china xlx fertiliser ltd. 中國心連心化肥有限公司 - HKEXnews

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CHINA XLX FERTILISER LTD. 中國心連心化肥有限公司 * (Incorporated in Singapore with limited liability) (Hong Kong Stock Code: 1866)

ANNOUNCEMENT OF UNAUDITED BUSINESS UPDATE FOR THE FIRST QUARTER OF 2016 AND PROFIT WARNING UNAUDITED BUSINESS UPDATE FOR THE FIRST QUARTER OF 2016 The board of directors (the “Board”) of China XLX Fertiliser Ltd. (the “Company”) hereby announces the unaudited first quarterly business update of the Company and its subsidiaries (the “Group”) for the three months ended 31 March 2016 (“1Q2016”). Although the unaudited consolidated revenue of the Group decreased only by about 1% from about RMB1,413 million for the three months ended 31 March 2015 (“1Q2015”) to about RMB1,400 million for 1Q2016, the unaudited consolidated net profit of the Group decreased by about 61% for 1Q2016 to approximately RMB41 million as compared against 1Q2015. As stated in the Company’s annual report for the year ended 31 December 2015, the international macro-economic downturn continues to impact domestic urea markets and leads to related recession. The substantial drop in the unaudited consolidated net profit of the Group for 1Q2016 was mainly due to the decreased selling prices of the Group’s three major products, namely urea, compound fertiliser and methanol in the market under the context of the gloomy global economy. In addition, the abolition by the PRC government of value added tax subsidies for domestic urea and compound fertiliser products further reduced the average selling prices of those products.

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Urea Revenue derived from the sales of urea decreased by about 6% Year on Year (“YoY”) to about RMB817 million for 1Q2016. As a result of the continuous weak international commodity prices and cessation of value added tax exemptions on urea products, the average selling price of urea decreased by about 31% YoY. Following the commencement of the Xinjiang Project, the Group’s urea sales volume increased by about 35% YoY to about 729,000 tons for 1Q2016. The increase in sales volume partially offset the decline in average selling prices. Compound fertiliser Revenue derived from the sales of compound fertiliser increased by about 2% YoY to about RMB378 million for 1Q2016. The increase was mainly due to the increase in sales volume from the expansion of the sales network of the Group. The sales volume of compound fertiliser increased by about 17% YoY to about 203,000 tons for 1Q2016. Due to the cessation of value added tax exemptions on domestic compound fertiliser products, the average selling price of compound fertiliser decreased by about 13% YoY. Methanol Revenue derived from the sales of methanol decreased by about 12% YoY to about RMB119 million for 1Q2016. The decrease was mainly due to the decline in average selling price of methanol by about 10% YoY for 1Q2016. The sales volume of methanol remained constant at about 87,000 tons for 1Q2016. PROFIT WARNING The following is made by the Company pursuant to Rule 13.09(2)(a) of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and the Inside Information Provisions (as defined in the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). The Board wishes to inform shareholders of the Company and potential investors that, based on the unaudited 1Q2016 financial results of the Group and considering that the newly commenced Xinjiang Project is still in its initial phase, it is expected that the net profit of the Group for the six months ended 30 June 2016 may decrease by about 60% to 75% YoY. The domestic urea market has been in recession since the fourth quarter of 2015, as a result of which our peers recorded substantial losses as well. It is expected that the international macro-economic downturn will

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continue in 2016, thereby exacerbating the recession in the domestic urea market. The Group also expects that the weak selling price of urea will speed up consolidation within the industry and squeezing out obsolete and inefficient producers. Ultimately, this is expected to result in a reduction in the supply of urea. By contrast, the domestic agricultural demand for urea product would remain stable and so, following the consolidation within the industry and the expected reduction in supply of urea, the Group expects urea prices to improve in the second half of 2016. The Group will continue the implementation of product differentiation strategies and increase the proportion of sales of high-efficiency fertilisers in its efforts to improve its profitability and competitiveness. The newly commenced Xinjiang Project, which is expected to achieve operation at full capacity and the resultant cost efficiencies, as well as the commencement of the Group’s melamine production facilities and nitro compound fertiliser production facilities in the second half of the year, are expected to contribute to an improvement in the Group’s performance in the second half of 2016. The profit warning information contained in this announcement is based on a preliminary assessment by the Board with reference to the information currently available (including the management accounts of the Group) from the Company’s management, which has not been reviewed or audited by the Company’s auditors and is subject to possible adjustments arising from further review. As such, the above data is provided for the shareholders’ and potential investors’ reference only. Shareholders of the Company and potential investors should exercise caution when dealing in the shares of the Company.



By Order of the Board Liu Xingxu Chairman of the Board

13 May 2016 As at the date of this announcement, the executive directors of the Company are Mr. Liu Xingxu, Ms. Yan Yunhua and Mr. Zhang Qingjin; the independent non-executive directors of the Company are Mr. Ong Kian Guan, Mr. Li Shengxiao and Mr. Ong Wei Jin; and the non-executive director of the Company is Mr. Lian Jie. * for identification purpose only

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