2008 Annual Result · production input cost growth. Domestic price increased by 42% over that in Sep. 07 Due to production input cost decrease and market depression, price dropped

2008 Annual Result

Nurturing China’s agriculture sector

8lhk0089_ss_v7.ppt

March, 2009March, 2009

This presentation and the presentation materials distributed herewith include

forward-looking statements. All statements, other than statements of historical

facts, that address activities, events or developments that Sinofert Holdings

(“Sinofert”) expects or anticipates will or may occur in the future (including but

not limited to projections, targets, estimates and business plans) are forward-

looking statements. Sinofert’s actual results or developments may differ

materially from those indicated by these forward-looking statements as a result

DisclaimerDisclaimer

2

materially from those indicated by these forward-looking statements as a result

of various factors and uncertainties, including but not limited to price

fluctuations, actual demand, exchange rate fluctuations, exploration and

development outcomes, estimates of reserves, market shares, competition,

environmental risks, changes in legal, financial and regulatory frameworks,

international economic and financial market conditions, political risks, project

delay, project approval, cost estimates and other risks and factors beyond our

control. In addition, Sinofert makes the forward-looking statements referred to

herein as of today and undertakes no obligation to update these statements.

�Performance Highlights

�Competitive Advantages

Table of ContentsTable of Contents

3

�Outlook

Sales volume (million tons)

Turnover

Gross profit

(RMB million) 2008 Growth YoY 2007 Note3

Performance Highlights for 2008：：：：Continuous Growth in Both Business Scale and ProfitabilityPerformance Highlights for 2008：：：：Continuous Growth in Both Business Scale and Profitability

16.22 8%

60%

24%

28,382

2,741

45,393

3,401

15.02

4

Gross profit

Net profit

EPS ( RMB 0.01) Note2

Dividend per share ( HK Cents)

Note 1: The changes in fair value of derivative component of convertible bonds led to increase of RMB 160 million of net profit in 2008, and decrease of RMB 710 million of net profit in 2007.

Note 2: The weighted average number of shares for 2008 was 6,983,421,000; while 6,000,022,000 for 2007

Note 3: The transfer of the stake in Shandong Fertilizers represented a business merger under joint control, with the relevant financials for 2007 being recalled and restated in the report as required by Merger Regulation

Net profit（（（（excluding the impact of changes in faire value of convertible bonds) Note1

1,913

24%

198%

2,741

641

10.69

3,401

1,749 29% 1,355

27.39

2.76

156%

4.64 68%

Turnover (RMB '000)Sales Volume ('000 tons)

Stable Growth in Business ScaleStable Growth in Business Scale

12,572

15,02316,215

45,392,88545,392,885

5

Note: The average selling price in 2008 was RMB 2799/ton, up by 48% from RMB 1889/ton in 2007.

12,572

21,650,510

28,381,689

21,650,510

28,381,689

Net Profit (RMB '000)Net Margin (%)

Stable Profitability with Sharp Growth in Net Profit Stable Profitability with Sharp Growth in Net Profit

4.77% Note

4%

5%

6

Note: 2007 figure did not include the impact of changes in fair value of derivative component of CB.

1,354,810Note

Profit BreakdownProfit Breakdown

Profit Breakdown (RMB '000)

3,092,922

378,601

144,157

1,912,555

273,559

944,008

150,320163,160

7

� Distribution Net Profit RMB 1,476 mn, up by 17% YoY

� Production Net Profit RMB 270 mn, up by 209% YoY

� CB the fair value evaluation of derivative component of CB impacts more RMB160 mn for 2008 and less RMB710 mn from profit for 2007, respectively

144,1571,475,836

Gross Profit (RMB '000)Price-volume Analysis of Incremental Gross Profit■■■■ Sales Volume Factor■■■■ Price Factor

Distribution Gross ProfitDistribution Gross Profit

3,092,922

710,913

8

2,382,009

Market Environment and Price Trend

Sep. 2007May 2008

Feb. 2009

Price Source: www.ccmb360.comGross Profit: Potash

Unit: RMB

� Domestic potash price kept rising due to growth in global potash price.

