TORONTO - Migao Corp. (TSX:MGO) has swung to a big net loss in its fiscal 2013 second quarter, with the China-focused fertilizer producer citing weak sales and prices.
Migao said Thursday that its net loss was almost $8.1 million or 15 cents per share as sales revenue plummeted more than 82 per cent to $11.7 million in the three months ended Sept. 30.
That compared with net profit of almost $6 million or 11 cents per share in the same year-earlier period when revenues topped $66 million.
The company, which had earlier warned its earnings would be impacted by tough market conditions, said continued weakness in the hydrochloric acid market, seasonality of customer purchases, lack of potassium chloride sales and lower overall selling prices all contributed to the decline in revenue.
In addition to the effect the revenue drop had on the bottom line, Migao said it also took an inventory provision of $1.7 million to reflect the valuation of some raw materials and finished goods.
"After comparing these second-quarter results to the pipeline of sales activity, including secured contracts, it appears the situation (is) showing signs of improvement," CEO Liu Guocai said in the company's financial report.
"We have focused our energies on negotiating contracts over the recent period and the success of these activities are proving themselves as evidenced by the increased delivery and production of our core fertilizers," he added.
Meanwhile, the company said it continues to face margin pressure from the impact of the hydrochloric acid business. "However there have been specific industry developments in the Chinese market that should result in some improvement to this business," it said.