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Press release from Marketwire

Hanfeng Evergreen Announces Fourth Quarter and Full Year 2012 Audited Financial Results

Gross Profit, EBITDA grow in fiscal 2012 Adjusted IPS of $0.10 in fourth quarter and $0.26 in fiscal 2012

Monday, September 24, 2012

Hanfeng Evergreen Announces Fourth Quarter and Full Year 2012 Audited Financial Results06:30 EDT Monday, September 24, 2012TORONTO, ONTARIO--(Marketwire - Sept. 21, 2012) - Hanfeng Evergreen Inc. (TSX:HF) ("Hanfeng" or the "Company") today reported its financial results for the fourth quarter and year ended June 30, 2012. All amounts are in Canadian dollars unless otherwise noted. Summary Financial Resultsin thousands in $Cdn except per share dataFor the 3 month period ended June 30For the 12 month period ended June 302012201120122011Sales$92,177$53,733248,526$246,800Gross profit10,5077,07333,38930,545EBITDA19,1545,02926,47525,863Impairment of property and equipment10,12024510,5715,245Net Income/loss(2,348)2,5076,92513,099Adjusted Net Income5,9002,71115,54017,458Basic IPS$(0.04)$0.04$0.11$0.21Diluted IPS$(0.04)$0.04$0.11$0.21Adjusted IPS2$0.10$0.05$0.26$0.29Sales for the quarter ended June 30, 2012 increased to $92.2 million from $53.7 million for the same quarter of fiscal 2011. The increase from the comparative period in 2011 is primarily attributable to a higher volume of sales in the fourth quarter at the Heilongjiang facility and contributions from the joint venture facility in Indonesia, as well the negative impact of an extended maintenance turnaround that commenced in the fourth quarter of 2011 at the Heilongjiang facility. Gross margin per metric ton for SCR in China, calculated on a quarterly basis and weighted by sales volume per quarter, was RMB 434 in fiscal 2012, as compared to RMB 418 during fiscal 2011. The main driver for the increase was increased margins on coated and blended products sold to the Company's largest customers, offset by lower margins on a high quality prill tower compound product, as demanded by the Company's largest customers, predominantly in fourth quarter of fiscal 2012.EBITDA in the fourth quarter of fiscal 2012 increased to $9.2 million versus $5.0 million in the fourth quarter of fiscal 2011 due to higher sales volumes, as explained above, which generated higher gross profits. Net loss in the fourth quarter of fiscal 2012 was $2.3 million as compared to net income $2.5 million during the same quarter in fiscal 2011. The loss is primarily attributable to a non-cash impairment charge of $10.1 million due primarily to IFRS requirements to adjust the overall assets of the Company to fair value when the market capitalization of the Company is lower than its book value. In addition, the Company also incurred one-time, non-cash impairments related to the sale of the Shandong and Shanxi joint venture facilities, and relating to the Shanghai real estate asset being held for sale. As a result, loss per share is $0.04 for the fourth quarter of fiscal 2012, compared to income per share ("IPS") of $0.04 for the same quarter during fiscal 2011. Excluding the aforementioned impairment charges, on an after-tax basis, IPS for the fourth quarter of fiscal 2012 was $0.10. Sales revenue in fiscal 2012 was $248.5 million compared to $246.8 million in the year ended June 30, 2011. The increase is primarily the result of higher sales prices per ton from the Heilongjiang facility and increased contribution from the Indonesian joint venture.Gross profit was higher during fiscal 2012 at $33.4 million compared to $30.5 million during fiscal 2011. The main reason for the increase was higher gross profit at the Indonesian joint venture, offset by slightly lower gross profit in the Chinese operations, while sales volumes increase in the Indonesian joint venture, as compared to a small decrease in China (led by the sale of the Shandong and Shanxi joint ventures with effect from the end of the third quarter of fiscal 2012). Gross profit margin as a percentage of sales was higher in fiscal 2012 at 13.4% compared to 12.4% during fiscal 2011. EBITDA for fiscal 2012 increased to $26.5 million from $25.9 million during fiscal 2011. The main reasons for the increase were higher gross profits during fiscal 2012, offset by higher selling, general and administrative, research and development costs, maintenance expenditures during fiscal 2012.Net income decreased to $6.9 million and IPS was $0.11 for the year ended June 30, 2012 versus $13.1 million and $0.21 for fiscal 2011. Adjusting for aforementioned non-cash items IPS was $0.26 per share for fiscal 2012 compared to 0.29 during fiscal 2011.Cash was $81.3 million as at June 30, 2012 (representing $1.353 per share), compared to $65.5 million as at June 30, 2011. Additionally, the Company, through its subsidiaries based in China, has undrawn lines of credit with Chinese banks totaling $96.2 million. As at June 30, 2012, Hanfeng reported a total of $21.8 million in debt related to its pro rata share (34%) of a working capital and shareholder loans for the Indonesian joint venture facility. Book value per share was $5.073 at June 30, 2012 versus $4.583 at June 30, 2011.Liquidity and Capital ResourcesIn thousands of Canadian dollars except for ratiosJune 30, 2012June 30, 2011Current ratio 47.8:113.1:1Cash81,32265,517Working capital217,554177,307Total assets340,664298,410Total debt 521,82811,115Total equity305,648280,963Total debt / Total equity7.1%4.0%The Company will also hold a conference call to discuss the financial results on Monday, September 24, 2012 at 10:00 a.m. Eastern Daylight Time (EDT). 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, September 24, 2012Time:10:00 a.m. Eastern Standard TimeDial in Number:1-888-430-8705 or 1-719-325-2463Taped Replay:1-877-870-5176 or 1-858-384-5517Taped Replay Pass Code:4095850Webcast Presentation Link: http://public.viavid.com/index.php?id=101798 Hanfeng's yearend financial statements and MD&A have been filed on SEDAR and will be available at www.sedar.com. 1 Earnings before interest, taxes, depreciation, and amortization ("EBITDA") is a non-GAAP 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) Property, plant and equipment and intangibles write-down,(7) foreign exchange loss (gain), (8) disposal loss (gain) and (9) bargain purchase loss (gain) . This definition of EBITDA may not be identical to the definition use by other companies. 2 Adjusted Net Income and IPS is calculated by adding back the net of tax impact of non-cash, fixed asset and intangible write-downs to Net Income and basic IPS. 3 Calculated based on the number of common shares outstanding as at the date referenced. 4 Current ratio = current assets / current liabilities.5 Total debt includes bank loans, long-term debt and shareholder loans from joint venture partners. About Hanfeng Evergreen Inc.Hanfeng is a leading producer and supplier of value-added fertilizer solutions in emerging markets. It is the largest producer 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. 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. MerchantHanfeng Evergreen Inc.Chief Financial Officer+1 (416) 368-8588nmerchant@hanfengevergreen.comORKevin O'ConnorHanfeng Evergreen Inc.Investor Relations+1 (416) 962-3300ko@spinnakercmi.com