� Price at the end of Apr.08 increased by 140% over that in Sep. 07.

� Chinese Potash negotiation concluded at the end of April with US$400/ton increase in price and half decrease in

9

Sales Volume (‘000) Gross Margin Price-volume Analysis

1,526,790+902,178 1,990,407

-438,561

price and half decrease in import volume.

� Domestic potash price kept relatively stable since May 08.

Gross Profit: Nitrogen


Sep. 2007June 2008 Feb. 2009

Price Source: www.ccmb360.comUnit: RMB

� Chinese government

levied special export

duty on urea up to

135%.

� Price kept falling, with

the largest decrease

of 34% due to

oversupply after June.

� Export increased and

domestic supply was

slightly tight due to

global urea price

growth.

� Price kept growing in

1H08, representing a

53% increase over

that in Sep. 07.

10


280,230

246,103 607,705

81,372

that in Sep. 07.

Gross Profit: Phosphate


Sep. 2007Aug. 2008 Feb. 2009


� Domestic price kept rising

due to growth in both global

price and major production

raw material cost

� Domestic price increased by

56% over that in Sep. 2007

� Chinese government levied

special export duty up to 135%.

� The price of sulphur, an important

raw material for phosphate

fertilizers, dived by over 90%.

� Phosphate price plunged since

Aug. with the largest decrease

above 40%.

11

344,175

-308,357

157,990

+122,172


Gross Profit: Compound Fertilizer


Sep. 2007Sep. 2008 Feb. 2009


� Domestic price kept growing due to production input cost growth.

� Domestic price increased by 42% over that in Sep. 07

� Due to production input cost decrease and market depression, price dropped significantly with the largest decrease over 30%.

� Inventory increased in compound fertilizer production companies and small and medium-sized enterprises faced

12

407,364

-66,784463,155

+122,575


sized enterprises faced with difficulties in operation.

Inventory ProvisionExpenses (RMB ‘000)

898,533

Expenses and Stock Provision

944,008

13

As at the end of 2008, inventory provision of distribution segment was RMB 379 mn.

Production ProfitProduction Profit

273,559

Production Profit (RMB ‘000)Production Profit Breakdown

(RMB’000)

Note 1QSLP 104,751

Tianji Sinochem 24,070

Shandong Fertilizer 4,049Sinochem Pingyuan

-76,758 Sinochem Changshan 189,709

Note 2

Note

14

88,624

Note 1:investment return based on stock proportion from QSLP from Apr. to Dec. was RMB192,448,000, fair value

valuation amortization impacted less RMB 87,697,000 from investment return

Note 2:including discount of RMB 25,717,000 on acquisition

Note 3:including discount of RMB 214,152,000 on acquisition

Three Circle Sinochem

-22,726Sinochem

Fuling 33,224

Sinochem Wengfu 6,172

Sinochem Jiaji 1,585

Sinochem Kailin 9,217

Others 565

Note 3

Inventory Turnover Days Inventory Breakdown by Product (RMB '000)

Operating Efficiency and InventoryOperating Efficiency and Inventory

Others

Phosphate

Compound

Nitrogen

9%

11%

6%

8%

11,569,643

15

Accounts Receivable Turnover Days

11%

7%

9%

14%

17%

18%11%

10% 52%

50%

Nitrogen

Potash4,385,078

6,705,372

End of 2007 End of 2008

66%

8%

End of 2006

Total Assets (RMB '000) Net Assets (RMB '000)

Asset ScaleAsset Scale

16

Proportion of Long-term Assets

Current Ratio

Asset StructureAsset Structure

17

Debt-to-equity Ratio

Note: Debt-to-equity ratio = total interest-bearing liabilities / total equity

Investment in Yunnan Three Circles-Sinochem 140,000

Network expansion 19,645

Acquisition of Xinlianxin (XLX) 184,240

2,635,309

6,443,444

Acquisition of Sinochem Pingyuan 695,000

Capital increase for Gansu Wengfu 31,830

Acquisition of Gansu Wengfu 22,500

Capital increase for Hubei Dongfang 18,076

Technique upgrade projects 577,594

Network expansion 20,603

Others 47,490

Capex (RMB '000)Capital Commitment for 2009

(RMB '000)

