Sichuan Meifeng Maintains a Steady Growth       

Sichuan Meifeng Chemical Industry Co., Ltd. (Meifeng, SZ: 000731), located in Deyang, Sichuan province, is one of China's important firms using natural gas to produce fertilizers and its shares had been listed publicly at Shenzhen Stock Exchange in June 1997.
   The company majored in manufacturing and selling melamine and chemical fertilizers such as synthesis ammonia, urea and ammonium bicarbonate. In recent years, by merging and acquisition, the company has expanded the urea production capacity, which ensures performance keep on rising.
    According to the result reported by Meifeng for the fiscal 2007, it has accomplished a sale revenue of RMB2.053 billion, increased 50.49% year-on-year. The total profit before income tax is RMB391 million, increased 27.46% comparing with the same period of 2006.
    Having made the achievement growth through having overcome the upward cost of natural gas, the company showed a strong managing and operating ability. In 2007 the price of natural gas increased by around RMB0.10 per cubic meter on average over that in 2006, however, Meifeng managed to decrease the natural gas consumption of producing one ton urea to 580 cubic meters (it is over 600 cubic meters on average in this industry) as well produced 100 000 tons urea more than in 2006, so the financial result performed distinctly good.

Multiple factors push the chemical fertilizer industry to develop

The agriculture is an important pillar for the national economy to develop, so to be supported properly is an objective requirement for developing agriculture strategy. Owing to the impulse of extending biotic energy in the United States the demand for crop is brisk, the international grain prices will keep on rising this year. In domestic market, with rising prices of grain, food oils, meat and its preparations etc., the agriculture develops rapidly.
    As the planting areas of crop keep on extending, the demand for urea will grow constantly, and the price of urea will go up further. It was counted that the 2007 price of urea in the international market raised with a big growth than that in 2006, and it was that promote China's exports increasing, finally drawing domestic urea price to go up. It is estimated that in the coming two years, urea price will still maintain going up, the industry will keep on developing hopefully with steady steps. In response, Meifeng's performance will keep on growing.

Meifeng's competitive advantages are being strengthened constantly

In recent years, as the company has been enlarging its production capacity, thus it has the capacity of producing one million tons per year in Sichuan province. At present, the company is carrying on the technological innovation to part facilities in order to expand its capacity again. Owing to that the domestic chemical fertilizer industry is more diversified, many small scale factories consuming energy highly, polluting seriously will be asked to close or shift their business under the national instruction of saving energy, reducing pollutants, thus it will speed up the industry conformity. However, to some extent, it provides a good opportunity for Meifeng, a large scale and regular firm to implement acquisition and expansion. In July 2006, Meifeng spent RMB251.145 million to purchase 45% equity of Liuhua Group (CCR2006, No.20), and purchased 51% of Lanzhou Far East Fertilizer Company in September 2007, 55.78% of Guizhou Chemical Fertilizer Co., Ltd in November 2007. The company will also relocate the ammonia and urea units in its Mianyang Branch to achieve environmental friendly production. (CCR 2007, No.35) As the production capacity is extended, both the competitive advantages and profit earning ability of company is going up.
   After being the controlling shareholder of Guizhou Chemical Fertilizer Co., Ltd. by augmenting investment, Meifeng, a company only produced chemical fertilizers from natural gas in the past, will take Guizhou Chemical Fertilizer Co., Ltd. as an important platform and make full use of coal, phosphorus, and water in Guizhou province to set foot in coal chemical business. Chengdu Huachuan Petroleum and Natural Gas Exploration Development Corporation of Sinopec Group, is the largest shareholder of Meifeng, by holding 14.42% equity, which will help Meifeng get natural gas more conveniently. As the exploration in Sichuan province gets progressed by Sinopec Group, gas supply will be plentiful for Meifeng in the future.
   In addition, Meifeng expressed that, according to the 2008 contract signed with natural gas suppliers, the cost for the company in 2008 will be increased by around RMB84 million only due to the increased gas price. Therefore, Meifeng will take measures to overcome the impact of gas price rise, such as raising output, optimizing management, saving energy, reducing consumption per unit product, reducing managing cost and the like.
    Meifeng had to discontinue its production in Deyang and Mianyang sites after suffering a serious earthquake on May 12th, and resumed production on May 25th. "The quake will not have great impact on the performance of Meifeng" said a source from Meifeng.