Hanfeng Evergreen Announces Third Quarter 2012 Financial Results

Hanfeng Evergreen Inc. (TSX:HF) ("Hanfeng" or the "Company"), a leading provider
of value-add fertilizers in China and South East Asia, today reported its
financial results for the three-month and nine-month periods ended March 31,
2012. All amounts are in Canadian dollars unless otherwise noted. 


Summary Financial Results



In Cad $000's except per share   For the three-month    For the nine-month  
 data                            period ended Mar 31    period ended Mar 31 
                                                                            
                                    2012        2011        2012        2011
----------------------------------------------------------------------------
Sales                            $98,803     $85,232     156,349    $193,067
Gross profit                      14,337      11,623      22,882      23,473
EBITDA                            12,289      11,011      17,321      21,760
Net Income                         8,360       8,202       9,273      10,592
  Basic IPS                         0.14        0.13        0.15        0.17
  Diluted IPS                       0.14        0.13        0.15        0.17



Operational and Financial Highlights:

China:



--  Hanfeng shipped a total of 156,787 metric tons ("MT") of slow and
    controlled release fertilizers ("SCR") in the third quarter, at an
    average selling price of RMB 3,380 per MT, and at an average gross
    margin of RMB 520 per MT.

--  Hanfeng shipped approximately 119,200 MT of SCR in the third quarter of
    fiscal 2012 relating to an order secured with Beidahuang Agricultural
    Company Limited and its affiliates (collectively "Beidahuang") for
    200,000 MT of SCR ("BDH Order"). The SCR being produced and delivered to
    satisfy the BDH Order is the New Hybrid Product made up of mostly SCR
    products, with certain nitrogen enhancer ("NE") products included as
    additives. Including the 20,000 MT shipped in the second quarter of
    fiscal 2012, approximately 70 percent of the BDH Order been shipped to
    date. The Company expects to ship the remaining portion of the BDH Order
    in the fourth quarter of fiscal 2012.

--  As previously announced, subsequent to the end of the third quarter, the
    Board of Directors of the Company announced strategic changes in China,
    including a plan to sell its interests in the Shanxi 50,000 MT per annum
    ("MTPA") joint venture and the Shandong 100,000 MTPA joint venture, as
    well as the Company's intention going forward to focus its growth
    initiatives on partnering with large end-users of multi-nutrient
    products, as opposed to single-nutrient urea producers. 



Indonesia: 



--  The Indonesian joint-venture's quarterly sales were 5,074 MT (net to
    Hanfeng) at an average selling price of $642 per MT equivalent, and a
    gross margin of $149 per MT equivalent.

--  The Indonesian joint-venture's quarterly production was 12,083 MT (net
    to Hanfeng), or approximately 48,000 MT (net to Hanfeng) on an
    annualized basis, representing approximately 67 percent capacity
    utilization levels, before the commissioning of the new 200,000 MTPA
    bulk blending line which occurred in the early part of the third quarter
    of fiscal 2012. 

--  Sales were negatively affected during the quarter by a change in the
    sales terms for certain major customers, whereby revenue is recognized
    when the goods are delivered to the customer's warehouse as opposed to
    at the point of shipment, which caused a one-time delay in the
    recognition of revenue during the third quarter of fiscal 2012.

--  As previously announced, subsequent to the end of the quarter, the
    Company announced that the Indonesian joint-venture has secured orders
    for calendar 2012 totaling 300,000 MT, including 70,000 MT to be sold to
    Thailand. In addition, the Indonesian Joint Venture announced the
    proposed construction of a new 600,000 MTPA facility, to be located on
    the island of Kalimantan, Indonesia. 



Sales increased by $53.0 million to $98.8 million in the third quarter of fiscal
2012 compared to the third quarter last year. The increase in sales was due
primarily to the increased volume of production and a drawdown of stockpiled
inventory at the Company's Heilongjiang plant, where most of the production to
supply the Company's largest customer occurs. Sales tonnage was higher than
production, by approximately 45,000 MT in the Chinese operations, as a result of
a draw-down in previously stock-piled inventory which commenced in the first
half of fiscal 2012. Sales were slightly offset by reduced sales volumes in
Indonesia.


