TORONTO, ONTARIO -- (Marketwired) -- 06/28/13 -- Migao Corporation (TSX: MGO), a China-based specialty potash fertilizer producer, today reported financial results for the three and twelve-month periods ended March 31, 2013.
Revenues were $299.5 million for the year ended March 31, 2013, compared with $402.7 million for the year ended March 31, 2012. The decrease for the year ended March 31, 2013 is mainly due to decreased sales volumes and selling prices of potassium nitrate, potassium sulphate, and compound fertilizers.
Revenues for the quarter ended March 31, 2013 were $190.7 million compared with $138.7 million for the quarter ended March 31, 2012. The increase in revenue for the quarter is primarily a result of increased sales volumes of potassium chloride and potassium sulphate, as well as the contribution from the new compound facility at Zunyi Migao.
The increase in revenue for the quarter is primarily a result of increased sales volumes. The decrease for the year ended March 31, 2013 is mainly due to decreased sales volumes and selling prices of potassium nitrate, potassium sulphate, and compound fertilizers.
During the year ended March 31, 2013, as a result of the ongoing weak market condition for hydrochloric acid and the related reduced production of potassium sulphate, the Company carried out a review of the recoverable amounts of all manufacturing property, plants and equipment. The review led to the recognition of an impairment of $18.4 million for assets primarily used in the production of potassium sulphate and hydrochloric acid. Without the impact of the impairment expense, loss per share was $0.36 for the year ended March 31, 2013. With the impact of the impairment expense, the net loss per share was $0.74 per share for the year. Without the impact of the impairment expense, loss per share was $0.07 for the quarter ended March 31, 2013. With the impact of the impairment expense, the net loss per share was $22.3 million or $0.43 per share for the fourth quarter.
Gross profit was $4.5 million for the year ended March 31, 2013, compared to $59.7 million for the same period last year. Gross margin as a percentage of sales for fiscal 2013 was 1.5% compared to 14.8% in fiscal 2012. The decrease in gross profit was due to increased raw material costs, lower sales volumes of potassium sulphate and compound fertilizer, lower average selling price of hydrochloric acid, increase in inventory write down, as well as a change of accounting treatment of VAT tax refund, which was included in gross profit in last year.
Average selling price for potassium nitrate was RMB 4,611 ($741) for the quarter and RMB 4,730 ($760) per tonne for the year. Average selling price for potassium sulphate was RMB 2,968 ($477) for the quarter and RMB 3,090 ($497) per tonne for year ended March 31, 2013. During the fourth quarter, sales of potassium sulphate increased dramatically to 84,245 tonnes as compared to 19,526 in the same period last year. The increase for the quarter shows improving market demand, as customer inventories are lower and coincides with the fertilizer application season.
At March 31, 2013, Migao reported cash and restricted cash of $77.4 million and working capital of $188.6 million.
At the end of the period, the Company had $67.1 million of inventory, which included $21.0 million (42,783 tonnes) of potassium chloride inventory with an average delivered price of $491 per tonne. Also included in inventory were $15.7 million (64,070 tonnes) of finished goods inventory, and $30.4 million of other non-potassium chloride raw materials and goods in transit. During the quarter, the Company sold 39,828 tonnes of potassium nitrate, 84,245 tonnes of potassium sulphate, 57,449 tonnes of specialty compound fertilizer, and 10,186 tonnes of ammonium chloride.
It is anticipated that Sichuan Migao will produce at full annual production capacity of 80,000 tonnes of potassium nitrate for fiscal 2014. At full capacity, Guangdong Migao produces 160,000 tonnes of potassium sulphate and 192,000 tonnes of HCL. As a result of continued Hydrochloric Acid market weakness, it is anticipated that Guangdong Migao will be at approximately 50% of capacity for fiscal 2014. It is anticipated that Changchun Migao will be at 60% of its 80,000 tonnes per year of potassium sulphate capacity for fiscal 2014. It is anticipated that Liaoning Migao will be at 80% capacity for fiscal 2014. It is anticipated that the SQM-Migao joint venture will be at 90% of the total annual 40,000 tonnes of potassium nitrate production capacity for fiscal 2014. The Shanghai Migao facility is expected to produce at 40% - 65% capacity for fiscal 2014, and Zunyi Migao is also expected to produce at 40% - 65% capacity for fiscal 2014, with the production and deliveries being seasonal.
Balance Sheet Highlights($'000) March 31, 2013 March 31, 2012Current ratio 1.82:1 2.56:1Cash and restricted cash 77,363 68,924Working Capital 188,637 205,483Total Assets 544,234 479,163Total Liabilities 235,793 136,747Total Equity 308,441 342,416Long Term Bank Debt to Equity Ratio 0.01:1 0.02:1
"We continue to work through the challenges that face our Company and we are encouraged by the pickup in demand for our core fertilizers in the fourth quarter as customer inventory levels declined and seasonal application was much improved over the first nine months of the year," said Mr. Liu Guocai, CEO of Migao. "The ongoing hydrochloric acid situation is yet to be resolved however we have seen a slight improvement in pricing and demand for this product in some regions."
Migao will be hosting a conference call to discuss the quarterly results at 10:00am, Eastern Time, Friday June 28, 2013. The details are as follows:
Dial in number: 416-340-9432 or 1-877-440-9795
Taped replay (until July 12, 2013): 905-694-9451 or 1-800-408-3053
Taped replay access code: 1308682#
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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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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Vice President Corporate Finance
416-869-1108 ext. 2104