China XLX Fertiliser Ltd. — Interim / Quarterly Report 2011

Aug 3, 2011

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

China XLX FertiLiser Ltd. 中國心連心化肥有限公司[*]

(Incorporated in Singapore with limited liability)

(hong Kong stock Code: 1866) (singapore stock Code: b9r)

annOUnCeMent OF UnaUdited interiM resULts FOr the siX MOnths ended 30 JUne 2011

The Board of Directors (the “ directors ’’) of China XLX Fertiliser Ltd (the “ Company ’’) is pleased to announce its unaudited consolidated interim results of the Company and its subsidiary (collectively the “ Group ’’) for the six months ended 30 June 2011 together with the comparative figures as follows:

1

COndensed COnsOLidated stateMent OF COMPrehensiVe inCOMe For the six months ended 30 June 2011

Notes reVenUe 4 Cost of sales Gross profit Other income/(expenses), net 4 Selling and distribution cost General and administrative expenses Finance costs 5 PrOFit beFOre taX 6 Income tax expense 7 PrOFit FOr the PeriOd attribUtabLe tO OrdinarY eQUitY hOLders OF the Parent Other COMPrehensiVe inCOMe Available-for-sale investment: Change in fair value Transfer of impairment loss to profit or loss Other COMPrehensiVe inCOMe FOr the PeriOd, net OF taX tOtaL COMPrehensiVe inCOMe FOr the PeriOd earninGs Per share attribUtabLe tO OrdinarY eQUitY hOLders OF the Parent Basic and diluted (RMB cents per share) 9

six months ended 30 June 2011 2010 RMB’000 RMB’000 (Unaudited) (Unaudited) 1,790,353 1,354,460 (1,583,482) (1,142,117) 206,871 212,343 (4,733) 1,796 (40,382) (19,337) (62,819) (49,639) (36,415) (25,668) 62,522 119,495 (12,991) (21,345) 49,531 98,150 (7,861) – 7,861 – – – 49,531 98,150 5.0 cents 9.8 cents

Details of the dividend paid and proposed for the period/year are disclosed in note 8 to the financial statements.

2

COndensed COnsOLidated stateMent OF FinanCiaL POsitiOn 30 June 2011

Notes nOn-CUrrent assets Property, plant and equipment 10 Prepaid land lease payments Prepayments 11 Available-for-sale investment 12 Total non-current assets CUrrent assets Available-for-sale investment 12 Inventories 13 Trade receivables 14 Bills receivables 14 Prepayments 11 Deposits and other receivables Income tax recoverable Pledged deposits 15 Cash and cash equivalents 15 Total current assets CUrrent LiabiLities Trade payables 16 Bills payables Accruals and other payables Due to related parties Deferred grants Interest-bearing bank and other borrowings 17 Total current liabilities net CUrrent assets tOtaL assets Less CUrrent LiabiLities	30 June 2011 RMB’000 (Unaudited) 2,441,955 92,246 41,925 – 2,576,126 13,917 247,553 42,693 36,379 141,426 27,810 16,294 29,000 309,118 864,190 43,129 19,000 258,784 627 3,713 445,000 770,253 93,937 2,670,063	31 December 2010 RMB’000 (Audited) 2,414,545 89,860 4,098 21,778
		2,530,281
		– 353,922 13,567 18,720 73,957 7,461 15,895 18,780 162,773
		665,075
		40,152 37,500 265,049 723 3,960 200,000
		547,384
		117,691
		2,647,972

3

Note nOn-CUrrent LiabiLities Interest-bearing bank and other borrowings 17 Deferred tax liabilities Total non-current liabilities net assets eQUitY attribUtabLe tO Owners OF the Parent Issued capital Statutory reserve fund Retained profits Proposed final dividend total equity	30 June 2011 RMB’000 (Unaudited) 1,023,000 38,359 1,061,359 1,608,704 836,671 117,269 654,764 – 1,608,704	31 December 2010 RMB’000 (Audited) 1,023,411 35,071
		1,058,482
		1,589,490
		836,671 110,678 612,141 30,000
		1,589,490

4

COndensed COnsOLidated stateMent OF ChanGes in eQUitY For the six months ended 30 June 2011

Group

(Unaudited) At 1 January 2010 Total comprehensive income for the period 2009 final dividend declared Transfer from retained profits to proposed final 2009 dividend At 30 June 2010 (Unaudited) At 1 January 2011 Profit for the period attributable to ordinary equity holders of the parent Other comprehensive income for the period: Change in fair value of an available-for-sale investment Transfer of impairment loss to profit or loss Total comprehensive income for the period Transfer to statutory reserve fund Transfer from retained profits to proposed final 2010 dividend Final 2010 dividend declared At 30 June 2011	issued capital RMB’000 836,671 – – – 836,671 836,671 – – – – – – – 836,671	statutory reserve fund available- for-sale investment revaluation reserve RMB’000 RMB’000 94,200 – – – – – – – 94,200 – 110,678 – – – – (7,861) – 7,861 – – 6,591 – – – – – 117,269 –	retained profits RMB’000 514,550 98,150 – (504) 612,196 612,141 49,531 – – 49,531 (6,591) (317) – 654,764	Proposed final dividend RMB’000 29,222 – (29,726) 504 – 30,000 – – – – – 317 (30,317) –	total equity RMB’000 1,474,643 98,150 (29,726) – 1,543,067 1,589,490 49,531 (7,861) 7,861 49,531 – – (30,317) 1,608,704

5

COndensed COnsOLidated stateMent OF Cash FLOws For the six months ended 30 June 2011