Gross margin as a percentage of sales increased to 14.5 percent in the third
quarter of fiscal 2012, as compared to 13.6 percent in the third quarter last
year. The increase in gross margin as a percentage of sales was due to higher
margins at the Heilongjiang facility (for the BDH Order) compared to the same
period last year. Gross margins were also positively impacted by higher margins
at the Indonesian Joint Venture.


Gross profit increased by 23 percent in the third quarter of fiscal 2012 to
$14.3 million versus the third quarter of fiscal 2011 at $11.6 million as a
result of the increased gross margins per MT and higher sales volumes relating
to the BDH Order. 


EBITDA (see Note 1 below) increased 12 percent during the third quarter of
fiscal 2012 to $12.3 million from $11.0 million during the same period last
year. Net income for third quarter of fiscal 2012 was $8.4 million, compared to
net income of $8.2 million in the same period last year. The main reasons for
the increased net income are higher sales volumes in China, higher gross margins
and gross profit during Q3FY12, slightly offset by reduced sales volumes in
Indonesia and asset impairment recognized against the property and equipment in
the Shandong and Shanxi plants. 


Basic and diluted income per share ("IPS") was $0.14 for the third quarter of
fiscal 2012 versus $0.13 in the same period in fiscal 2011.


For the nine-month period ended March 31, 2012, sales were $156.3 million versus
$193.1 million during the same period last year, primarily due to the
Maintenance Turnaround at the Company's Heilongjiang facility in the first
quarter of fiscal 2012 and inventory stockpiling, partially offset by increased
production from the Indonesian Joint Venture after its initial commissioning in
October 2010.


Gross profit was $22.9 million and gross margin as a percentage of sales was
14.6 percent versus $23.5 million and 12.2 percent respectively in the same nine
month period last year. 


EBITDA (see Note 1 below) was $17.3 million versus $21.8 million during the same
period last year, primarily due to lower sales volumes in the first two quarters
of fiscal 2012. Net income was $9.3 million, compared to net income of $10.6
million in the same period last year. Net income year to date in fiscal 2012 was
impacted by the aforementioned factors and offset by increased profitability in
the second and third quarters of the current fiscal period. 


Basic and diluted IPS was $0.15 for the nine month period in fiscal 2012 versus
$0.17 in the same period last year.


Liquidity and Capital Resources



----------------------------------------------------------------------------
In thousands of Canadian dollars except for                                 
 ratios                                      March 31, 2012    June 30, 2011
----------------------------------------------------------------------------
Current ratio (1)                                     9.1:1           13.1:1
----------------------------------------------------------------------------
Cash                                                 25,872           65,517
----------------------------------------------------------------------------
Working capital                                     200,209          177,305
----------------------------------------------------------------------------
Total assets                                        332,682          298,410
----------------------------------------------------------------------------
Total debt                                           16,083           10,527
----------------------------------------------------------------------------
Total equity                                        305,248          280,961
----------------------------------------------------------------------------
Total debt / Total equity                              5.3%             3.7%
----------------------------------------------------------------------------
Notes: (1) Current ratio = Current Assets / Current Liabilities             



Cash was $25.8 million as at March 31, 2012, compared to $65.5 million as at
June 30, 2011. Cash was used to finance working capital, predominantly inventory
purchases, and to repurchase shares under the Company's Normal Course Issuer Bid
which was renewed in December 2011. 


Total inventory and advances to suppliers increased by $84.1 million to $169.5
million as at March 31, 2012. The increase was mainly due to the inventory
build-up process, in anticipation of deliveries in relation to the BDH Order
during Q4FY12.


