Sinofert Announces 2006 Annual Results.

Net Profit Up by 15% to Record-high

Expanding Market Share by Improving Competitive Advantages

Highlights:

* Turnover of HK$ 21.13 billion, an increase of 10%

* Net profit of HK$ 896 million, up 15%

* Basic earnings per share: 15.43HK cents, an increase of 6%

* Recommend a final dividend of 2.31HK cents per share, an increase of 15%

* Continue to expand market share by improving competitive advantages

HONG KONG -- Sinofert Holdings Limited ("Sinofert" or "the Company", together with its subsidiaries, collectively "the Group"; HKEx stock code: 0297) announced its annual results today for the 12 months ended December 31, 2006 ('the Period under Review" or "the Period").

During the Period under Review, turnover was HK$21.13 billion, up 10% compared with 2005. Net profit amounted to HK$896 million, up 15% over the previous year. Basic earnings per share were 15.43 HK cents, an increase of 6% over the corresponding period in 2005. The Board recommended a final dividend of 2.31HK cents per share (2005: 2.01HK cents)

Sales volume of the Group increased by 13%. This was slightly higher than the increase in turnover, mainly due to the lower sales of potash fertilizers, which have increased in price. However, sales of low-price nitrogen fertilizers rose. The breakdown in turnover of the Group's products in 2006 are: Potash fertilizers 40.45%, nitrogen-based fertilizers 24.41%, compound fertilizers 18.41%, phosphate-based fertilizers 13.31% and others 3.42%. (Please see table 1)

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For the Period under Review, the Group's gross profit margin was 8.08%, which is slightly higher than the figure for 2005. Net profit for the Group increased by 15%. This significant increase is mainly a result of the Group's effective marketing strategy. With a stable profitability, the net profit has been gradually rising as the scale of the business expands.

Such remarkable results can be attributed to the Chinese government's increasing efforts to support the agricultural sector, especially farmers, which has created good opportunities for growth in the Chinese fertilizer industry, in general, and the Group in particular. At the same time, the results are also a product of the management and staff's hard work and commitment to our corporate strategy, which has helped to overcome various difficulties.

Commenting on the satisfactory results, Mr. Du Keping, CEO of the Group, said: "The prolonged annual potash contract negotiations with international suppliers and the sharp fall of Chinese nitrogen market prices - with unprecedented fluctuations - in the third quarter caused significant pressure on the Company's operations. The Group fully utilized potash inventories and expanded domestic potash sales volume to maintain the profitability and market position of its potash business. In addition, we expanded the sourcing of nitrogen fertilizer, with increased capital input, and the business volume of nitrogen fertilizers doubled. The Group also put a strong emphasis on building up its downstream distribution network and brand value. These measures not only contributed to the growth in the Company's annual figures but also enhanced the Group's competitiveness and laid a strong foundation for its long-term development."

Sales

The Group sold 12.57 million tons of fertilizer, an increase of 13% year on year, further consolidating its position as the largest fertilizer distributor in China. Of this, sales of imported fertilizers totaled 5.3 million tons, which accounted for 42% of total sales. Sales of domestically produced fertilizers reached 6.36 million tons, 51% of total sales.

Against the adverse effects of the prolonged contract negotiations with international suppliers, the Group sold 4.56 million tons of potash, accounting for 45% of China's total potash consumption, thus maintaining its leading position in China's potash market.

With the implementation of a supply-chain management process, the Group has been continuously expanding its channels of domestic nitrogen supply by investing in competitive nitrogen manufacturers and signing long-term contracts with core suppliers. In addition, by taking advantage of its distribution networks and financial resources, the Group sourced and stocked up on nitrogen fertilizers during the off-season. This meant that nitrogen fertilizer sales expanded rapidly, improving profitability.

In 2006, the Group sold 3.71 million tons of nitrogen fertilizer, a rise of 105% over the same period in 2005. This figure accounts for approximately 8% of China's total nitrogen fertilizer consumption. During the same period, the Group sold 1.46 million tons of phosphate-based fertilizers and 1.93 million tons of compound fertilizers, an increase of 16% and 34%, respectively.

Upstream Production and Procurement 

In 2006, the Group had shareholder equity in seven fertilizer production enterprises, with a total operating capacity of 3.03 million tons. This was 300,000 tons more than at the end of 2005, an increase of 11%. The Group secured quality resources of 2.55 million tons from these enterprises, up 680,000 tons or 36%.

The Group also attached top priority to expanding the supply system for domestic fertilizers. By investing in competitive manufacturers, such as Luxi Chemical and Hualu Hengsheng, which are publicly listed on the Shenzhen and Shanghai stock exchanges, respectively, the Group has formed a stable base for domestic fertilizer supplies.