CapexCapex

18

Capacity expansion of Sinochem Fuling 169,170

Acquisition of three fertilizer Assets, including QSLP 2,099,754

Acquisition of three Assets including QSLP 4,903,081

Capital increase for Sinochem Changshan 149,770

20082007

Production firms 1,064,360

2009E

713,014

Network expansion

10,973

Sinochem Fuling

588，102

Sinochem Pingyuan

113,940

� Stable growth in business scale with higher contribution from domestic

fertilizer sales

� Stable profitability with sharp increase in net profit

� Different performance of four fertilizers with significant growth in

production profit

Performance Highlights

19

� Maintaining relatively large inventory supporting development of

nationwide distribution networks

� Further development in assets scale with higher proportion of long-term

assets

� Keeping robust asset and debt structure with continuous improvement

of operating efficiency




20

�Outlook

2005

The Company steadily pushes forward the strategy of integrating

production, supply and distribution after listing. Both sales volume and

net profit kept fast growth with CAGR of 13% and 33%, respectively. In

2008, Sinofert’s market share reached 18%.

� As at the end of 2008,

Sinofert had 14 production

Strategic Development Footprint Strategic Development Footprint

2006

2007

note

200816.22mn tons

RMB 1913mn

15.02mn tons

RMB 1355mn

12.57mn tons

RMB 918mn

11.17mn tons

21

� In 2001, Sinofert invested in a

production company for the first

time. As at the end of 2004,

Sinofert has 7 production

subsidiaries with total

production capacity of 2.46 mn

tons.

� In 2000, Sinofert began to

establish distribution centers. As

at the end of 2004, the number

of distribution centers reached

552 with sales volume of 4.03

mn tons.

� 11 production subsidiaries with product line covering all of the four basic fertilizers: phosphate, potash, nitrogen and compound fertilizers. The production capacity reached 7.85 mn tons

� Pushing forward distribution network expansion. As of the end of 2007, Sinofert had 16 branches, 1,672 distribution centers, covering 91% of the arable land of China, with sales volume of 9.79 mn tons

2000-2004

Sinofert had 14 production

subsidiaries with total

capacity exceeding 10 mn

tons of nitrogen, phosphate,

potash and compound

fertilizers.

� As at the end of 2008, the

number of distribution

centers reached 2,010,

representing preliminary

completion of distribution

network structure. The

sales volume through

network reached 11.33 mn

tons, accounting for 70%

of otal sales volume

Note: the data excluded the impact of fair value change in derivative component of CB

11.17mn tonsRMB 820mn

China’s largest integrated service

provider of agricultural inputs

Sales/Marketing

Production andSupply

�Potash– market leader

�Nitrogen– supply chain consolidator

�Phosphate and compound fertilizer –

leveraging strength of integrated

business model

Unique Competitive Edge: the Integrated Business Model of Production, Supply and DistributionUnique Competitive Edge: the Integrated Business Model of Production, Supply and Distribution

22

Distribution Network

� Establishing distribution network

covering major agriculture counties

in China

�Pushing forward network operating

standardization and enhancing

management

�Continuously providing various

agrichemical services

�Large self-owned production capacity and supply capability

�Long-term and stable supply system of imported fertilizer

�Multi-level domestic

fertilizer supply system

� Strong distribution capability secured steady enhancement of profitability and bargaining power in supply sector,

meanwhile, the supply system comprising production and purchasing supports the rapid development of distribution

network and maximizes profit.

� All of the business segments in the industrial chain supplemented each other with synergy effect, providing stable

profitability and risk prevention capability.

