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Sinofert Holdings Limited Announces 2009 Interim Results

Sinofert Holdings Limited
2009-08-18 14:47 1179

HONG KONG, Aug. 18 /PRNewswire-Asia/ --

Summary 2009 Interim Results (six months ended June 30th)

-- Turnover was RMB 12,505 million, down by 44.0% over the same period

of 2008.

-- Net loss attributable to shareholders was RMB 828 million. Excluding

write-down of inventories and change in fair value of derivative

component of convertible loan notes, net profit attributable to

shareholders was RMB 118 million, representing a decrease of 90.7%

YoY decrease.

The board of directors (the "Board") of Sinofert Holdings Limited ("Sinofert" or the "Company", stock code: 0297.HK) today announced the reviewed interim results of the Company and its subsidiaries (the "Group") for the six months ended 30 June 2009.

Global demand for fertilizer slackened further in the first half of 2009 amid the impact of the global financial tsunami. Fertilizer prices continued to fall, and competition remained intense. In the first half, the Group generated sales volume of 6.35 million tons, a decrease of 34.7% over the same period of last year. It achieved turnover of RMB 12,505 million, down 44.0% YoY. Net loss attributable to shareholders was RMB 828 million. Excluding a write-down of inventories and the change in fair value of a derivative component of convertible loan notes, the Group reported net profit attributable to shareholders of RMB 118 million, representing a 90.7% YoY decrease. The Group reported its first operating loss mainly due to the decline in sales volume and gross profit as a result of worsening operating environment amidst the financial crisis.

While the operating environment worsened, the Board adjusted the company's strategies to increase production through sales enhancement and to secure sales through increased production. Management took advantage of its value chain, integrating upstream and downstream operations, to strengthen synergies under the guiding principles of "prudent management, fast stock turnover and stringent risk control". The Group stepped up its efforts in promoting network distribution and creating more value for customers by improving services. As a result, Sinofert remained the largest fertilizer distributor in China. During the period under review, the Group sold 2.63 million tons of nitrogen fertilizers, 1.68 million tons of phosphate fertilizers and 1.01 million tons of compound fertilizers. Sales volume of potash fertilizers dropped by 71.4% YoY to 0.6 million tons because market demand remained subdued because of high prices for potash fertilizers relative to competing/substitute products. Lower production of compound fertilizers substantially slashed demand for potash fertilizers and led to higher potash fertilizers inventory. Thus, the sales performance of the Group's potash fertilizers was severely affected.

Production and Supply

In the first half of 2009, the Group did not build any new production facilities or make any significant acquisitions. Total fertilizer production capacity of the Group's subsidiaries and affiliated production enterprises remained at 10.16 million tons. However, the Group exercised better management controls and made full use of technological advances to keep costs under control and to enhance its capacity for sustained growth.

In order to take advantage of opportunities arising amidst the financial crises, the Group actively recruited technology-savvy staff with upstream production experience, further improving its specialties in the areas of research and development, production technology and corporate management. Moreover, it strengthened its competitiveness through innovation and sped up development of national technology centers. The Group vigorously improved its operating efficiency and strove to conserve more energy during the production process and to ensure safer production.

Network Distribution

A nationwide distribution network that was essentially completed in 2008 was extended to major agricultural counties in the PRC. From the beginning of 2009, the focus of the distribution network's development shifted to the enhancement in the quality and efficiency of the network. In the first half, 12 distribution centers were added, expanding the number of distribution centers to 2,022. The volume of fertilizers sold through the distribution network amounted to 4.61 million tons, accounting for 72.6% of the Group's total sales volume. The proportion of sales sold through the distribution network continued to increase. Distribution through the group's network assumed greater importance as market demand decreased.

The distribution centers provide "one-stop shopping" services to customers, including the sale of various agricultural materials, fertilizers and agricultural pesticides. This one-stop shopping business model worked well and helped boost sales, margins and profits.

Outlook

While the global economy faltered, the Chinese economy started to recover in the first half of 2009. Meanwhile, the economic data of the United States for the second quarter demonstrated that the country's economy was close to a trough and might recover in the near future. Improvements in the economies of China and the United States should help the global economy rebound.

The Chinese government has attached great importance to agriculture and continued to initiate favorable policies to spur rural development. Incentives for rural residents were thus greatly improved, leading to the stable development of rural areas and bolstering rural income growth. In 2009, the Chinese government formulated the "Plan for increasing national crop production capacity by 50-billion kg (2009-2020)". It should provide a strong boost to the fertilizer sector. Domestic demand for fertilizers is expected to increase in the coming years. Meanwhile, as the agricultural sector is under increasing pressure to restructure, the Group, as a leading player in the market, will play an important role in the restructuring process, providing it invaluable opportunities to expand its operational base and to enhance its ability to provide sustained development.

Mr. Du Keping, Chief Executive Officer of Sinofert, commented, "The Group's operating results were adversely affected in the first half of 2009 amidst the financial crisis. However, its fundamentals were unscathed. Sinofert remains the largest fertilizer distributor in China. Although the fertilizer market suffers from severe oversupply and keen competition, the Group's distribution network, fundamentals and its well-honed business model forged from 10 years' efforts in implementing strategic transformations, remain its most important assets. With an ability to tap into global resources and its strong brand recognition, Sinofert maintains a competitive edge over its peers. The Board, management and the entire workforce are confident that the Group has a bright future."

Background of Sinofert Holdings Limited

Listed on the Stock Exchange of Hong Kong Limited on 28 July 2005, Sinofert Holdings Limited specializes in businesses of agriculture related products including fertilizers. As the largest fertilizer enterprise integrating production, supply and sales in China, Sinofert Holdings Limited's operating fields extends through the whole industry chain of fertilizer including R&D, production, import & export, distribution and retail as well as agrochemical service of the products through the growth strategy of "centering on marketing and distribution and expanding into both production and network distribution". Sinofert is the flagship company of Sinochem Corporation. Established in 1950, Sinochem Corporation is one of the largest state-owned enterprises in the PRC in terms of turnover. Sinochem Corporation is also one of Fortune 500 enterprises, globally dealing in business in petroleum, fertilizer and chemicals.

For more information, please contact:

Investor and media enquiries:

Ma Yan Cindy Cheung

Sinofert Holdings Limited Sinofert Holdings Limited

Tel: +86-10-5956-9192 Tel: +852-3656-1510

Fax: +86-10-5956-9627 Fax: +852-2850-7229

Email: mayan@sinochem.com Email: cindy.cheung@sinochem.com

Jane Liu Henry Chik

PRChina Limited PRChina Limited

Tel: +852-2522-1838 Tel: +852-2522-1368

Email: jliu@prchina.com.hk Email: hchik@prchina.com.hk

Source: Sinofert Holdings Limited
Keywords: Chemical
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