China XLX Fertiliser's Net Profit Grew 25% y-o-y to RMB 181 Million in 2011

HONG KONG, Feb. 26, 2012 /PRNewswire-Asia/ -- China XLX Fertiliser Ltd. ("China XLX Fertiliser" or the "Company") (HKSE: 01866.HK; SGX: B9R.SI) is pleased to announce the financial results of the Company and its subsidiaries (the "Group") for the twelve months ended 31 December 2011 (the "Period") improved substantially compared to the respective period in 2010.

During the Period, the Group's revenue rose 29% year-on-year to RMB 3.69 billion, mainly buoyed by increased sales volume of urea and compound fertiliser and improved average selling prices of urea, methanol and compound fertilizer. Gross profit was RMB 506 million, up 39% from the preceding year. Net profit attributable to owners of the Company reached RMB 181 million, an increase of 25% year-on-year, while basic earnings per share were RMB 17.96 cents compared to RMB 14.46 cents in 2010. The board of directors recommends paying a final dividend of RMB 3.7 cents per ordinary share, which represents a dividend payout ratio of approximately 20%.

Commenting on the Group's results, Mr. Liu Xingxu, Chairman and CEO of the Group, commented, "China saw a bumper grain harvest last year, with output growing by 4.5% year-on-year to a record high of 571.21 million tonnes under the government's supportive measures. Nevertheless, the domestic urea industry was buffeted by market imbalance and the government's tightened export policy. In a market environment that is highly competitive, volatile and dynamic, we have steadfastly maintained our core focus on improving efficiency, lowering costs and boosting operating efficiency."

Business Review

In 2011, revenue from urea sales was approximately RMB 2.41 billion, up 29% year-on-year mainly due to an increase of 21% in average selling price of urea and 7% in sales volume. The full year gross profit margin of urea improved 0.5 percentage points year-on-year to 16.9% because of higher average selling price resulting from the 3Q peak season and tight inventory levels due to low industry production utilization rates in 1H 2011.

Compound fertilizer revenue soared 43% in 2011 over that in 2010 to RMB 849 million. The increase was mainly attributable to an 18% year-on-year growth in sales volume due to a gradual shift in product mix towards compound fertiliser due to better profitability. The average selling price of compound fertiliser rose 21% year-on-year, leading to a year-on-year increase of 3.6 percentage points of its gross profit margin to 15% in 2011. Improvement in average selling price was mainly due to factors similar to that for urea, including the 3Q seasonal peak and low inventory levels.

Methanol revenue rose 10% year-on-year to RMB 422 million as average selling price edged up 16% year-on-year. Nevertheless, its sales volumes eased 6% year-on-year due to weak downstream domestic demand. The gross profit margin regressed to -6% from -3% in 2010 as higher coal and electricity prices expanded cost of sales by about 20.4% year-on-year, leading to a continued loss from this business segment.

Outlook

Mr. Liu Xingxu, Chairman and CEO of the Group, commented on the Group's outlook, "We expect demand for our products to remain robust due to market conditions and positive government policies. The Chinese government's fiscal spending on agriculture and rural development exceeded RMB 1 trillion in 2011 and more resources are expected to spend on this sector in 2012. Early this year, the government raised the minimum purchase prices of major crops again, which should translate to increased fertilizer demand, as growers attempt to boost yields. The State Council highlighted the importance of reinforcing Henan Province as a major crop production base in China in the guidance issued in October on the development of the Central Plains Economic Zone, aiming at ensuring domestic food security. Such efforts promise tremendous opportunities for the fertiliser sector in the province. Meanwhile, according to the 'Twelfth Five-year Plan' for nitrogen fertiliser industry, the government will pursue its efforts to rationalize the fertilizer industry to 'weed out' less efficient producers. It is positive for us as one of the industry's largest and most efficient producers. We will maintain our focus on lowering costs, improving efficiency and developing new products. The construction work of the fourth urea plant is going on in full swing and is expected to be completed in the second half of 2013. Moreover, the acquisition of coal resources in Xinjiang progresses well, which enables us to secure upstream resources in the long run. Furthermore, we believe we can leverage on our investment partner Primavera Capital's close relationships to explore more potential merger and acquisition investment opportunities."

About China XLX Fertiliser Ltd.

China XLX Fertiliser Ltd. is one of the largest and most cost efficient coal-based urea producers in China. It is mainly engaged in the production and sale of urea, compound fertiliser and methanol. Current production capacity of its urea, compound fertiliser and methanol operations is 1.25 million tons, 600,000 tons and 200,000 tons respectively. The Company is planning to develop the fourth plant in Xinxiang City, Henan Province. The plant is expected to be completed in 2013. The annual production capacity of its urea operation will then increase to over 2 million tons. The Company's shares are dually traded on the main boards of the Stock Exchange of Hong Kong Limited (stock code: 01866.HK) and the Singapore Stock Exchange (stock code: B9R.SI).

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