Migao Reports Fiscal 2014 Second Quarter Financial Results
November 14, 2013 (Source: Marketwired) — Migao Corporation (TSX:MGO), a China-based specialty potash fertilizer producer, today reported financial results for the three and six -month periods ended September 30, 2013.
Revenues for the second quarter were $32.8 million for second quarter of fiscal 2014, representing an increase of $23.6 million from the same period one year ago and a slight increase compared to the recent first quarter revenues of $29.4 million. The increase in revenue is primarily a result of higher sales volume in direct sales of potassium chloride and potassium sulphate. Due to seasonality, sales for potassium nitrate and compounds fertilizer for the quarter were minimal. The effects of higher sales volume are partially offset by lower average selling prices of potassium chloride and potassium sulphate.
Gross loss was higher at $ (7.6) million for the current quarter compared to $ (1.5) million for the same period last year predominately as a result of direct sale of potassium chloride at prices below costs as well as $3.3 million of inventory write-down. The Company took efforts to reduce its raw materials stocks on hand amid recent market price decline to mitigate the risk of further decrease in inventory value.
For the quarter, the Company reported a net loss of $18.5 million or $(0.35) per basic share as compared to net loss of $8.1 million or $(0.15) per basic share for the same period one year ago. The increasing net loss continues to be a result of weakness in the hydrochloric acid market and overall lower average selling prices. In addition, an impairment charge of $5.2 million was recognized during the quarter on assets primarily used in production of potassium sulphate and hydrochloric acid as a result of the situation mentioned above.
|SUMMARY FINANCIAL RESULTS|
|In $’000 except per share data|
|3 months ended||3 months ended||YTD||YTD|
|September 30, 2013||September 30, 2012||fiscal 2014||fiscal 2013|
|Gross (loss) profit||(7,606||)||(1,542||)||(5,619||)||1,279|
|Gross (loss ) profit (% of revenue)||(23.2||%)||(16.8||%)||(9.0||%)||3.1||%|
|(loss) earnings per share (basic and diluted)||(0.35||)||(0.15||)||(0.45||)||(0.23||)|
|Weighted average number of shares (in millions of shares)|
|Balance Sheet Highlights|
|In $’000 except ratio|
|September 30,||March 31,|
|Cash, cash equivalents and restricted cash||131,650||77,040|
|Non-current bank debt to equity ratio||0.01:1||0.01:1|
For the six months ended September 30, 2013 the Company reported revenues of $62.2 million as compared to revenues of $41.7 million for the six-month period ended September 30, 2012. The Company reported a net loss of $23.7 million or $(0.45) per basic share for the most recent six-month period as compared to net loss of $12.0 million or $(0.23) per basic share for the same six-month period one year ago.
At the end of the period, the Company had $19.6 million (50,213 tonnes) of potassium chloride inventory with an average delivered price of $390 per tonne and $14.0 million of various raw materials for compound fertilizer. In addition, during the quarter, the Company sold 1,375 tonnes of potassium nitrate, 26,199 tonnes of potassium sulphate, 596 tonnes of specialty compound fertilizer (direct sale), 53,107 tonnes of potassium chloride, 48,233 tonnes of hydrochloric acid, 11,839 tonnes of ammonium chloride, and at the end of the period, the Company had $59.3 million (115,659 tonnes) of finished goods inventory on hand, including co-products.
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Cash was $7.2 million as at September 30, 2013, compared to $10.2 million as at March 31, 2013. Cash decreased mainly as a result of combined effects of $29.8 million cash inflow from operations, $11.5 million spent on purchase of plant and equipment, land use rights and investments in a joint venture, as well as loan repayments of $21.8 million during the six- month period ended September 30, 2013.
At September 30, 2013, Migao reported cash and restricted cash of $131.7 million and working capital of $166.6 million.
The Company also announced the Board of Migao approved to issue 250,000 options to each member of its Board of Directors (with total of 1,750,000 options being issued) under the Company’s stock option plan to purchase common shares of the Company as at October 7, 2013. The exercise price of the options is $0.93 per share. Such options expire on October 6, 2018 and vest as follows: one-third on October 7, 2013, one-third on October 7, 2014 and one- third on October 7, 2015.
Migao’s financial statements and MD&A have been filed on SEDAR and will be available at www.sedar.com
Migao 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.
USE OF NON-GAAP MEASURES
Certain non-GAAP measures referenced in this news release have no standardized meaning under International Financial Reporting Standards (“IFRS”) and, therefore, are unlikely to be comparable to similar measures presented by other issuers. Where we reference non-GAAP measures, we provide definitions. For example, EBITDA is commonly defined as earnings before interest, taxes, depreciation and amortization. EBITDA is most directly comparable to the GAAP measure operating income or loss, except that depreciation and amortization of plant assets are included in measuring operating income or loss, but depreciation and amortization expenses are excluded in measuring EBITDA. In the Company’s earnings releases, consolidated financial statements and MD&As, unless otherwise noted, all financial data is prepared in accordance with IFRS.
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This 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.
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