The Board of Directors of Migao Corporation has suspended the quarterly dividend as a result of the net loss from operations related to the ongoing weakness in the hydrochloric acid market. Earlier indications of improving market conditions have not yet led to a return to healthier demand and pricing of hydrochloric acid in China. The dividend will be reviewed again at the next quarterly meeting of Directors.
The Company's gross profit margin (excluding inventory write-down of $0.2 million) of 2.5% for the quarter ended December 31, 2012 represents an improvement compared to the previous quarter's 1.8% profit margin (excluding inventory write-down of $1.7 million). Compared to the same period one year ago, gross margin declined from 16.1%. The decline versus one year ago was primarily attributed to decreased sales volume and product pricing. Gross profit margin is expected to continue to improve in the fourth quarter.
It is anticipated that Sichuan Migao and the joint venture with SQM will operate at full capacity for the balance of fiscal 2013. The Company's specialty compound facility at Zunyi Migao is anticipated to be at full capacity for the balance of fiscal 2013 as well. Potassium sulphate production at Liaoning Migao is expected to operate at its full 40,000 tonne per year production rate in the fourth quarter. It is anticipated that Guangdong Migao will operate six of its sixteen potassium sulphate units in the fourth quarter. Changchun Migao will operate at approximately 60%, and Shanghai Migao continues to be hampered by the hydrochloric acid downturn and is expected to have little production in the fourth quarter.
At the end of the period, the Company had $76.1 million (155,380 tonnes) of potassium chloride inventory with an average delivered price of $490 per tonne, of which 136,012 tonnes were on hand with the remainder being in transit. In addition, during the quarter, the Company sold 43,421 tonnes of potassium nitrate, 24,730 tonnes of potassium sulphate, 17,705 tonnes of specialty compound fertilizer, 36,590 tonnes of hydrochloric acid, and at the end of the period, the Company had $57.1 million (129,264 tonnes) of finished goods inventory on hand, including co-products.
At December 31, 2012, Migao reported cash and restricted cash of $73.6 million and working capital of $189.1 million.
Migao will be hosting a conference call to discuss the quarterly results at 10:00am, Eastern Time, Friday February 15, 2013. The details are as follows:
Dial in number: 416-340-9432 or 1-877-440-9795Taped replay (until March 1, 2013): 905-694-9451 or 1-800-408-3053Taped replay access code: 7472329#
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, potassium sulphate, and specialty compound fertilizers) to China's agricultural market. Migao Corporation is subject to, and complies with strict government regulations that govern safety, quality and environmental protection. Please visit www.migaocorp.com for further information.
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