Newly-added production capacity of 2.31 mn tons

Phosphate capacity : 3.98

mn tons

Nitrogen capacity: 2.51 mn

tons

� Tianji Sinochem 0.6 mn

tons

� Sinochem Changshan 0.3

mn tons

� Sinochem Pingyuan 1.41

mn tons

� Sinochem Fuling 0.2 mn

tons

� Sinochem Fuling 1.00 mn

tons

� Sinochem Kailin 1.36 mn

tons

� Sinochem Cargill 0.6 mn

tons

� Three Circles-Sinofert 0.6

mn tons

Comprehensive product line

Enhanced Integration Strength: Production Capacity Exceeded 10 mn TonsEnhanced Integration Strength: Production Capacity Exceeded 10 mn Tons

Acquisition of Sinochem Pingyuan added nitrogen

Acquisition of Sinochem

Chanshan added nitrogen

capacity of 0.3 mn tons

and compound fertilizer

capacity of 0.4 mn tons

23

Compound fertilizer capacity

1.67 mn tons

Potash capacity

2 mn tons

� Shandong Fertilizer 0.6 mn tons

� Sinochem Fuling 0.3 mn tons

� Sinochem Zhisheng 0.2 mn tons

� Sinochem Yantai 0.1 mn tons

� Sinochem Dongfang 0.07 mn

tons

� Sinochem Changshan 0.4 mn

tons

� Salt Lake Potash 2 mn tons

tons� Gansu Wengfu 0.42 mn tons

� Total production capacity reached 10.16 mn tons with a total of 2.31 mn tons of capacity newly added in 2008 due

to the acquisitions of Sinochen Pingyuan and Sinochem Changshan and capacity expansion at Sinochem Fuling

� The product line covered all of the four basic fertilizers, providing comprehensive supply to a wider distribution

network

added nitrogen capacity of 1.41 mn tons

Newly-added nitrogen capacity of 0.2 mn tons in Sinochem Fuling

天津天津天津天津河北河北河北河北内蒙古内蒙古内蒙古内蒙古辽宁辽宁辽宁辽宁吉林吉林吉林吉林黑龙江黑龙江黑龙江黑龙江新疆新疆新疆新疆北京北京北京北京Distribution Centers layout

Shandong：：：：196 Henan：：：：180

Hebei：：：： 172 Jiangxi：：：：169

20102008

2007

Upon the preliminary completion of network structure, more efforts will be made to uplift the marketing abilities and market position

Enhanced Integration Strength: Number of Distribution Centers Exceeded 2,000Enhanced Integration Strength: Number of Distribution Centers Exceeded 2,000

24

福建福建福建福建台湾台湾台湾台湾广东广东广东广东广西广西广西广西云南云南云南云南贵州贵州贵州贵州湖南湖南湖南湖南江西江西江西江西江江江江苏苏苏苏安徽安徽安徽安徽湖北湖北湖北湖北四川四川四川四川河南河南河南河南山东山东山东山东山西山西山西山西甘肃甘肃甘肃甘肃宁夏宁夏宁夏宁夏青海青海青海青海西藏西藏西藏西藏陕西陕西陕西陕西

海南海南海南海南重庆重庆重庆重庆浙浙浙浙江江江江

Hainan：：：： 158 Jiangsu：：：：155

Hubei：：：： 135 Northwest：：：：125

Heilongjiang：：：：109 Anhui：：：：105

Guangdong：：：： 105 Liaoning：：：：103

Jilin：：：： 97 Hunan：：：： 94

Fujian：：：： 79 Guangxi：：：： 27

Southwest：：：：1

2006

2005

2004

2003

1375

1063

552

404

16722007

Sales Volume through Distribution Network and Number of Customers Six Functions of Distribution Network

Enhanced Integration Strength: Growth in Sales Volume through Distribution Network with Implementation of Six FunctionsEnhanced Integration Strength: Growth in Sales Volume through Distribution Network with Implementation of Six Functions

Brand

25

BrandPromotion

AgrichemicalService

Information Collection and Analysis

Sales and Marketing

ChannelMaintenance

� Reasonable asset and debt structure

� Balanced financing structure

� Keeping healthy and steady cash flow

� Prudent risk management policy and stringent credit granting policy management

� Prudent investment decision and reasonable dividend policy

Abundant Credit Line (RMB 100mn)■Credit line in use■Credit line

Enhanced Integration Strength: Robust Financial PolicyEnhanced Integration Strength: Robust Financial Policy

