Chinese liquid organic fertilizer company Xi 'an CGA group said, it had raised revenue by 40% this year, but the merger was put on hold

Chinese liquid organic fertilizer company Xi 'an CGA group said, it had raised revenue by 40% this year, but the merger was put on hold

BEIJING (Reuters) Dec 16 – Chinese liquid organic fertilizer enterprises – Xi’an TechTeam group chairman Tao Li said, by benefitting from the company's business development and brand marketing, the global financial crisis only has a little impact on the company, the industrial Business today will still be able to grow 40-50% next year. But the company merger and acquisition move and capital operation process had to slow down the processing.  

He told Reuters in the interview that, so far the company is still in a state of full production and operation, and actively expanding production to meet the demands of market development, the company is still in control of growth stage. And in the long run, due to appropriate policy to the enterprise development, the company has a good prospects for development. "However on the other hand, the financial crisis is also an opportunity for the development of enterprises." said by Tao Li, the spread of financial crisis gives a lot of impacts to the organic fertilizer enterprises, so this would offer the opportunity for merger and expand.

He said, the green liquid organic fertilizer in China has a huge potential market spaces, plus the national policy to encourage agriculture industrialized and scaled management and increased market potential, at least for now, company nearly has no competitors in the market. As a result, even the current condition of the economic situation is not good, the company has not met the situation of lack of demand.

Due to the limited production, even under the state of full production but still unable to meet the market demand, therefore the company has decided to expand the existing 10000 tons of production line to 14000 tons, and will build new production line which would undertake production of 40000 tons, the plan will carry out in Feb to March next year as trial period.

He says, because of concerns about excessive growth will lead to problem about management on logistics and cash flow problems, combined with the existing limited production capacity, it would limiting the growth of company. In general the company will continue to maintain 40% growth a yearin the next few years.

Xi’an CGA group Founded in 2000 is one of the largest liquid organic fertilizer suppliers in China. The company by the end of June in 2008 fiscal year revenue of $22.6 million, up 48.9% compared to previous year.

** deferred acquisitions and capital operations to ensure ample cash flow**

The impact of the financial crisis has serious affected on the company's operations in capital markets, so that the work of financing and acquisitions must stop, said by Li.

"Although we have a lot of cashon hand, but during this special period, it is important to stick on conservative attitude under the relatively optimistic condition, the abundant cash flow is also very important." he said. In his opinion, the current situation enterprise guarantee abundant cash flow is very important. The company was considering some mergers and acquisitions about the industries who have ability to sale agricultural products orstrong regional control ability, but now had to suspend the process temporally.

"If capital market is getting better, we will continue to buy the dealers who meet the requirements about regional market." he stressed. At present, the priority work for company is doing some preparation works forthe capital market, but no substantial progress. In recent year and a half year, the company aimed to focus on building the new production line to ensure the stability of the new production line operation.

** appropriate long-term policy**

Liquid organic fertilizer industry in China is still relatively small industry. According to the estimate from Department of Agriculture, the entire industry's sales is about 100 billion yuan in 2006, weight about 20% of the fertilizer industry. There are more than 2000 enterprises in total in the industry, but only a few truly established the enterprise, the industry is still under the situation of unexpectable.

Li believes that the current policy requires to form a new rural development pattern, scale and industrialization, it is the perfect opportunity for liquid fertilizer industry, because of the scale and industrialization can reflect the effect of liquid organic fertilizer on agriculture.

He mentioned, the country proposed the new land circulation system is expected to accelerate the agricultural financial growth, resulting in the agricultural industry transformation and upgrade, so the company is considering the new self- growth under the new situation.However, these policies are very good for medium and long term development, but the short-term may not soon to be able to reflect the means on agricultural production, fertilizer industry is fully market-oriented industry. But as one of the few normative company in the industry, we believe that the company will have more opportunities.

The liquid organic fertilizer generally accounted for more than 50% in some Europe and United States developed countries, Li said, "we believe that in 10 years, till 2016-2017, (China) will reach 50%, the scale would at least reach 200 billion, the growth rate is still very fast."

In his view, the biggest challenge at the moment is not market growth or sales, but the disorder in rural market, and how to ensure that the logistics and cash flow management works functionally in the rapid development process. (finished)