China XLX Fertiliser Ltd

OUR CORE COMPETITIVENESSSecurelyrooted1CostSuperiorityCost is the keydifferentiating factoramongst chemical fertiliserproducers. We are the 4thlowest cost and 6th largestcoal-based producer ofurea in the PRC in termsof total cost and in termsof production capacityrespectively .According to CNCIC, ourtotal cost of producing ureais about 23% less than theindustry average in Chinadue to the following factors:CoalCoal constitutes about 50%of our costs.PRICE Our input prices areabout RMB 100/ton less dueto lower transportationcost because of the closeproximity to coal mines inJincheng, just 150km awayfrom our plants. Due to ourstrategic location in Henan,we are more efficientthan even the other largerproducers.QUANTITY With moreadvanced technology,we use about 10% lesscoal for each ton of ureaproduced compared to otherproducers. In addition, wehave sealed long-frame2contracts with oursuppliers to supply 70%of our coal requirements.ElectricityElectricity constitutesabout 25% of our costs.QUANTITY With moreadvanced technologies,we use about 20% lesselectricity for each ton ofurea produced comparedto other producers.ProductReputation& Qualityour “ 心 连 心 ” brand wasawarded Henan Provincewell-known Trademark since2004. This is endorsementof our product quality andcompany reputation whichoften enables us to priceslightly above the marketrate. In the same year, wewere also honoured to beranked as one of the Top100 companies in Henan dueto our size, reputation andenvironmental protectionefforts.3EnvironmentalProtectionSuperiorityIn recent years, we haveplaced added emphasis onenvironmental protectionas a result of increasingenvironmental awarenessand to comply withincreasingly stringent PRCrequirements.We have implementedadvanced technologies tocomply with environmentalrequirements and also tobring about energycost savings. We haveplayed an exemplary rolein the fertiliser industry inthe PRC. In 2006 we wereawarded ISO 14001:2004Certificate of EnvironmentalManagement Systemand the 2nd Prize for the“Project for the Non-Discharge of Waste WaterDuring NitrogenousFertiliser ProductionProcess”. In addition, wehave held several of theyearly environmentalprotection conferences forurea producers at our plant,to showcase our strategiesto protect the environment.4DistributionChannelsDue to the qualityand reputation of ourproducts, all our ureasales are secured byeither MOU or bindingcontracts, and sold over5,000 distribution pointsacross the PRC, as shownon page 13. Our maincustomer is Sinofert,who has signed a 5-yearagreement with us topurchase 300k tons ofurea each year. Sinofert isthe largest distributor inChina and we capitaliseon their strengthto expand into newmarkets. Sinofert is alsoour key strategic investorholding 4.99% of ourcompany.ShanxiJINCHENGwhere weprocurecoal suppliesHenan150 kmXINXIANGwhere our plantsare locatedCORE COMPETITIVENESS12