Sound Financial PolicySound Financial Policy

26

policy

Long-term assets

144

Current Assets

157

ShareholderEquity

144

Long-term Liabilities 11

Current Liabilities

146� Increasing credit line and ensuring payment security

� Expanding the cooperation between banks and the Company, ensuring the security of the funds settlement

� Leveraging integrated model of domestic and overseas operation with rational financing arrangements, enhancing capital efficiency with lower cost

Balanced Asset and Debt Structure (RMB 100mn)

Secure and Efficient Capital Management

Secure and Efficient Capital Management

301 301

� Comprehensive safeguard system

� Advance inventory alarm and notification mechanism: strengthening inventory budget management, dynamic

tracking, up-limit controlling, over-limit warning and notification; reporting and monitoring mechanism for aged

inventory

� Intermediate stocktaking and accountability system: strengthening the stocktaking system, establishing

accountability system, ensuring accuracy and consistency of the accounts

� Afterwards settlement and summarizing mechanism: making timely settlement; summarizing the experience

to optimize the process

� Information tracking and service mechanism: real-time tracking and analysis of market information; proactive

adjustment of inventory.

� Stringent control of the movement of inventory

Stringent Control of Inventory Security

Stringent Control of Inventory Security

Intensified Integration Strength: Stringent Risk ManagementIntensified Integration Strength: Stringent Risk Management

27

Establishing corresponding measures to control all movement of inventory, including port, railway and warehouse,

ensuring the security of the inventory

� Stringent credit policy: sales on credit limited within 30 days; purchase on credit limited

within 45 days; dynamic visiting scheme for clients with credit line above RMB 10 mn

� Stringent approval control: including budget control, credit line control, payment period

control and credit insurance (if necessary)

� Dynamic supervision management: including dynamic client tracking, 3-tier precaution

mechanism, accountability system and effective legal resolution methods

Stringent Credit Management

Stringent Credit Management




28

�Outlook

� The trend of farming of scale provides business growth opportunity for Sinofert

With Chinese government’s permission of legal circulation of rural land and scale operation trend in agriculture and focusing on distribution, Sinofert is presented with good opportunities to

Financial Support on “Agriculture, Farmers and Rural Area (RMB100 mn)From 2004 to 2009, six consecutive No. 1 Documents

issued by the Central government to establish a policy system and a sustainable mechanism to boost the agriculture sector. Fertilizer industry is to benefit from the most favorable environment in agriculture development.

Policies and Environment in 2009: PositivePolicies and Environment in 2009: Positive

0

1000

2000

3000

4000

5000

6000

7000

8000

26262975

3517

4318

5955

7161

29

0

200

400

600

800

1000

1200

1400

2006 2007 2008 2009

120

276

716 756

310

514

1030

1231

农资综合直补农资综合直补农资综合直补农资综合直补四项补贴四项补贴四项补贴四项补贴Source: Ministry of Finance, P.R.China

on distribution, Sinofert is presented with good opportunities to further expand its market share and intensify its market leadership.

� Exemption of agricultural tax and increasing subsidies to farmers

Chinese government not only exempted all the agricultural taxes on the farmers, but also established a direct subsidy system to farmers with subsidy standards increasing on an annual basis. In 2009, farmers producing grain will get a subsidy of RMB 82 per mu, of which RMB 55 for agricultural inputs such as fertilizers.

� Continuous and steady growth in farmers’ income contributing to increase in fertilizer investment

In 2008, farmers' average annual net income was RMB 4,761, up by 62% over 2004, with an annual growth rate of about 8%.

Fiscal input in four items of rural subsidy (RMB 100 mn)

Four Agricultural SubsidiesDirect Subsidy for agricultural commodities

0

2004 2005 2006 2007 2008 2009

0

100

200

300

400

500

2006/2007 2007/2008 2008/2009

442 448 471 425 432 428

9 12 41

生产消费结余

� The situation that China’s grain supply/demand will continue for the years to come

The production of China’s grain enjoys bumper harvest for five consecutive years, but the grain consumption increases by 5 million tons annually, and the supply/demand will be in tight balance in the long run due to the effects of reduced land, water shortage and natural disasters.

