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Press release from Marketwire

Migao Reports First Quarter, Fiscal 2011 Financial Results

Tuesday, August 10, 2010

Migao Reports First Quarter, Fiscal 2011 Financial Results07:00 EDT Tuesday, August 10, 2010TORONTO, ONTARIO--(Marketwire - Aug. 10, 2010) - Migao Corporation (TSX:MGO), a China-based leading specialty potash fertilizer producer, today reported financial results for the first quarter ended June 30, 2010. Migao reported revenues of $66.3 million (RMB 440.0 million) for the 3-months ended June 30, 2010 as compared to revenues of $58.9 million (RMB 344.8 million) for the three-month period ended June 30, 2009. For the quarter, the Company reported net income of $8.9 million or $0.17 per basic share as compared to net income of $9.6 million or $0.21 per basic share. The revenue improvement is attributed to increased product sales by volume compared to the same period last year. The decrease in net income was primarily a result of increased taxes as Migao's subsidiaries complete various tax free and tax-reduced programs in China. SUMMARY FINANCIAL STATEMENTS 3 months ended 3 months ended June 30, 2010 June 30, 2009 ($'000) Sales 66,256 58,928 Gross Profit 17,499 14,608 Gross Profit (% of revenue) 26.4% 24.8% Net Income 8,921 9,558 EBITDA 13,277 12,607 Basic EPS 0.17 0.21 Diluted EPS 0.17 0.20 Weighted average number of shares (in millions of shares) Basic 52.1 46.5 Diluted 52.6 46.9 Balance Sheet Highlights ($'000) June 30, 2010 March 31, 2010 Current ratio 3.52:1 3.52:1 Cash 96,173 60,221 Net Cash 48,037 18,790 Working Capital 207,212 189,451 Total Assets 373,973 343,976 Total Debt 82,388 75,470 Total Equity 291,585 268,506 Long Term Bank Debt to Equity Ratio 0:1 0:1 "The industry and market conditions continued to exhibit signs of strength with Migao's products and distribution meeting demand throughout China," said Mr. Liu Guocai, President and CEO of Migao. "Our core fertilizer products were in strong demand with pricing for our higher-volume product, potassium sulphate (SOP), seeing price increases. Our specialty compound and low-grade SOP provided little revenue during the period as expected due to the seasonal nature of those products. The compound and low grade SOP market demand will return later this summer."Migao's gross profit margin improved to a record 26.4% of revenue, ahead of the targeted 22-24% range. Gross margin improved as a result of well-timed raw material purchases, ahead of the stable and improving pricing environment in China for the Company's core products. EBITDA for the first quarter of fiscal 2011 was $13.3 million versus $12.6 million for the three months ended June 30, 2009. "Demand for Migao's products, and fertilizers in general in China, has steadily improved since picking up in late 2009 after a period of weak conditions. However, China's fertilizer application and potash use remain below levels seen in previous years," said Mr. Liu Guocai, President and CEO of Migao. "Flooding that is occurring in China has not directly impacted Migao however, there could be some minor transportation delays on some rail lines. We believe we will be in a stable environment for our core products for the next few months and expect the price of our main raw material, potash to increase as we near 2011, which has historically translated into higher selling prices for us."Currently Migao produces 420,000 tonnes annually of combined core products and specialty compound fertilizers. Announced projects under construction will bring online an additional 100,000 tonnes of core product capacity by the end of calendar 2011. Specifically, the additional capacity comes from a 40,000 tonne per year potassium sulphate facility near Shanghai and a 40,000 tonne per year potassium nitrate facility, which we are building through a 50/50 joint venture with Chile's SQM at our Sichuan Migao property. In addition, a 40,000 tonne per year potassium sulphate facility will be added to the Changchun Migao site.At the end of the period, the Company had $93.1 million (273,213 tonnes) of potassium chloride inventory with an average delivered price of $341 per tonne, of which 65,055 tonnes were on hand with the reminder being in transit. In addition, during the quarter, the Company sold 25,610 tonnes of potassium nitrate, 80,347 tonnes of potassium sulphate, 7,286 tonnes of compound fertilizer, 13,091 tonnes of potassium chloride, and at the end of the period, the Company had $4.7 million (44,132 tonnes) of finished goods inventory on hand, including co-products. At June 30, 2010, Migao reported cash of $96.2 million and working capital of $207.2 million. Conference CallMigao will be hosting a conference call to discuss the year-end results at 10:00am, Eastern Time, Tuesday August 10, 2010. The details are as follows: Dial in number: 416-340-2216 or 1-866-226-1792 Taped replay (until August 24, 2010): 416-695-5800 or 1-800-408-3053 Taped replay access code: 1738120# About MigaoMigao 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 and potassium sulphate) to China's agricultural market. Migao Corporation is subject to, and complies with strict government regulations that govern safety, quality and environmental protection. Migao's Sichuan facility is ISO 14001 certified, an international environmental management standard. Please visit www.migaocorp.com for further information.CAUTION REGARDING FORWARD-LOOKING STATEMENTSThis 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.To be added to Migao's email distribution list for news releases or to be removed from the list, please send a request to info@migaocorp.com.FOR FURTHER INFORMATION PLEASE CONTACT: Migao Corporation Jay Hussey Vice President Corporate Finance 416-869-1108 ext. 104 jay.hussey@migaocorp.com or Migao Corporation Randall Smallbone Chief Financial Officer 416-869-1108 ext. 103 randall.smallbone@migaocorp.com