TORONTO, ONTARIO -- (Marketwire) -- 02/15/13 -- Migao Corporation (TSX: MGO), a China-based specialty potash fertilizer producer, today reported financial results for the three and nine-month periods ended December 31, 2012.
Revenues for the third quarter were $60.4 million for third quarter of fiscal 2013, representing a decrease from the same period one year ago, however it is a dramatic increase compared to the recent second quarter revenues of $11.7 million. For the quarter, the Company reported a net loss of $4.5 million or $0.09 per basic share as compared to net income of $3.8 million or $0.07 per basic share for the same period one year ago. The decline in earnings continues to be a result of weakness in the hydrochloric acid market and overall lower average selling prices.
SUMMARY FINANCIAL STATEMENTS 3 months ended 3 months ended Dec. 31, 2012 Dec. 31, 2011 ($'000 except EPS) Sales 60,362 97,360 Gross Profit 1,302 15,704 Gross Profit (% of revenue) (i)2.5% 16.1% Net Income (loss) (4,514) 3,838 EBITDA (982) 8,046 EPS (0.09) 0.07 (i)excluding $222 inventory write-down Weighted average number of shares (in millions of shares) 52.5 52.5 Balance Sheet Highlights ($'000) Dec. 31, 2012 March 31, 2012 Current ratio 1.89:1 2.56:1 Cash and restricted cash 73,566 68,924 Working Capital 189,070 205,483 Total Assets 545,400 479,163 Total Liabilities 217,397 136,747 Total Equity 328,003 342,416 Long Term Bank Debt to Equity Ratio 0.01:1 0.01:1
"The increased focus on sales and marketing resulted in significant revenue growth compared to the previous quarter. We anticipate this revenue ramp-up to continue into the fourth quarter," said Mr. Liu Guocai, CEO of Migao. "Returning to profitability is also a priority focus and commitment. We saw a slight improvement to gross margin in the third quarter however we are still far from acceptable levels. We continue to address the ongoing hydrochloric acid situation and we are working with international experts to expand the potential customer and industry opportunities for the hydrochloric acid. We are also looking at our processes to determine if we can achieve further efficiencies. At the same time, we are aware of China's evolving agricultural markets and Migao will pursue opportunities that best match imbalances in China's supply and demand of agricultural goods and services."
For the nine months ended December 31, 2012 Migao reported revenues of $108.8 million as compared to revenues of $263.9 million for the nine-month period ended December 31, 2011. The Company reported a net loss of $16.5 million or $0.31 per basic share for the most recent nine-month period as compared to net income of $17.6 million or $0.33 per basic share for the same nine-month period one year ago.
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 1-877-440-9795 Taped replay (until March 1, 2013): 905-694-9451 or 1-800-408-3053 Taped 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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