June 3, 2010 / 12:38 PM / 8 years ago

UPDATE 2-Migao's profit tops expectations, shares jump

* Shares rise 7 pct to C$6.45 on the TSX (Adds details on results, share price)

By Euan Rocha

TORONTO, June 3 (Reuters) - Specialty fertilizer maker Migao Corp MGO.TO reported a higher-than-expected quarterly profit on Thursday as new production facilities helped boost the company’s output in China.

The Toronto-listed company, which operates specialty potash fertilizer plants across China, said its spring fertilizer sales to tobacco growers were unharmed by the drought in parts of southern China because the tobacco crop in the region is irrigated.

Migao said net income for its financial fourth quarter, ended March 31, was C$10.4 million ($10.05 million), or 20 Canadian cents a basic share, compared with C$13 million, or 29 Canadian cents, a year earlier.

Analysts, on average, had expected the company to earn 17 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Migao produces two specialty potash-based fertilizers: potassium nitrate and potassium sulphate. These two products account for the bulk of its revenue, with the remainder coming from by-products such as ammonium chloride and hydrochloric acid.

The company’s specialty fertilizer products target tobacco crops and fast-growing fruit and vegetable markets within China. Sales to fruit and vegetable farmers represent 70 percent of Migao’s revenue, up from about 50 percent last year.

Migao said it has inventory of more than 300,000 tonnes of potassium chloride, the primary raw material used in potash-based fertilizers, secured at an average price of about $320 a tonne.

Recent potassium chloride, or potash, export sales to China have settled at disclosed prices of $350 to $370 a tonne.

Analysts noted that Migao’s large stockpile of favorably priced raw material will help it maintain strong profit margins in upcoming quarters.

The company’s shares rose 7 percent to C$6.45 in early trade on the Toronto Stock Exchange on Thursday.

$1=$1.04 Canadian Reporting by Euan Rocha in Toronto; additional reporting by Abhiram Nandakumar in Bangalore; editing by Peter Galloway

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