� Chinese government will carry out 50bn kg grain production capacity expansion plan

During 2009-2020, Chinese government will carry out 50bn kg grain production capacity expansion plan, which

China’s Grain Supply/Demand Trend (mn tons)

Policies and Environment in 2009 : Positive (Continued)Policies and Environment in 2009 : Positive (Continued)

30

2006/2007 2007/2008 2008/2009生产消费结余

60

65

70

75

80

85

90

95

2006 2007 2008 2009

72 72

77

87

70 70

77

90

75 75

82

95

白小麦早籼稻粳稻

kg grain production capacity expansion plan, which consequently will significantly increase the needs for fertilizers.

� In 2009, Chinese government significantly raises the grains purchases prices.

In 2009, Chinese government increases the minimum purchase prices of wheat and rice by 13% and 17%, respectively, and enlarges the grain purchase and storage scale organized by the government

� Continuous growth in both farmers’ income from grain planting and input fertilizer applications.

Continuous growth of farmers’ income from grain planting enables the farmers to invest more in fertilizers.

Minimum Purchase Prices for Major Grains (RMB/ 50 kg)

Source: China National Grain and Oils Information Center , NDRC

supply Consumption Balance

wheat Early indica rice

Japonica

� Chinese government plans to restrict he

production capacity of phosphate and

nitrogen while increasing that of

Chinese government issued a six-point policy package for fertilizer industry on Dec.24, 2008, deregulated price control for fertilizers since Jan. 24, 2009, and imposed lower export duty in 2009, benefiting Sinofert in terms of production, trading and distribution.

� The system for potash pricing for domestic sales at the ports was changed from prior approval by the government to

Positive for the Company to consolidate production base and enhance production profitability

Fertilizer Production

Import & Export

Policies and Environment in 2009: Positive (Continued)Policies and Environment in 2009: Positive (Continued)

Positive for the Company to make full use of both the domestic and international markets

31

nitrogen while increasing that of

potash, providing Sinofert with supporting

policies for further integration of nitrogen

and phosphate industries and increase the

investment in potash fertilizers.

� Chinese government deregulated ex-

factory price of fertilizers. Electricity, gas

and railway transportation used for

fertilizers continue to enjoy favorable prices.

� Abolished 7% general margin limitation on fertilizers distribution and sales

� Encourages and supports the development of large-sized fertilizers distributors

� Fertilizer distribution businesses continue to enjoy VAT-free policy

from prior approval by the government to price registration with the government after sale by the companies .

� Adopt different export tariffs for peak and off seasons, tariff ceiling reduced from

185% to 110％ and only 10% tariffs during the four months of off-season.

� Imported fertilizers continued to enjoy a VAT-free policy.

Government reform in fertilizer policy and market benefits distribution segment most

Production Export

Distribution Network

(I) As required by agriculture production of China’s 1.8bn mu of arable land, rigid demands of fertilizers will remain. With a population of 1.3 bn, China’s fertilizer industry will remain as a sunrise industry and be the 1st to recover, despite shrinking demand in 2008 due to high market volatility.

China Fertilizers Consumption in 2007-2008 (10,000 tons, in nutrient)

-1.5%

-5.4%

Recovering Growth Seen in 2009 in Terms of Demand and Price for China’s FertilizerRecovering Growth Seen in 2009 in Terms of Demand and Price for China’s Fertilizer

32

� China’s fertilizer demand slumped in 2008 though this does not represent the long-term growth trend of the country’s fertilizer demands.

• Since 2003, Chinese fertilizer consumption maintained an annual growth rate of 4-5%

• Due to 2008 financial crisis, China National Chemical Information Center (CNCIC) estimates China’s fertilizer demand

decreased by 5.4% from 2007, specifically 1.5%, 7.7%, 18.1% and 5.4% for nitrogen, phosphate, potash and

compound fertilizers, respectively.

