Continuing Improvement in China XLX's 2Q Operating Results

Revenue for 1H 2011 up 32% Year-on-year

HONG KONG, Aug. 3, 2011 /PRNewswire-Asia/ --

Financial Highlights for 1H and 2Q 2011 results:

• Revenue increased by 32% year-on-year to RMB 1.79 billion in the first half and soared by 50% year-on-year to RMB 943 million in the second quarter.
• Although gross profit for the first half declined slightly by 3% year-on-year to RMB 207 million, it was a substantial improvement in the second quarter and jumped 95% year-on-year to RMB 123 million.
• Net profit attributable to owners of the Company for the first half dropped 50% year-on-year to RMB 50 million, but was an increase of 24% year-on-year to RMB 28 million in the second quarter.
• As at the end of the second quarter, the Group had RMB 309 million in cash, up 90% from the end of last year.

China XLX Fertiliser Ltd. ("China XLX" or the "Company") (HKSE: 01866.HK; SGX: B9R.SI) is pleased to announce that the operating results of the Company and its subsidiaries (collectively known as the "Group") for the quarter ended 30 June 2011 improved substantially when compared with the first quarter of this year and the fourth quarter of last year. Revenue for the second quarter of this year soared by 50% year-on-year to RMB 943 million, while gross profit jumped 95% year-on-year to RMB 123 million during the period. Net profit attributable to owners of the Company for the second quarter of this year was RMB 28 million, up 24% from the same period last year.

The robust growth of the Group's revenue in the second quarter of this year was mainly driven by a 144% year-on-year increase in sales volume of compound fertiliser and higher gross margins for all its key products. In the second quarter, only one urea production plant was shut down for 10 days for maintenance. In contrast, all three urea production plants of the Group were shut down for 7-10 days for maintenance in the second quarter of 2010. Gross margins for all products rose as the average selling prices for urea, compound fertiliser and methanol rose more than the increase in costs.

The Group achieved revenue of RMB 1.79 billion for the six months ended 30 June 2011, an increase of 32% year-on-year. Gross profit slightly decreased by 3% year-on-year to RMB 207 million during the period mainly due to a 39% year-on-year increase in cost of sales. Net profit attributable to owners of the Company for the first half of this year went down 50% year-on-year to RMB 50 million resulting from a slowdown of operating results in the first quarter. Nevertheless, the operating performance in the second quarter resumed growth momentum.

Mr. Liu Xingxu, Chairman and CEO of China XLX, commented, "The fertiliser sector in China faced various difficulties in the first half. Operations enterprises were adversely affected by a number of negative factors including natural disasters and power shortage. Thankfully, the market conditions have showed remarkable improvement since the second quarter. Urea prices have trended upwards steadily since May while coal prices moderated. The Group took various measures to enhance operating efficiency. We stepped up efforts to expand compound fertiliser business and the self-owned railway was put into operation. Moreover, we are building the fourth urea production plant near existing facilities and plans to acquire two premier coal mines in Xinjiang. When these expansion plans are completed, the Group will create a more complete value chain through vertical integration. Our production capacity will thus be substantially boosted, whereby further strengthening our leadership in the market."

Sales volume of urea and compound fertiliser for the first half of this year edged up by 4% and 78% year-on-year respectively, while that of methanol dropped by 18% year-on-year. The average selling prices of urea, compound fertiliser and methanol grew 16%, 22% and 18% year-on-year respectively. Benefiting from slower increase in cost of sales, gross profit margin of compound fertiliser for the first half added 4 percentage points to 15% from the same period last year. However, gross profit margins of urea and methanol dropped 6 percentage points and 9 percentage points respectively to 14% and -10% on rising coal prices. Nonetheless, as the coal prices in the second quarter of this year were lower than those in the first quarter this year and the fourth quarter of last year, and the Group's production was less affected by power cut during the period, gross profit margin of urea operation for the second quarter was 3 percentage points higher than the first quarter and 4 percentage points higher than the fourth quarter last year. Meanwhile, gross profit margin of methanol for the second quarter was 12 percentage points higher than the first quarter of this year and 2 percentage points higher than the fourth quarter of last year.

The Group maintained a sound financial position. As at 30 June 2011, it had RMB 309 million cash and cash equivalents, an increase of 90% from the end of 2010. Its net assets reached approximately RMB 1.609 billion, a slight increase of 1% from the end of last year.

Looking ahead into the second half, Mr. Liu Xingxu said, "While the urea output for the first half was lower than the same period last year, demand for agricultural and industrial urea and compound fertiliser is expected to increase steadily. Moreover, the low-tariff export window for urea has reopened since the third quarter. We expect urea prices will stay at high levels in the rest of this year. Meanwhile, anthracite coal prices will remain stable. Gross profit margin of urea operation for the third quarter is expected to be better than the second quarter. The Group will continue to enhance efforts in expanding compound fertiliser business and we are set to benefit from the seasonal boom of compound fertiliser business in the third quarter."

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. Its current production capacity of urea, compound fertiliser and methanol are 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 fully completed in 2013 and its annual production capacity of urea 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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