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Press release from Marketwire

Migao Reports Record Fiscal 2011 Year-End Financial Results

- Chairman Guarantees Supply Agreement - - Company Announces Share Buy Back -

Thursday, June 09, 2011

Migao Reports Record Fiscal 2011 Year-End Financial Results07:00 EDT Thursday, June 09, 2011TORONTO, ONTARIO--(Marketwire - June 9, 2011) -Migao Corporation (TSX:MGO), a China-based leading specialty potash fertilizer producer, today reported financial results for the year ended March 31, 2011. Migao reported net income of $34.5 million or $0.66 per basic share from record revenues of $317.0 million (RMB 2.1 billion) for the 12-months ended March 31, 2011 as compared to net income of $38.3 million or $0.80 per basic share from revenues of $269.1 million (RMB 1.7 billion) for the year ended March 31, 2010. EBITDA for the year was $34.5 million as compared to $38.3 million in the prior year.SUMMARY FINANCIAL STATEMENTS12 months ended March 31, 201112 months ended March 31, 2010($'000)Sales316,937269,107Gross Profit 70,90762,654EBITDA51,95349,984Net Income 34,45338,288Basic EPS0.660.80Diluted EPS0.650.79Weighted average number of shares (in millions of shares)Basic52.348.1Diluted52.748.6Balance Sheet Highlights($'000)March 31, 2011March 31, 2010Current ratio2.39:13.52:1Cash26,00760,221Working Capital116,085189,451Total Assets387,669343,976Total Equity304,343268,506Long Term Debt to Equity Ratio0.0:10.0:1"Despite very difficult conditions in the capital markets, Migao continued to deliver strong operational and financial results," said Mr. Liu Guocai, Migao CEO. "I acknowledge the confusion and uncertainty caused due to the potash supply agreement announced in March. The Board and Management of Migao have analyzed an exhaustive list of potential remedies to assure fellow shareholders as to the legitimacy and benefit of the potash agreement. The agreement is very important to the Company in terms of security of supply and economic benefit. We will continue to honor a non-disclosure agreement, which prohibits us from disclosing the share structure and resources of our potash supplier. For competitive reasons we are not yet willing to disclose the exact discount pricing built into the contract. As such, and to show my confidence in the agreement, I have pledged my entire shareholdings of Migao against the possibility of default by our supplier. This represents approximately one third of the total outstanding shares of Migao."Migao also announced today, its plan to file a notice of intention to make a Normal Course Issuer Bid ("NCIB") for its Common Shares in the open market through the facilities of the Toronto Stock Exchange ("TSX"). The NCIB is subject to the receipt of TSX approval. The bid will be restricted to a maximum of 2,640,000 Common Shares, which represents no more than 5% of the Company's 52,890,661 issued and outstanding Common Shares as at June 8, 2011.Migao believes the purchase of its Common Shares is a worthwhile, value added use of its resources. "The value of Migao's strong operational and financial performance is not reflected in the share price," said Mr. Liu Guocai, Migao's CEO. "We feel this use of funds is in the best interest of shareholders as we strive to maximize shareholder value."Purchases under the NCIB may commence on the date that is two trading days after the later of (i) the date of acceptance by the TSX of Migao's notice of intention in final executed form; and (ii) the date of this press release. Purchases may occur during the 12-month period thereafter, unless terminated on such earlier date as the Company may complete its purchases.Any purchases made pursuant to the NCIB will be in accordance with the rules of the TSX. Migao intends that purchases will be funded out of its available cash, and that any Common Shares acquired pursuant to the NCIB will be cancelled. Migao has not purchased any Common Shares during the previous year pursuant to any issuer bid.Gross profit for the year was 22.4%, achieving the targeted annual range of 22-24%. Gross profit for the quarter declined to 17.5% as a result of the sale of raw potash inventory at an average profit margin of 12.4%, in line with management's strategy to reduce the amount of inventory as a result of the long-term supply agreement recently signed. Gross margin for Fiscal 2012 is expected to be in line with the historical range of 22-24%. During the quarter, Migao brought two new facilities into production. A joint venture with SQM for the annual production of 40,000 tonnes of potassium nitrate began production during the quarter and is contributing at full run rate for the current quarter. The new facility employs a modified process, which allows the Company to market to a wider range of high value crops that previous forms were not applicable for. Construction, burn-in, and testing were all completed at Migao's new 40,000 tonne per year potassium sulphate facility near Shanghai and production commenced in March 2011. Shanghai