China XLX Fertiliser's Net Profit for 1H 2013 Grows 9% Y-o-Y to ...

year-on-year to 606,000 tonnes, which partly offset the negative impact oflower average selling price.Revenue from compound fertiliser for the Period decreased 3% year-on-yearto approximately RMB490 million, while its average selling price dropped 8%year-on-year to RMB 2,314 / tonne due to lower costs of major raw materials.As the Group pursued an established strategy to expand its sales network,sales volume of compound fertiliser advanced 5% year-on-year to 212,000tonnes, which partly offset the negative impact of lower selling price.Revenue from methanol for 1H 2013 dropped 8% year-on-year toapproximately RMB231 million mainly attributable to a 10% decline ofaverage selling price to RMB2,014 / tonne. However, the negative impact oflower selling price was partly offset by a 2% year-on-year increase in its salesvolume to 115,000 tonnes.Continued Improvement in Gross Profit Margin and A Sound FinancialPositionThe Group's gross profit margin further improved in the first half of 2013thanks to higher gross profit margins of urea and methanol. The average costof urea sales for the Period declined 11% year-on-year due to weaker coalprices. As a result, gross profit margin of urea improved from 24% in 1H 2012to 26% in 1H 2013. Meanwhile, gross profit margin of methanol improved from-2% in 1H 2012 to 6% in 1H 2013 owing to a 17% year-on-year decline in itsaverage cost of sales. However, gross profit margin of compound fertiliserdecreased 1 percentage point to 15% from a year ago because its average costof sales decreased at a lower rate than its average selling price.The Group maintained a sound financial position. As of 30 June 2013, its netasset reached RMB2,458 million, up 6% from the year end of 2012. Its netgearing ratio was 55.4%, representing a modest increase of 4.6 percentagepoints from the year end of 2012. Henan Xinlianxin Fertiliser Co., Ltd, asubsidiary of the Company, completed the issuance of second tranche ofRMB300 million short-term notes in June 2013. The annual coupon rate is 60basis points lower than that of first tranche, reflecting the market’s fullconfidence about the Group's future developments.OutlookLooking forward, Mr. Liu Xingxu said, “Given the demand and supplyconditions in the market, urea prices are likely to go down further in thesecond half of this year, which will negatively impact on domestic urea sector.The Group’s operating results in the second half will thus be unavoidablyaffected. However, we will strive hard to retain our cost leadership andovercome various difficulties. The development of our fourth urea plant isgoing smoothly, which will start trial-production in the third quarter of thisyear as scheduled and start full operations in the first half of next year.Moreover, the development of the fifth plant in Xinxiang is progressing well.2