TORONTO, ONTARIO--(Marketwire - Aug. 15, 2012) - Migao Corporation (MGO.TO), a China-based leading specialty potash fertilizer producer, today reported financial results for the first quarter ended June 30, 2012.
Migao reported revenues of $36.7 million for the first quarter ended June 30, 2012 as compared to revenues of $100.5 million for the three-month period ended June 30, 2011. For the quarter, the Company reported a net loss of $3.9 million or ($0.07) per basic share as compared to net income of $7.8 million or $0.15 per basic share. The decline in revenue is attributable to continued weakness in the market for hydrochloric acid that directly and indirectly negatively impacted revenue from its co-product, potassium sulphate. Revenue was further reduced as a result of repair and maintenance shutdowns across all facilities. Also impacting revenue on a comparative basis is lower sales of potassium chloride.
The decrease in net income was primarily a result of lower gross profit margin related to the decreased revenue volume, slower than anticipated start-up of new production facilities, and increased legal and audit costs.
The Company is studying a variety of different applications for HCl to resolve the ongoing impact to operations from the market conditions for Migao's current HCl applications.
The Board of Directors of Migao Corporation declared a quarterly cash dividend of $0.015 for each common share, payable on September 13, 2012 to shareholders of record on August 30, 2012. The dividends are eligible pursuant to the Income Tax Act (Canada) and any similar provincial legislation pertaining to eligible dividends.
SUMMARY FINANCIAL STATEMENTS
3 months ended 3 months ended
June 30, 2012 June 30, 2011
Sales 36,692 100,521
Gross Profit 3,188 17,162
Gross Profit (% of revenue) 8.7% 17.1%
Net Income (3,919) 7,767
EBITDA (474) 12,155
Basic EPS (0.07) 0.15
Diluted EPS (0.07) 0.15
Weighted average number of shares (in
millions of shares)
Basic 52.4 52.9
Diluted 52.4 52.9
Balance Sheet Highlights
June 30, 2012 March 31, 2012
Current Ratio 2.36:1 2.56:1
Cash 38,969 42,935
Working Capital 204,348 205,483
Total Assets 498,886 479,163
Total Debt 155,803 136,747
Total Equity 343,083 342,416
Long Term Bank Debt to Equity Ratio 0:1 0:1
"We continue to operate in a climate of challenging economic conditions," said Mr. Liu Guocai, CEO of Migao. "We are expecting improvement in our markets as well as from our efforts to offset the drag from the hydrochloric acid market. Pricing of hydrochloric acid in northeastern China is expected to improve in the next few months, which should have a positive impact on our revenue and margin for both hydrochloric acid and potassium sulphate products. Upcoming price and volume negotiations with recurring major customers are expected to result in improved production levels from the first quarter's performance."
Migao's gross profit margin was 8.9% of revenue, compared to 17.1% in the same period a year ago. The decrease is a result of reduced production volume, the ongoing impact of reduced selling prices for hydrochloric acid, and slower than anticipated start-up of new production capacity.
Migao's current annual production capacity is 620,000 of combined potassium nitrate, potassium sulphate and specialty compound fertilizers. An additional 100,000 tonnes per year production capacity of specialty compound fertilizers is to be built if market demand continues to grow and the Company is successful in attracting new crop customers. Beginning earlier in the year, several new crop customers were introduced to Migao's specialty compound fertilizers with encouraging results and negotiations to date.
At the end of the period, the Company had $39.0 million (77,544 tonnes) of potassium chloride inventory with an average delivered price of $502 per tonne, of which 58,205 tonnes were on hand with the reminder being in transit. In addition, during the quarter, the Company sold 14,940 tonnes of potassium nitrate, 13,324 tonnes of potassium sulphate, 2,899 tonnes of compound fertilizer, 22,254 tonnes of potassium chloride, and at the end of the period, the Company had $24.0 million (66,651 tonnes) of finished goods inventory on hand, including co-products.
At June 30, 2012, Migao reported cash and restricted cash of $82.5 million and working capital of $204.3 million.
Migao will be hosting a conference call to discuss the year-end results at 10:00am, Eastern Time, Wednesday August 15, 2011. The details are as follows:
Dial in number: 416-340-2216 or 1-866-226-1792
Taped replay (until August 29, 2012): 905-694-9451 or 1-800-408-3053
Taped replay access code: 3506656#
Annual Meeting of Shareholders
The Company invites all shareholders to the annual and special meeting of Migao Corporation to be held at the offices of Goodmans LLP, 333 Bay Street, Suite 3400, Toronto, Ontario on September 28, 2012 at 10:00 a.m.
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.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
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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