(24 March 2011, Hong Kong) The Board of Directors (the “Board”) of Sinofert Holdings Limited ("Sinofert" or the "Company", stock code: 00297) announced the audited annual results of the Company and its subsidiaries (the "Group") for the year ended 31 December 2010.
Overall Results Performance
China’s fertiliser sector staged a rebound in 2010 on a gradual recovery of the global economy and a comeback of international fertiliser market. It gained an additional boost as the Chinese government took measures to consolidate and revive the fertiliser industry. Production and income of the industry thus improved from the previous year. Nevertheless, the industry faced various internal and external challenges, including cold weathers, floods, droughts, short supply and rising costs of raw materials and stricter tax regime for fertiliser exports. They had significant impacts on the market demand and the production and operations of the sector.
In the face of oversupply problems and a slow recovery of the market, the Group took effective measures to minimize operating risks. As it has established a value chain integrating upstream and downstream operations and an extensive business network covering domestic and international markets, the Group benefited from greater synergy. In 2010, the Group realized total sales volume of 15.51 million tons, up 1.81% year-on-year. Its turnover reached RMB 29.271 billion, an increase of 8.37% from the previous year. Profit attributable to shareholders was RMB 536 million, reversing from a loss in 2009. Basic earnings per share were RMB 0.0763. As a result, the Group further strengthened its market position.
Sales volume of potash fertiliser for 2010 increased by 17.28% to 2.77 million tons from the previous year. The Company took advantage of a revival of the potash fertiliser sector to turn around the potash fertiliser operations and to retain its leadership in the market. The recovery of this sector was particularly visible in the second half of last year. The Group sold 6.82 million tons of nitrogen fertiliser in 2010, an increase of 10.19% year-on-year. It optimized the nitrogen fertiliser operations. As procurements from core suppliers increased by 47% over 2009, direct sales proportion hence climbed up to 54%, leading to lower logistic expenses and capital costs and greater operating efficiency of this low-margin business. Moreover, the Company strengthened its cooperation with the Nitrogen Fertiliser Industry Association and increased its influence in the market, as its membership at the Association was promoted to Vice General Director from Director. Sales volume of phosphate fertiliser decreased by 10.32% year-on-year to 3.31 million tons and sales volume of compound fertiliser was 2.06 million tons, which was almost unchanged from the previous year. The Company improved the supplier base for its domestic phosphate business and achieved cost leadership through economy of scale, stable procurement system and increased proportion of direct sales to major customers. Meanwhile, its domestic compound fertiliser business benefited from integrated operations, which not only ensured a higher utilization rate of its production facilities, but also met the demand from the distribution network.
Mr. Feng Zhibin, CEO of Sinofert, commented, “China’s fertiliser industry was adversely affected in 2010 by various natural disasters including cold weathers, snowstorm, droughts and floods. Although sales and prices of urea and DAP improved in the second half due to the improvement in exports, enterprises were exposed to increasing operating risk due to the substantial market fluctuations. Their operating results were thus negatively affected. In the face of complicated market conditions, the Group, under the leadership of the Board, enhanced its business value, management and profitability capabilities. We strengthened the cooperation with core suppliers, stepped up efforts to acquire natural resources and reduce fertiliser production costs of its subsidiaries. We explored new development modes for the distribution network and improved operating efficiency and earning ability of distribution network, while systematically strengthened internal controls in order to realize synergy from upstream and downstream integration. With our access to global resources and strong brand power, we remained competitive in the market. The Board of Directors, management of the Company and the entire staff are fully confident of our future development.”
