Stanley to purchase equity of Chengde Lihe Fertiliser

    Summary: To develop upstream industrial chain and form synergetic effect on the company's compound fertiliser business, Stanley plans to acquire 51% shares of Chengde Fertiliser to build up industrial chain of "phosphorus ore—phosphate fertiliser—compound fertiliser".   

    On 30 June, 2021, the leading compound fertiliser enterprise, Stanley Agriculture Group Co., Ltd. (Stanley) announced that its wholly-owned subsidiary, Stanley Fertiliser Longhua Co., Ltd., plans to purchase 51% shares of Chengde Lihe River Fertiliser Co., Ltd. (Chengde Fertiliser) with USD37.71 million (RMB244 million), USD3.06 million (RMB19.78 million) of which is for capital increase, through share transfer and capital increase. After the transaction, Chengde Lihe Fertiliser will become a holding subsidiary of Stanley.   

    Chengde Lihe River Fertiliser Co,.Ltd, located in Longhua County, Chengde City, Hebei Province and covering an area of around 23.33 hectares, is a modern phosphate fertiliser enterprise integrating production, sales and service. The company possesses production lines of spray granulation ammonium phosphate, spray drying powdered monoammonium phosphate (MAP) and diluted acid-process industrial grade MAP, with total capacity hitting 100,000 t/a.   

    Financial data showed that Chengde Fertiliser achieved revenues of USD68.92 million (RMB446 million) in 2020; its net profits reached USD5.12 million (RMB33.11 million). During the first three months in 2021, the company's revenues and net profits attained USD 20.71 million (RMB134 million) and USD2.20 million (RMB14.22 million) respectively.   

    Stanley stated that the acquisition of 51% shares of Chengde Fertiliser is aimed to develop upstream industrial chain and form synergetic effect on the company's compound fertiliser business as Chengde Fertiliser mainly engages in production and sales of phosphate fertilisers. Stanley has formulated a strategy to extend the industrial chain to upstream sectors: in terms of phosphate fertiliser industrial chain, the company plans to develop phosphate fertiliser business through cooperation, merger and acquisition and self-construction and eventually form an industrial chain of "phosphorus ore—phosphate fertiliser—compound fertiliser". Stanley's acquisition plan of Chengde Fertiliser is a key step to establish a complete phosphate fertiliser industrial chain.   

    Additionally, Stanley has the following considerations:   

    
•       1. Resource and location advantage—Chengde City, where Chengde Fertiliser is located, is rich in phosphosiderite resource and is close to Chifeng City (Inner Mongolia Autonomous Region), a producing area of coal, which enables the company to integrate nitrogen, phosphorus and sulphur resources relying on nonferrous metal smelting     
    
•       2. Industrial chain advantage—Longhua County has formed a mature circular industrial chain of "phosphorus ore—phosphate fertiliser—phosphogypsum—building material"; the by-product phosphogypsum generated from phosphate fertiliser production can be utilised effectively.     
    
•       3. Talent advantage—Chengde Fertiliser has experience and talent advantages as it has engaged in phosphate fertiliser production for many years.     
    
•       4. Cost advantage—Local supply of sulphuric acid is abundant and the production cost is at a low level, which is conductive to S-based compound fertiliser production in the near future.