The Company will hold a conference call to discuss the financial results on
Monday, May 14, 2012 at 10:00 a.m. Eastern Standard Time (EST). Mr. Niral
Merchant, CFO and Mr. Loudon Owen, Non-Executive Chairman of the Board of
Directors will host the call, and invite analysts and investors to participate
in the conference call.




Date:                        Monday, May 14, 2012                           
                                                                            
                                                                            
Time:                        10:00 a.m. Eastern Standard Time               
                                                                            
                                                                            
Dial in Number:              1-888-468-2440 or 1-719-457-2729               
                                                                            
                                                                            
Taped Replay:                1-877-870-5176 or 1-858-384-5517               
                                                                            
                                                                            
Taped Replay Pass Code:      4827830                                        
                                                                            
                                                                            
Webcast Presentation Link:   http://viavid.net/dce.aspx?sid=000097BA        



Hanfeng's financial statements and MD&A have been filed on SEDAR and will be
available at www.sedar.com.


About Hanfeng Evergreen Inc. 

Hanfeng is a leading producer and supplier of value-added fertilizer solutions
in emerging markets. It is one of the largest producers of slow and controlled
release fertilizer in two of world's most significant agricultural markets: the
People's Republic of China ("China") and the Republic of Indonesia. As the first
company to introduce slow and controlled release fertilizers into China's
agriculture market, Hanfeng has established itself both as a market leader and
innovator. A Canadian Company, Hanfeng is headquartered in Toronto, Ontario and
its shares trade on the Toronto Stock Exchange under the ticker HF. 


Note 1: Earnings before interest, taxes, depreciation, and amortization
("EBITDA") is a non-IFRS financial measure, which the Company believes is
meaningful information for purposes of performance evaluation and it allows for
comparisons of the Company's performance to the industry as it eliminates the
impact of financing decisions, capital structure and the cost basis of assets.
Hanfeng calculates it by adding (1) net income, (2) interest expense reported on
the income statements (or deducting interest income) (3) amortization expense
reported as part of cost of goods sold on the income statements, (4)
amortization expense reported as a line item on the income statements, (5)
income tax expense reported on the income statements, (6) write-downs of
intangible assets and property, plant and equipment write-down and (7) and by
deducting foreign exchange gain (loss). EBITDA does not have a standard meaning
prescribed under IFRS and is therefore unlikely to be comparable to similar
measures presented by other companies.


This press release contains forward-looking statements based on current
expectations. Forward looking statements include, without limitation, statements
evaluating market and general economic conditions, and statements regarding
growth strategy and future-oriented projected revenue, costs and expenditures.
Actual results could differ materially from those projected and should not be
relied upon as a prediction of future events. A variety of inherent risks,
uncertainties and factors, many of which are beyond Hanfeng's control, affect
the operations, performance and results of Hanfeng and its business, and could
cause actual results to differ materially from current expectations of estimated
or anticipated events or results. Some of these risks, uncertainties and factors
include the impact or unanticipated impact of: current, pending and proposed
legislative or regulatory developments in the jurisdictions where Hanfeng
operates, in particular in China and the Republic of Indonesia; changes in tax
laws; political conditions and developments; intensifying competition from
established competitors and new entrants in the fertilizer industries;
technological change; currency value fluctuation and changes in foreign exchange
restrictions; changes in Chinese government support or restrictions on foreign
investment; general economic conditions worldwide, as well as in China and South
East Asia; Hanfeng's success in developing and introducing new products and
services, constructing and operating new manufacturing facilities, expanding
existing distribution channels, developing new distribution channels and
realizing increased revenue from these channels. This list is not exhaustive of
the factors that may affect any of Hanfeng's forward-looking statements. Risks
and uncertainties about Hanfeng's business are more fully discussed in the
Company's disclosure materials, including its annual information form and MD&A,
filed with the securities regulatory authorities in Canada. Hanfeng undertakes
no obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made, or to reflect the
occurrence of unanticipated events, whether as a result of new information,
future events or results or for any other reason. Readers are cautioned not to
put undue reliance on forward-looking statements.