During the Company’s year end results call, Mr. Busseri Hanfeng’s Executive Vice President outlined three markets where Hanfeng will focus its resources in order to drive future growth. In its core and most important market, China, where the Company enjoys a first mover advantage, Hanfeng announced plans to ramp-up its joint venture and M&A activities to partner with domestic market leaders in order to expand its production and distribution base geographically and secure access to raw materials such as urea, phosphate, and potash, which make up approximately 90 percent of Hanfeng’s costs of goods sold. The Company is currently in negotiations with a number of large targets and expects to make further announcements within the next couple of quarters.
Hanfeng also reiterated that it plans to expand into Southeast Asia by exporting its patented and proprietary technology and process know-how and partnering with established market participants that have committed to either consuming or distributing 100 percent of the available production from the joint venture. The Company is moving forward on its first Southeast Asia joint venture project in Indonesia, a 200,000 (MTPA), which it expects to execute definitive documentation in the next 45 days and begin operations in the first quarter of 2010.
The Company also announced that it intends to carefully pursue opportunities in the North American agricultural sector for its value-add SCR fertilizers. North America represents the second largest agricultural market in the world (China is the largest), however like China, SCR represents a very small percentage of overall fertilizer sales and use. The Company committed to providing more details on this component of the growth plan during calendar year 2009.
Due to the strong demand for its SCR products, Hanfeng announced it has elected not to initiate its proposed expansion in the bulk blending/distribution initiative at this time. Hanfeng has previously announced that it expected to begin to distribute SCR products through its own network of distributors beginning in the first half of 2009 however the Company has experienced less slack in demand than expected. The Company produced 544,000 metric tonnes (MT) in 2008 and had 4,400 MT in finished goods inventory at year end.
In an unrelated disclosure, Hanfeng announced that, subject to CRA approval, the Company intends change its fiscal year end from December 31 to June 30 effective June 30, 2009.
(1) EBITDA is defined as Earnings before Interest, Taxes, Depreciation, and Amortization and is a non-GAAP measure.
About Hanfeng Evergreen Inc.
Hanfeng is the largest producer of slow and controlled release fertilizers in China. It was the first company to introduce the concept of slow and controlled release fertilizers into China’s agriculture market with its establishment of the first commercial scale production in China. All production facilities are located in prime agricultural regions of China. The Company is headquartered in Toronto, Ontario and its shares trade on the Toronto Stock Exchange. hanfengevergreen.com.
This press release contains forward-looking information based on current expectations. This forward-looking information entails various risks and uncertainties that could cause actual results to differ materially from those reflected in forward-looking statements. Such statements relate to, among other things, sales growth, expansion and growth of Hanfeng’s business, future capital expenditures and Hanfeng’s business strategy. Risks and uncertainties about Hanfeng’s business are more fully discussed in Hanfeng’s disclosure materials, including the Business Risks section in Hanfeng’s MD&A, its annual information form and other disclosure filed with the securities regulatory authorities in Canada.