Downstream Sales and Distribution

In 2006, new distribution centers were being built to cover new regions throughout the country. 312 new distribution centers have been added. By the end of 2006, the Group's distribution network boasted 1,375 distribution centers and sales outlets, covering 22 agricultural provinces and 80% of the country's arable land.

The distribution centers have succeeded in their aim to develop and maintain a customer base mainly at the township level. At present, the number of such customers has increased to over 25,000. Meanwhile, the farmer-oriented service system was further improved. Following the "Sinofert-CAU R&D Center" joint project, set up in 2003, and the "Sinochem Agrichem Square", a public-welfare radio program co-sponsored by Sinofert and the Central People's Radio Station in 2004, in 2006 the Group jointly set up the "Sinofert-CAAS Balanced Fertilization Technological Center" and a laboratory with the Chinese Academy of Agricultural Sciences. A total of 3,300 workshops and events were held to teach farmers about balanced fertilization; 175 "model villages for scientific fertilization" were set up; and booklets and fact sheets on fertilizer application techniques were given out to farmers throughout the country. As well as promoting sales and the Company's brand value, these activities also boosted the Group's image as a socially responsible company.

Expenditures

Selling and distribution expenses for the 12 months ended 31 December 2006 were HK$ 535 million, up 35.54% from the figure of HK$ 395 million for 2005. This was mainly due to the year-on-year increase in sales volume, which incurred proportionally higher transportation, and loading and discharging charges, increased expenses on agrichemical services and brand promotions, as well as rising transportation cost.

Administrative expenses for the 12 months ended 31 December 2006 were HK$ 187 million, down 16.10% from the figure of HK$ 223 million for the corresponding period of 2005. If the effect of the "provision for impairment of inventories" were deducted, it would have been up by HK$ 29 million over the figure of 2005, which was mainly due to distribution network expansion incurring more administrative expenses.

Finance costs for the 12 months ended 31 December 2006 were HK$ 129 million, up 14.46% over the figure of HK$ 112 million for 2005.

Outlook

Looking to the future, we believe that the Group has an excellent opportunity for strategic development. The world's population is rising and bio-energy is booming, accelerating the demand for grains. However, global grain output and grain inventories fell in 2006, further intensifying the world's supply-demand situation. China, as the world's largest grain producer and consumer, is required to implement the strictest arable land protection system to ensure food security for its population. In this respect, the Chinese government will continue to implement preferential policies to support the agricultural sector, which will help to steadily increase farmers' income and boost their enthusiasm for farming. It is expected that this will help to create a positive environment for the growth of the fertilizer business as well as other agricultural inputs. The Group has already built competitive strength and enjoys a powerful position in the Chinese fertilizer market. Hence, we have full confidence in its prospects.

Mr. Liu De Shu, Chairman of the Company, said: "In 2007, the Group will, in line with the preset strategic positioning of 'marketing-services', make greater efforts to fulfill its strategic goal of "focusing on marketing and distribution, and expanding both downstream and upstream operations along the industrial chain. We will continue to enhance the Group's position as the leading fertilizer distributor in China and push forward to exercise the options and preemptive right to purchase the three fertilizer production companies in which Sinochem Corporation has equity interest at fair market value and at appropriate time. and strive to achieve impressive growth in the pesticide and seed businesses through mergers and acquisitions. We aim to turn the Company into the largest comprehensive service provider of agricultural inputs in China, and to take a global lead. As such, we will continue to bring higher returns to our shareholders, create wealth for society, and contribute more to the nation's food security and agricultural development."

About Sinofert Holdings Limited

Sinofert Holdings Limited, a listed company of the Hong Kong Stock Exchange ("Sinofert" or the "Company", together with its subsidiaries, collectively the "Group"; HKEx: 0297), is principally engaged in the fertilizer business in the PRC and overseas. The Group is the largest importer and distributor of fertilizer products in the PRC, and the flagship fertilizer company of Sinochem Corporation, which was established in 1950. Sinochem Corporation is one of the largest state-owned enterprises in terms of revenue, and a Fortune Global 500 Company, with global operations in the oil refining, chemicals and fertilizer industries.

Notice: Sinofert Holdings will announce the details of its financial and business review for the 12 months ended December 31, 2006 in major newspapers, including the Hong Kong Economic Times and the South China Morning Post, and at www.sinofert.com.hk, on April 12, 2007 (Thursday). Information will also be available on the corporate website at www.sinofert.com.hk and the website of the Hong Kong Stock Exchange at www.hkex.com.hk.