Migao Reports Fiscal 2013 First Quarter Financial Results

"We continue to operate in a climate of challenging economic conditions," said Mr. Liu Guocai, CEO of Migao. "We are expecting improvement in our markets as well as from our efforts to offset the drag from the hydrochloric acid market. Pricing of hydrochloric acid in northeastern China is expected to improve in the next few months, which should have a positive impact on our revenue and margin for both hydrochloric acid and potassium sulphate products. Upcoming price and volume negotiations with recurring major customers are expected to result in improved production levels from the first quarter's performance."

Migao's gross profit margin was 8.9% of revenue, compared to 17.1% in the same period a year ago. The decrease is a result of reduced production volume, the ongoing impact of reduced selling prices for hydrochloric acid, and slower than anticipated start-up of new production capacity.

Migao's current annual production capacity is 620,000 of combined potassium nitrate, potassium sulphate and specialty compound fertilizers. An additional 100,000 tonnes per year production capacity of specialty compound fertilizers is to be built if market demand continues to grow and the Company is successful in attracting new crop customers. Beginning earlier in the year, several new crop customers were introduced to Migao's specialty compound fertilizers with encouraging results and negotiations to date.

At the end of the period, the Company had $39.0 million (77,544 tonnes) of potassium chloride inventory with an average delivered price of $502 per tonne, of which 58,205 tonnes were on hand with the reminder being in transit. In addition, during the quarter, the Company sold 14,940 tonnes of potassium nitrate, 13,324 tonnes of potassium sulphate, 2,899 tonnes of compound fertilizer, 22,254 tonnes of potassium chloride, and at the end of the period, the Company had $24.0 million (66,651 tonnes) of finished goods inventory on hand, including co-products.

At June 30, 2012, Migao reported cash and restricted cash of $82.5 million and working capital of $204.3 million.