events. Additional information about factors that may cause actual results to differ materially from expectations, and about material factors or assumptions applied in making forward-looking statements, may be found under the "Risk Factors" sections in our Annual Information Form and annual MD&A and elsewhere in our filings with Canadian securities regulatory authorities. Except as required by Canadian securities laws, we do not undertake to update any forward-looking statements, whether written or oral, that may be made from time to time by us or on our behalf; such statements speak only as of the date made. We cannot assure readers that actual results, performance and achievements will be consistent with these forward-looking statements, and the differences may be material. The forward-looking statements included herein are expressly qualified in their entirety by this cautionary language.

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