Migao Q1 profit down, missed estimate

China-based Potash-based fertilizer producer Migao Corp reported net income for the first quarter of C$7.8 million or C$0.15 per share as compared to net income of C$8.8 million or C$0.17 per share in the year-ago quarter.

On average, 8 analysts polled by Thomson Reuters expected earnings of C$0.16 per share for the quarter. Analysts' estimates typically exclude special items.

The income drop was attributed to decreased gross profit margin related to the increased volume of potassium chloride sales and further impacted by maintenance shutdown programs of the company's higher margin core fertilizers.

Revenues for the quarter grew to C$100.5 million or RMB 675.1 million from C$66.3 million or RMB 440.0 million in the year-ago quarter. Six Street analysts had a consensus revenue estimate of C$77.2 million for the quarter.

The revenue improvement was attributed to increased sales of potassium chloride.

Gross profit as a percentage of revenue for the quarter decreased to 17.1 percent from 26.4 percent last year.

Liu Guocai, CEO of Migao, said," We have negotiated increased selling prices of our core fertilizers and are still enjoying strong pricing and demand for our specialty compound products. We expect gross profit margin to return to the strong historical range of 22-24% for the remainder of the year."

During the quarter, the company sold 24,191 tons of potassium nitrate, 69,262 tons of potassium sulphate, 22,817 tons of compound fertilizer, 57,317 tons of potassium chloride, and at the end of the period, the company had C$8.9 million (43,459 tons) of finished goods inventory on hand, including co-products.

At the end of the period ended June 30, the company had $35.7 million (81,436 tons) of potassium chloride inventory with an average delivered price of C$438 per ton, of which 33,852 ton were on hand with the reminder being in transit.

Currently, Migao produces 480,000 tons annually of combined core products and specialty compound fertilizers. Announced projects under construction will bring online an additional 40,000 tons of core product capacity by the end of calendar 2011 as well as 100,000 tons of per year of specialty compound fertilizers to be built in two phases ending in the fourth quarter of calendar 2012.