-5.4%

-7.7%

-18.1%

(II) As spring plough season starts in 2009, operating rate of fertilizer companies will resume. Demand already bounced back from 2008 downturn, showing a recovering growth. The fertilizer demand in 2009 is expected to be close to that of 2007.

China Fertilizer Demand in 2006-2009(10,000 tons, in nutrient)

Recovering Growth Seen in 2009 in Terms of Demand and Price for China’s Fertilizer (Continued)Recovering Growth Seen in 2009 in Terms of Demand and Price for China’s Fertilizer (Continued)

Usage rate Growth

33

� Operating rate of fertilizer enterprises is resuming back to normal

• 4Q2008 was the most difficult period for the fertilizer industry, with production in most companies cut by half.

• Since 2009, with market turnaround and rising prices, the operating rate of production companies has resumed. At present, operating rate for urea, phosphate and compound fertilizers producers are 98％％％％, 80% and 70% respectively, recovering to the level of 1H2008 and getting through the difficulties.

� Recoverable increase of demand for potash fertilizers will likely rise sharply in 2009

• Agricultural experts estimate total demand for fertilizer in 2009 is about 49.7 mn tons, up by 3% over 2008 and recovers to the level of 2007, in which demand growth for potash will be the highest, up by 9% over 2008.

(III) In 1H08, fertilizer price reached record high while slumped in 2H08, reaching the bottom at the end of the year. Since 2009, fertilizer price has risen steadily

Urea Price (RMB/ton) DAP Price (RMB/ton)

Recovering Growth Seen in 2009 in Terms of Demand and Price for China’s Fertilizer (Continued)Recovering Growth Seen in 2009 in Terms of Demand and Price for China’s Fertilizer (Continued)

1000

1500

2000

2500

3000

2000

3000

4000

5000

6000

34

� Fertilizer price reached record high in 1H08 and fell by about 50% in 2H08

� In 2009, price has started rising steadily from the lowest point

Fertilizer prices began to go up steadily from Jan 2009. Price for urea, DAP and potash increased by 8.1%, 5.7% and 40%, respectively, over the lowest point in 2008. From March, the prices of various fertilizers continued to rise and have roughly reached the level as that of the same period last year.

0

500

1000

2008/1

/1

2008/2

/1

2008/3

/1

2008/4

/1

2008/5

/1

2008/6

/1

2008/7

/1

2008/8

/1

2008/9

/1

2008/1

0/1

2008/1

1/1

2008/1

2/1

2009/1

/1

2009/2

/1

0

1000

2000

2008/1

/1

2008/2

/1

2008/3

/1

2008/4

/1

2008/5

/1

2008/6

/1

2008/7

/1

2008/8

/1

2008/9

/1

2008/1

0/1

2008/1

1/1

2008/1

2/1

2009/1

/1

2009/2

/1

Distribution: the largest agricultural

input distributor and service provider

in China

Production: the largest basic fertilizer producer in China

Continue to implement an integrated strategy of “expanding into production and marketing and distribution business while focusing on distribution”, aiming at becoming China’s largest comprehensive service provider of agricultural inputs

Development

Objectives

Continues to Implement an Integrated Strategy in 2009Continues to Implement an Integrated Strategy in 2009

� Continue to boost the production investment strategy based on resources

� Strengthen management of production subsidiaries and increase profitability

� Seize opportunities to realize low-cost expansion in production

� Continue to strengthen network construction with focus on layout optimization and densification based on existing distribution network and

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Supply: continuously improve multi-level domestic and

international supply system

sector

� Strengthen the strategic alliance with international suppliers to guarantee the supply of competitive products

� Explore into new product import

� Diversify the cooperation with domestic suppliers to ensure supply

on existing distribution network and establish 100 new distribution centers each year

� Continue to standardize operating management and improve network quality and efficiency

� Intensify agrichemical service, boost product sales and improve brand image

� Maintain a growth rate of no less than 10% during 2009-2011

� Strive to gain 20% market share in China in 2009

Sinofert : Growing with Modern Chinese Agriculture in a Sustainable,

Healthy and Rapid Fashion

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Q & A