Press release from Marketwire
Hanfeng Evergreen Announces Third Quarter 2012 Financial Results
Monday, May 14, 2012
TORONTO, ONTARIO--(Marketwire - May 14, 2012) - Hanfeng Evergreen Inc. (TSX:HF) ("Hanfeng" or the "Company"), a leading provider of value-add fertilizers in China and South East Asia, today reported its financial results for the three-month and nine-month periods ended March 31, 2012. All amounts are in Canadian dollars unless otherwise noted.
Summary Financial Results
|In Cad $000's except per share data||For the three-month period ended Mar 31||For the nine-month period ended Mar 31|
Operational and Financial Highlights:
- Hanfeng shipped a total of 156,787 metric tons ("MT") of slow and controlled release fertilizers ("SCR") in the third quarter, at an average selling price of RMB 3,380 per MT, and at an average gross margin of RMB 520 per MT.
- Hanfeng shipped approximately 119,200 MT of SCR in the third quarter of fiscal 2012 relating to an order secured with Beidahuang Agricultural Company Limited and its affiliates (collectively "Beidahuang") for 200,000 MT of SCR ("BDH Order"). The SCR being produced and delivered to satisfy the BDH Order is the New Hybrid Product made up of mostly SCR products, with certain nitrogen enhancer ("NE") products included as additives. Including the 20,000 MT shipped in the second quarter of fiscal 2012, approximately 70 percent of the BDH Order been shipped to date. The Company expects to ship the remaining portion of the BDH Order in the fourth quarter of fiscal 2012.
- As previously announced, subsequent to the end of the third quarter, the Board of Directors of the Company announced strategic changes in China, including a plan to sell its interests in the Shanxi 50,000 MT per annum ("MTPA") joint venture and the Shandong 100,000 MTPA joint venture, as well as the Company's intention going forward to focus its growth initiatives on partnering with large end-users of multi-nutrient products, as opposed to single-nutrient urea producers.
- The Indonesian joint-venture's quarterly sales were 5,074 MT (net to Hanfeng) at an average selling price of $642 per MT equivalent, and a gross margin of $149 per MT equivalent.
- The Indonesian joint-venture's quarterly production was 12,083 MT (net to Hanfeng), or approximately 48,000 MT (net to Hanfeng) on an annualized basis, representing approximately 67 percent capacity utilization levels, before the commissioning of the new 200,000 MTPA bulk blending line which occurred in the early part of the third quarter of fiscal 2012.
- Sales were negatively affected during the quarter by a change in the sales terms for certain major customers, whereby revenue is recognized when the goods are delivered to the customer's warehouse as opposed to at the point of shipment, which caused a one-time delay in the recognition of revenue during the third quarter of fiscal 2012.
- As previously announced, subsequent to the end of the quarter, the Company announced that the Indonesian joint-venture has secured orders for calendar 2012 totaling 300,000 MT, including 70,000 MT to be sold to Thailand. In addition, the Indonesian Joint Venture announced the proposed construction of a new 600,000 MTPA facility, to be located on the island of Kalimantan, Indonesia.
Sales increased by $53.0 million to $98.8 million in the third quarter of fiscal 2012 compared to the third quarter last year. The increase in sales was due primarily to the increased volume of production and a drawdown of stockpiled inventory at the Company's Heilongjiang plant, where most of the production to supply the Company's largest customer occurs. Sales tonnage was higher than production, by approximately 45,000 MT in the Chinese operations, as a result of a draw-down in previously stock-piled inventory which commenced in the first half of fiscal 2012. Sales were slightly offset by reduced sales volumes in Indonesia.
Gross margin as a percentage of sales increased to 14.5 percent in the third quarter of fiscal 2012, as compared to 13.6 percent in the third quarter last year. The increase in gross margin as a percentage of sales was due to higher margins at the Heilongjiang facility (for the BDH Order) compared to the same period last year. Gross margins were also positively impacted by higher margins at the Indonesian Joint Venture.
Gross profit increased by 23 percent in the third quarter of fiscal 2012 to $14.3 million versus the third quarter of fiscal 2011 at $11.6 million as a result of the increased gross margins per MT and higher sales volumes relating to the BDH Order.
EBITDA (see Note 1 below) increased 12 percent during the third quarter of fiscal 2012 to $12.3 million from $11.0 million during the same period last year. Net income for third quarter of fiscal 2012 was $8.4 million, compared to net income of $8.2 million in the same period last year. The main reasons for the increased net income are higher sales volumes in China, higher gross margins and gross profit during Q3FY12, slightly offset by reduced sales volumes in Indonesia and asset impairment recognized against the property and equipment in the Shandong and Shanxi plants.
Basic and diluted income per share ("IPS") was $0.14 for the third quarter of fiscal 2012 versus $0.13 in the same period in fiscal 2011.
For the nine-month period ended March 31, 2012, sales were $156.3 million versus $193.1 million during the same period last year, primarily due to the Maintenance Turnaround at the Company's Heilongjiang facility in the first quarter of fiscal 2012 and inventory stockpiling, partially offset by increased production from the Indonesian Joint Venture after its initial commissioning in October 2010.
Gross profit was $22.9 million and gross margin as a percentage of sales was 14.6 percent versus $23.5 million and 12.2 percent respectively in the same nine month period last year.