Production and Supply
The Group continued lean management and enhanced its technological capabilities and innovation in 2010. It implemented low-cost strategy and raised production and supply capacity. Sinochem Fuling, a subsidiary of the Company, achieved record production by producing 1 million tons of phosphate fertiliser and 455,000 tons of compound fertiliser. It made a new breakthrough through self-innovation in fine phosphate chemicals business, achieving a total of 19 patents. Meanwhile, Sinochem Changshan completed technological upgrading of compound fertiliser facilities, with annual urea production topped 300,000 tons, a record high for this subsidiary. Sinochem Pingyuan completed the disposal of its non-core assets. Its polypeptide urea project, the second phase of feedstock coal briquetting project and desulphurization project came into operation, with annual production exceeded 900,000 tons. Sinochem Shangdong Fertilisers focused on lean management and technological innovation. Its project of reducing overall energy consumption was rated as an Excellent Quality Control Achievement in the national chemical industry. Sinochem Yantai initially realized the transformation from an enterprise producing traditional bulk-blended fertiliser to the one producing specialty fertiliser, controlled-released polypeptide fertiliser and new fertiliser products with trace elements.
In 2010, the Group optimized the existing distribution network and expanded its market coverage. It added 70 distribution outlets during the year, which were mainly located in southwest China and Guangxi Province. The Group had not established a presence in these areas before and the newly added outlets made its market coverage more comprehensive. As at 31 December 2010, the Group owned 2,106 distribution outlets in total. They brought in sales volume of 10.27 million tons. Besides, the Group proceeded with the organic growth of its distribution network, focusing on the expansion of township customers. By the end of 31 December 2010, it carried out transactions with 43,700 trading customers and 37,400 township customers through the distribution network.
The Group established a “Fert-Mart”, an agri-resources chain-store, in Pingdu County, Shandong Province in June and another one in Jinhua County, Zhejiang Province in November. They provided “one-stop shopping” services to farmers, emerging big crop-growers, group-buying farmers and farming associations. The services they provide ranged from fertilisers, pesticides, seeds, agricultural production tools to farming books.
The global economy is expected to maintain growth momentum in 2011. However, there are rising uncertainties. As a result, the road to recovery is rocky. The outlook for China’s overall economy is promising. The government’s austerity measures are aimed at “maintaining stable economic growth, optimizing economic structure and reining in inflation”. To keep inflation under control and prices at a stable level is the top priority of the government. Tightened credit and rising costs of borrowings will inevitably impact on all industries.
China has seen its food production grow for seventh consecutive year. Demand and supply of crops is in an equilibrium position and the country has the capability to increase food reserve in bumper years. However, the global food supply remains tight due to frequent occurrence of natural disasters. As the threat of food crisis is rising, China attaches great importance to food safety. The Chinese government has put more and more resources into the agricultural sector over the past years, aiming at improving the infrastructure in rural areas and ensuring the stable growth of this sector and farmers’ income. A favourable environment for the agriculture will drive continuing improvement in the fertiliser sector. While different areas in China implement policies to increase food production, domestic fertiliser sector will experience steady growth for a long period of time.
As newly added capacity has increased rapidly in recent years, the overproduction problems in the domestic fertiliser sector become more apparent. This sector and its distribution channel are under rising pressure for consolidation. As a leading enterprise in the country’s fertiliser industry, the Group will strengthen the ability of natural resources acquiring, enhance the core competitive edges of its production enterprises through technological upgrading and innovation. In the meantime, the Group will continue to explore new modes for distribution network development and business operation and to greatly enhance its ability for providing value added services in order to realize sustainable development of the Company and create value for shareholders, making greater contribution to national food security and agricultural development.
Background of Sinofert Holdings Limited
Listed on the Stock Exchange of Hong Kong Limited on 28 July 2005, Sinofert Holdings Limited specializes in businesses of agriculture related products including fertilisers. As the largest fertiliser enterprise integrating production, supply and sales in China, Sinofert Holdings Limited's operating fields extends through the whole industry chain of fertiliser including R&D, production, import & export, distribution and retail as well as agrichemical service of the products through the growth strategy of “centering on marketing and distribution and expanding into both production and network distribution”. Sinofert is the flagship company of Sinochem Corporation. Established in 1950, Sinochem Corporation is one of the largest state-owned enterprises in the PRC in terms of turnover. Sinochem Corporation has been named as one of Fortune 500 enterprises for twenty times, globally dealing in business in petroleum, fertiliser, chemicals, property and finance.
This press release is distributed by PRChina Limited on behalf of Sinofert Holdings Limited.
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