November 16, 2012
Migao reveals financial results for 2012
China-based potash fertiliser producer, Migao Corporation, announces its financial outcome for the three and six-month periods concluding on September 30, 2012.
Revenues for the second quarter ending September 30, 2012 were US$11.7 million as compared to revenues of US$66.0 million for the three-month period ending September 30, 2011. For the quarter, the company reported a net loss of US$8.1 million or US$0.15 per basic share as compared to net income of US$6.0 million or US$0.11 per basic share for the same period one year ago. The decline in revenue was impacted by several conditions that include continued weakness in hydrochloric acid market, seasonality of customer purchases, weak sales of potassium chloride, and overall lower selling prices.
The net loss was a result of decreased volumes and selling prices of finished goods, which impacted absorption of fixed and variable costs. An inventory provision of US$1.7 million made to reflect the valuation of some raw material and some finished goods further impacted earnings.
"After comparing these second quarter results to the pipeline of sales activity including secured contracts, it appears the situation showing signs of improvement," said Mr. Liu Guocai, CEO of Migao. "We have focused our energies on negotiating contracts over the recent period and the success of these activities are proving themselves as evidenced by the increased delivery and production of our core fertilisers. We continue to face margin pressure from the impact of the hydrochloric acid business, however, there have been specific industry developments in the Chinese market that should result in some improvement to this business."
For the six months ending September 30, 2012, Migao reported revenues of US$48.4 million as compared to revenues of US$166.5 million for the six-month period ending September 30, 2011.
The Board of Directors of Migao Corporation declared a quarterly cash dividend of US$0.015 for each common share, payable on December 13, 2012 to shareholders of record on November 30, 2012.
The company''s gross profit margin of 1.8% for the quarter ending September 30, 2012 was primarily attributed to the decreased sales volume and product pricing. Gross profit margin is expected to improve, beginning in the third quarter.
It is anticipated that Sichuan Migao and Liaoning Migao will operate at full capacity for the balance of fiscal 2013. The company''s joint venture potassium nitrate facility is anticipated to be at full capacity for the balance of fiscal 2013, as well as the specialty compound facility at Zunyi Migao. It is anticipated that Guangdong Migao will reach approximately 60-70% of capacity, Changchun Migao at 50-60%, and Shanghai Migao at 50-60% of capacity by the end of fiscal 2013.
At the end of the period, the company had US$49.4 million (98,925 tonnes) of potassium chloride inventory with an average delivered price of US$499 per tonne, of which 89,796 tonnes were on hand with the remainder being in transit. In addition, during the quarter, the company sold 5,075 tonnes of potassium nitrate, 10,931 tonnes of potassium sulphate, nil of compound fertiliser, nil tonnes of potassium chloride, and at the end of the period, the company had US$45.6 million (106,604 tonnes) of finished goods inventory on hand, including co-products.
At September 31, 2012, Migao reported cash and restricted cash of US$51.9 million and working capital of US$192.1 million.