China XLX Fertiliser's Gross Profit Margin for 9M 2013 Remains Stable

HONG KONG, November 14, 2013 /PRNewswire/ --

Results Highlights for 9M 2013:

• Net profit attributable to owners of the parent dropped 20% year-on-year to approximately RMB224 million.
• Revenue decreased slightly by 2% year-on-year to approximately RMB3,022 million amidst a 13% year-on-year increase in compound fertiliser revenue.
• Gross profit margin stayed flat at 19% when compared to 9M2012.

China XLX Fertiliser Ltd. ("China XLX Fertiliser" or the "Company") (HKSE: 01866.HK; SGX: B9R.SI) announces that net profit attributable to owners of the parent for the nine months ended 30 September 2013 (the "Period" or "9M2013") declined 20% year-on-year to approximately RMB224 million. Basic earnings per share were RMB19.10 fen, down 20% from a year ago.

Revenue of the Company and its subsidiaries (the "Group") for the Period decreased slightly by 2% year-on-year to approximately RMB3,022 million mainly due to lower average selling prices of urea, compound fertiliser and methanol. The Group's overall gross profit margin stayed flat at around 19% when compared to the same period last year, mainly attributable to lower cost of urea and methanol sales resulting from weaker coal prices.

Mr. Liu Xingxu, Chairman and CEO of the Group, commented, "The domestic urea sector was adversely affected by a combination of negative factors in 9M2013. The operating environment was very challenging, in particular during the third quarter. Urea prices tumbled to a record low for the past several years in the third quarter, mainly due to weak domestic demand, overcapacity as well as soft international urea prices and coal prices. The Group implemented various measures to overcome the difficulties. By stepping up marketing efforts and actively expanding our sales network, we achieved sales volume growth in urea, compound fertiliser and methanol, which partially offset the decrease in their average selling prices. Moreover, we pushed ahead with the development of compound fertiliser operations, leading to a double-digit growth of compound fertiliser sales, which partially offset the decline in revenues from urea and methanol. While enhancing our risk management, we prudently expanded our capacity so as to ensure the Group's sustainable business growth."

Double-digit Sales Growth of Compound Fertiliser

Revenue from urea for 9M2013 retreated 8% year-on-year to approximately RMB1,740 million despite sales volume growth of 5% year-on-year to 908,000 tons. The revenue decrease was attributable to a 13% year-on-year drop in urea average selling prices to RMB1,917/ton during the Period.

In 9M2013, revenue from compound fertiliser increased 13% year-on-year to approximately RMB902 million. Although the average selling price of compound fertiliser dropped 13% to RMB2,193/ton from a year ago, sales volume of compound fertiliser surged 30% year-on-year to 411,000 tons on the Group's efforts to extend its sales network, leading to a double-digit revenue growth from compound fertiliser.

Revenue from methanol for 9M 2013 was approximately RMB374 million, almost unchanged when compared to the same period last year. While its sales volume grew 8% year-on-year to 182,000 tons, the average selling price of methanol declined 8% year-on-year to RMB2,053/ton, resulting in a drop of revenue from methanol.

Stable Gross Profit Margin of Urea and Significant Improvement in Gross Profit Margin of Methanol

The gross profit margins of urea and methanol for 9M 2013 were lower than the same period last year due to the contraction of their average selling prices. However, thanks to weakened coal prices, the cost of urea sales declined 12% year-on-year. As a result, the gross profit margin of urea decreased by a mere 0.7 percentage points year-on-year to 23.7%. Meanwhile, the gross profit margin of compound fertiliser fell 3.3 percentage points year-on-year to 11.4%. The gross profit margin of methanol rose 11.1 percentage points to 12.8% from a year ago because its average cost of sales fell 18% year-on-year on soft coal prices.

The Group maintained a sound financial position. As of 30 September 2013, its cash on hand reached approximately RMB595 million, up 25% from the end of 2012. With available undrawn credit line of RMB2.54 billion from banks, the Group possesses adequate financial resources to meet its capital expenditure requirements.

Outlook

Looking ahead, Mr. Liu Xingxu said, "For the foreseeable future, the urea industry will remain challenging. Due to overcapacity, selling prices of urea are expected to stay at lower levels. In the face of these difficulties, the Group will take a pragmatic approach to reinforce its cost leadership and improve its risk management. Urea Plant IV started trial production in September 2013 and will commence operations in the fourth quarter. Upon its full production next year, the Group's annual urea production capacity will jump to approximately 2.1 million tons from the current level of 1.25 million tons. Plant IV will employ advanced production technologies, thereby enabling the Group to reinforce its cost leadership in the market through lower consumption of coal and electricity. Moreover, we tapped upstream resources after the acquisition of a premier coal mine in Xinjiang. The development of Plant V in Xinjiang is progressing well and it is expected to be completed in 2016. When both of Plant IV and Plant V come on stream, the Group will realize greater economies of scale and strengthen its cost and technological leadership, hence enhancing its leading position in the industry and allowing it to deliver better returns to shareholders."

About China XLX Fertiliser Ltd.

China XLX Fertiliser Ltd., one of the largest and most cost efficient coal-based urea producers in China, is mainly engaged in the production and sale of urea, compound fertiliser and methanol. Its current production capacity of urea, compound fertiliser and methanol is 1.25 million tonnes, 750,000 tonnes and 200,000 tonnes, respectively. The Group is developing its fourth urea plant in Xinxiang City, Henan Province. Upon completion in the second half of 2013, the Group's annual production capacity of urea will increase to over 2 million tonnes. Meanwhile, it forged a strategic partnership with Primavera Capital, an internationally renowned private equity fund, at the end of 2011. The Group will lever its extensive experience and resources network in the capital market to drive continuous business growth. 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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