EBITDA (see Note 1 below) was $17.3 million versus $21.8 million during the same period last year, primarily due to lower sales volumes in the first two quarters of fiscal 2012. Net income was $9.3 million, compared to net income of $10.6 million in the same period last year. Net income year to date in fiscal 2012 was impacted by the aforementioned factors and offset by increased profitability in the second and third quarters of the current fiscal period.
Basic and diluted IPS was $0.15 for the nine month period in fiscal 2012 versus $0.17 in the same period last year.
Liquidity and Capital Resources
|In thousands of Canadian dollars except for ratios||March 31, 2012||June 30, 2011|
|Current ratio (1)||9.1:1||13.1:1|
|Total debt / Total equity||5.3%||3.7%|
|Notes: (1) Current ratio = Current Assets / Current Liabilities|
Cash was $25.8 million as at March 31, 2012, compared to $65.5 million as at June 30, 2011. Cash was used to finance working capital, predominantly inventory purchases, and to repurchase shares under the Company's Normal Course Issuer Bid which was renewed in December 2011.
Total inventory and advances to suppliers increased by $84.1 million to $169.5 million as at March 31, 2012. The increase was mainly due to the inventory build-up process, in anticipation of deliveries in relation to the BDH Order during Q4FY12.
The Company will hold a conference call to discuss the financial results on Monday, May 14, 2012 at 10:00 a.m. Eastern Standard Time (EST). Mr. Niral Merchant, CFO and Mr. Loudon Owen, Non-Executive Chairman of the Board of Directors will host the call, and invite analysts and investors to participate in the conference call.
|Date:||Monday, May 14, 2012|
|Time:||10:00 a.m. Eastern Standard Time|
|Dial in Number:||1-888-468-2440 or 1-719-457-2729|
|Taped Replay:||1-877-870-5176 or 1-858-384-5517|
|Taped Replay Pass Code:||4827830|
|Webcast Presentation Link:||http://viavid.net/dce.aspx?sid=000097BA|
Hanfeng's financial statements and MD&A have been filed on SEDAR and will be available at www.sedar.com.
About Hanfeng Evergreen Inc.
Hanfeng is a leading producer and supplier of value-added fertilizer solutions in emerging markets. It is one of the largest producers of slow and controlled release fertilizer in two of world's most significant agricultural markets: the People's Republic of China ("China") and the Republic of Indonesia. As the first company to introduce slow and controlled release fertilizers into China's agriculture market, Hanfeng has established itself both as a market leader and innovator. A Canadian Company, Hanfeng is headquartered in Toronto, Ontario and its shares trade on the Toronto Stock Exchange under the ticker HF.
Note 1: Earnings before interest, taxes, depreciation, and amortization ("EBITDA") is a non-IFRS financial measure, which the Company believes is meaningful information for purposes of performance evaluation and it allows for comparisons of the Company's performance to the industry as it eliminates the impact of financing decisions, capital structure and the cost basis of assets. Hanfeng calculates it by adding (1) net income, (2) interest expense reported on the income statements (or deducting interest income) (3) amortization expense reported as part of cost of goods sold on the income statements, (4) amortization expense reported as a line item on the income statements, (5) income tax expense reported on the income statements, (6) write-downs of intangible assets and property, plant and equipment write-down and (7) and by deducting foreign exchange gain (loss). EBITDA does not have a standard meaning prescribed under IFRS and is therefore unlikely to be comparable to similar measures presented by other companies.
This press release contains forward-looking statements based on current expectations. Forward looking statements include, without limitation, statements evaluating market and general economic conditions, and statements regarding growth strategy and future-oriented projected revenue, costs and expenditures. Actual results could differ materially from those projected and should not be relied upon as a prediction of future events. A variety of inherent risks, uncertainties and factors, many of which are beyond Hanfeng's control, affect the operations, performance and results of Hanfeng and its business, and could cause actual results to differ materially from current expectations of estimated or anticipated events or results. Some of these risks, uncertainties and factors include the impact or unanticipated impact of: current, pending and proposed legislative or regulatory developments in the jurisdictions where Hanfeng operates, in particular in China and the Republic of Indonesia; changes in tax laws; political conditions and developments; intensifying competition from established competitors and new entrants in the fertilizer industries; technological change; currency value fluctuation and changes in foreign exchange restrictions; changes in Chinese government support or restrictions on foreign investment; general economic conditions worldwide, as well as in China and South East Asia; Hanfeng's success in developing and introducing new products and services, constructing and operating new manufacturing facilities, expanding existing distribution channels, developing new distribution channels and realizing increased revenue from these channels. This list is not exhaustive of the factors that may affect any of Hanfeng's forward-looking statements. Risks and uncertainties about Hanfeng's business are more fully discussed in the Company's disclosure materials, including its annual information form and MD&A, filed with the securities regulatory authorities in Canada. Hanfeng undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results or for any other reason. Readers are cautioned not to put undue reliance on forward-looking statements.
FOR FURTHER INFORMATION PLEASE CONTACT:
Niral V. Merchant Hanfeng Evergreen Inc. Chief Financial Officer +1 (416) 368-8588 firstname.lastname@example.org
Investor Relations Kevin O'Connor +1 (416) 962-3300 email@example.com