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Date:2019-03-29     source:

Achieve 40% growth in gross profit, return to profitability and

pay out dividends of 2.24 HK cents per share

2018 Annual Results Highlights:

Revenue grew 30.33% year-on-year to RMB22.996 billion.

Gross profit surged 39.43% year-on-year to RMB1.913 billion as both of the sales volume and revenue of fertilizer products increased.

The Company returned to profitability with profit attributable to its shareholders amounted to RMB460 million.

The board of directors recommended the payment of a final dividend of 2.24 HK cents per share; the payout ratio is approximately 30%.

(28 March 2019, Hong Kong) Sinofert Holdings Limited ("Sinofert" or the "Company", together with its subsidiaries collectively known as the "Group") (stock code: 00297) announced the annual results for the twelve months ended 31 December 2018 (the "Period").

During the Period, the Group recorded revenue of RMB22.996 billion, up 30.33% from a year ago. Its gross profit surged 39.43% year-on-year to RMB1.913 billion as both of the sales volume and revenue of fertilizer products increased. The Company returned to profitability and made significant improvement in its operating results, with profit attributable to its shareholders amounted to RMB460 million. Taking into account the Company’s profitability, return on equity and funding requirements for future development, the board of directors recommended the payment of a final dividend of 2.24 HK cents per share. The payout ratio is approximately 30%.

In 2018, the overall environment of domestic fertilizer industry recovered. Dragged by the government’s tighter environmental regulations, the utilization rate of industrial production capacity significantly dropped. As a result, the profitability of fertilizer businesses remarkably improved on lower supply and substantial growth in selling prices. Nevertheless, this sector continued to be plagued by supply glut problems. Many Chinese producers were forced to accelerate their business transformation and upgrading and to extend their value chains. They strived to offer new types of integrated agro-services to farmers, thereby ensuring the sustainable development of agriculture and the green development of fertilizer industry. The Group further pursued strategic transformation and organizational reform, with an aim to become a leading crop nutrition technology marketing and services provider in China.

The Group strengthened strategic cooperation with domestic and overseas core suppliers. It took a customer-centric approach and enhanced the collaboration of R&D, production and marketing operations. By stepping up efforts to drive technological innovation, it upgraded existing products and retained a higher market share. As a result, the sales volume of its major fertilizer products, namely compound fertilizers, potash fertilizers, nitrogenous fertilizers and phosphate fertilizers grew 10.18%, 7.31%, 9.72% and 18.04% respectively from a year ago. The average selling price of these products increased by 14.62% year-on-year.

The breakdown of the revenues of major fertilizer products by type are as follows: the revenue of potash fertilizers grew by 15% year-on-year to approximately RMB4.502 billion; the revenue of nitrogenous fertilizers grew by 36% year-on-year to approximately RMB4.874 billion; the revenue of compound fertilizers grew by 22% year-on-year to approximately RMB5.891 billion; the revenue of phosphate fertilizers grew by 38% year-on-year to approximately RMB4.920 billion; the revenue of monocalcium / dicalcium phosphate grew by 7% year-on-year to approximately RMB832 million.

During the Period, all of the Group’s three business segments (Basic Fertilizers, Distribution and Production) remained profitable. Revenue from the Basic Fertilizers segment amounted to RMB14.985 billion, up 34% from a year ago and accounting for 65.16% of its total revenue. The segment profit of Basic Fertilizers was RMB642 million, up 10.88% year-on-year and accounting for 87.23% of the Group’s total profit. It remained the largest profit contributor to the Group.

As for Distribution business, the Group further expanded DTS distribution channel, enhanced its technical services capability, recruited agronomists to expedite the applications of new technologies, and adjusted the product mix. The sales volume of differentiated products thus grew 39% from the previous year. Meanwhile, the Distribution business generated revenue of RMB5.740 billion, up 26.58% year-on-year and accounting for 24.96% of total revenue. The Distribution business returned to profitability with the segment profit amounted to RMB70 million, which accounted for 9.52% of total profit.

Sinochem Changshan, a subsidiary of the Company, took its lead in suspending the operation of an obsolete, material-consuming and energy-consuming synthetic ammonia production facility in early 2018. On the other hand, it maintained the operation of synthetic ammonia production facility equipped with energy-saving and environmentally-friendly pulverized coal gasification technology. Therefore, the production and operation of Sinochem Changshan remarkably improved with its costs being substantially cut and its profitability significantly grew. In 2018, it produced 173,800 tons of synthetic ammonia (equivalent to 305,000 tons of urea) and 121,600 tons of compound fertilizers.

Looking ahead, Mr. Qin Hengde, Executive Director and Chief Executive Officer of Sinofert, commented, "As the government is making vigorous efforts to promote the implementation of rural revitalization strategy, 2019 is a year full of opportunities. While the market environment is improving, the Group will leverage our strengths to diversify the models for business cooperation. We will facilitate collective farming and scale operation in a proper manner. Meanwhile, we will take initiatives to reduce production inputs, promote green production and encourage large-scale farming and green agriculture. By integrating our upstream and downstream resources and strengthening our supply chain management, we will revitalize our production capacity, enhance operating efficiency and resources procurement capability, thereby boosting our overall competitive strengths and creating greater value to shareholders.”

Mr. Qin Hengde said, "As a leading nutrition technology marketing and services provider in China, the Group will take the lead to drive the modernization of China’s agriculture and the healthy development of fertilizer sector. While reinforcing the marketing and sales of our basic fertilizers operation, we will also focus on the expansion of businesses by taking a crop and product-oriented approach, step up efforts to promote in-depth marketing, technology-enabled marketing and direct marketing to large-scale customers. Through transforming ourselves from a distributor into a service provider, the Group strives to create a powerful fertilizer distribution network. Meanwhile, we will vigorously promote the product mix of differentiated compound fertilizers, crop-specific fertilizers and key masterbatch for bulk blending fertilizers, enhancing our marketing capability and creating a complete value chain with upstream and downstream resources, strengthen our overall agro-services capability and provide the Chinese farmers with quality agricultural production data and services.”