Migao is operating at full run rate as of the current quarter.For the year, Migao's production volume for potassium nitrate and potassium sulphate (excluding 43,000 tonnes of lower grade potassium sulphate) was 332,000 tonnes combined. As a percentage of annual available capacity utilization, our facilities ran at 100%. Natural gas disruptions during part of the third and fourth quarter at the Sichuan Migao facility were expected and planned for. "As a result of our planning, which included scheduling maintenance work during the gas shortage, and running three shifts on either side of the gas disruption, we are very pleased to have achieved 100% capacity output at our Sichuan facility," said Mr. Liu Guocai. "I wish to thank Mr. Li Jian, General Manager of Sichuan Migao, responsible for potassium nitrate operations, for his teams hard work and dedication in this achievement." With the addition of the SQM joint venture and Shanghai Migao, our core and compounding production capacity is 480,000 tonnes. Additional construction activities underway are fully funded and on schedule. Changchun Migao will see an additional 40,000 tonne per year capacity of potassium sulphate come on line in the third quarter of fiscal 2012. Concurrent construction at Zunyi Migao for a 100,000 tonne specialty compounding facility will see the first phase of 50,000 tonnes completed in the third quarter of 2012 followed by the second phase of 50,000 tonnes completed in the second quarter of fiscal 2013. Once completed this will bring Migao's production capacity to 620,000 tonnes per year. In addition to the aforementioned construction, a warehousing facility is being constructed at the Company's Tianjin location as a strategic logistical centre for the import of potash and export of potassium nitrate. For the three-month period ended March 31, 2011, Migao reported record sales of $117.6 million compared to $75.5 million in the same three-month period in 2010. Net income was $8.9 million or $0.17 per basic share for the final quarter of fiscal 2011 compared to $10.4 million or $0.20 per basic share for the fourth quarter of fiscal 2011. Income tax is levied on a calendar year basis separately for each subsidiary of the Company in accordance with the tax regulations of the PRC. Each of the Company's operating subsidiaries has been and will be enjoying an income tax policy for being Foreign Invested Enterprises (FIE), and is income tax exempt for the first two profitable years and at a reduced rate (50% of normal State level income tax plus local tax) for the next three profitable years. The National People's Congress of China approved legislation relating to tax reforms on March 16, 2007. As of January 1, 2008, the tax incentives for FIE's were removed. The State level income tax rate reduced to 25% from 30%. Each of the four operating subsidiaries of the Company will enjoy the favourable income tax policy with new State level income tax rate applicable once coming out of its respective income tax policy period. It is management's belief that SQM joint venture, Tianjin Migao, and Zunyi Migao will not be eligible to enjoy the favourable income tax policy as they were all incorporated after March 16, 2007. Tax losses within the Canadian corporate office are not currently tax benefited. The Company, along with its tax advisors, has developed and is implementing a tax plan that will allow the Company to benefit any such tax losses in the near future. The following is a step analysis of the Company's effective tax rate for the year ended March 31, 2011.Q4 2011F2011Profitable PRC Subsidiaries19.7%17.2%Start-up PRC Subsidiaries0.0%0.9%Corporate Entities2.5%2.2%Future Income Taxes8.7%3.3%Total30.9%23.6%At the end of the period, the Company had $46.2 million (112,079 tonnes) of potassium chloride inventory with an average delivered price of $413 per tonne, of which 28,354 tonnes were on hand and the reminder in transit. In addition, during the quarter, the Company sold 12,812 tonnes of potassium nitrate, 74,935 tonnes of potassium sulphate, 28,861 tonnes of compound fertilizer, 131,370 tonnes of potassium chloride and at the end of the period, the Company had $5.9 million (35,061 tonnes) of finished goods inventory on hand, including co-products. At March 31, 2011, Migao reported cash of $26.0 million and working capital of $116.1 million. At March 31, 2011, current bank debt was $45.6 million.Conference CallMigao will be hosting a conference call to discuss the year-end results at 10:00am, Eastern Time, Thursday June 9, 2011. The details are as follows:Dial in number: 416-340-2218 or 1-866-226-1793Taped replay (until June 23, 2011): 905-694-9451 or 1-800-408-3053 Taped replay access code: 4226083#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: Jay HusseyMigao CorporationVice President Corporate Finance416-869-1108 ext. 104jay.hussey@migaocorp.comORRandall SmallboneMigao CorporationChief Financial Officer416-869-1108 ext. 103randall.smallbone@migaocorp.comwww.migaocorp.com