Notes CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax Adjustments for: Amortisation of prepaid land lease payments 6 Depreciation of property, plant and equipment 6 Impairment loss on an available-for-sale investment 6 Loss on disposal of items of property, plant and equipment 4,6 Amortisation of deferred grants 4 Interest income 4 Dividend income 4 Finance costs 5 Decrease in inventories Increase in trade and bills receivables Decrease/(increase) in prepayments Decrease/(increase) in deposits and other receivables Decrease in trade and bills payables Increase/(decrease) in accruals and other payables Decrease in amounts due to related parties Cash generated from operations Government grants received Interest paid Interest received Tax paid Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from disposal of items of property, plant and equipment Purchases of items of property, plant and equipment 18 Purchase of an available-for-sale investment Decrease/(increase) in bank deposits pledged Purchase of land lease premium Dividend income received Net cash flows used in investing activities

six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 62,522 119,495 993 834 84,187 81,060 7,861 – 1,159 3,617 (247) (2,990) (379) (302) (720) – 36,415 25,668 191,791 227,382 106,369 35,018 (46,785) (1,146) (67,400) 29,179 (20,349) 17,213 (15,523) (22,219) 4,289 (136,046) (96) (278) 152,296 149,103 – 2,990 (36,415) (25,668) 379 302 (10,102) (15,918) 106,158 110,809 2,607 2,655 (163,744) (218,369) – (21,778) (10,220) 21,173 (3,448) – 720 – (174,085) (216,319)

6

Note CASH FLOWS FROM FINANCING ACTIVITIES Dividends paid on ordinary shares Proceeds from loans and borrowings Repayments of loans and borrowings Net cash flows from financing activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period ANALYSIS OF BALANCE OF CASH AND CASH EQUIVALENTS Cash at banks and on hand 15

six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 (30,317) (29,726) 400,000 300,000 (155,411) (270,000) 214,272 274 146,345 (105,236) 162,773 139,796 309,118 34,560 309,118 34,560

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nOtes tO the COndensed COnsOLidated interiM FinanCiaL inFOrMatiOn 30 June 2011

1. COrPOrate inFOrMatiOn

China XLX Fertiliser Ltd. is a limited liability company incorporated in Singapore on 17 July 2006 under the Singapore Companies Act and its shares are dual primary listed on the Singapore Exchange Securities Trading Limited (the “ sGX-st ”) and The Stock Exchange of Hong Kong Limited. The registered office of the Company is located at 333 North Bridge Road, #08-00 KH KEA Building, Singapore 188721. The principal place of business of the Group is located at THE Xinxiang High Technology Development Zone, West Zone, Henan Province, the People’s Republic of China (the “ PrC ”). The principal activity of the Company consists of investment holding. The principal activities of the major subsidiary of the Company, namely Henan Xinlianxin Fertiliser Co., Ltd. (“ henan XLX ”), are the manufacturing and trading of urea, compound fertiliser, methanol, liquid ammonia and ammonia solution.

2.1 basis OF PreParatiOn

The condensed consolidated interim financial information have been prepared in accordance with Singapore Financial Reporting Standard (“ sFrs ”) 34 “Interim Financial Reporting” issued by the Singapore Accounting Standards Council and the applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited and the relevant regulations of the Singapore Exchange Securities Trading Limited.

The condensed consolidated interim financial information do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group’s annual financial statements for the year ended 31 December 2010.

2.2 ChanGes in aCCOUntinG POLiCY and disCLOsUres

The accounting policies adopted in the preparation of the condensed consolidated interim financial information of the Company and its subsidiaries (collectively the “Group”) are consistent with those followed in the preparation of the annual financial statements for the year ended 31 December 2010, except for the adoption of the following new and revised SFRSs for the first time for the current period’s condensed consolidated interim financial information.

• Amendment to SFRS 32 Financial Instruments: Presentation – Classification of Rights Issues

• INT SFRS 119 Extinguishing Financial Liabilities with Equity Instruments

• Amendments to SFRS 101 Limited Exemption from Comparative SFRS 107 Disclosures for First-time Adopters

• Revised SFRS 24 Related Party Disclosures

• Amendments to INT SFRS 114 Prepayments of a Minimum Funding Requirement

• INT SFRS 115 Agreements for the Construction of Real Estate

• Improvements to SFRSs issued in 2010:

• Amendments to SFRS 101 First-time Adoption of Singapore Financial Reporting Standards

• Amendments to SFRS 103 Business Combinations

• Amendments to SFRS 107 Financial Instruments: Disclosures

• Amendments to SFRS 1 Presentation of Financial Statements

• Transition requirements for amendments arising as a result of SFRS 27 Consolidated and Separate Financial Statements

• Amendments to SFRS 34 Interim Financial Reporting

• Amendments to INT SFRS 113 Customer Loyalty Programmes

The adoption of these standards and interpretations did not have any material effect on the results and financial position of the financial statements, or their presentation for the current period.

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3. OPeratinG seGMent inFOrMatiOn

For management purposes, the Group is organised into business units based on its products, and has three reportable operating segments as follows:

(i) Urea

Urea is an effective, neutral nitrogen-based fertiliser which is suitable for various crops and land. It will not leave any residue in the soil, and provides nitrogen to crops and serves as a raw material for agricultural fertilisers, plastic, resin, coating materials and pharmaceutical industries.

(ii) Compound fertiliser

Compound fertiliser is a type of round, hard, colourful granulated fertiliser and has various distinctive characteristics such as high concentration, high absorption rate by crops, and enhancement of resistance of crops to diseases, insects, droughts and lodges. The use of compound fertiliser generally improves the quality of crops and the productivity of the land. It can be used as ground fertiliser or added fertiliser and is suitable for the growing of wheat, paddy, corn, peanuts, tobacco, fruit trees, vegetables and cotton.

(iii) Methanol

Methanol is a colourless, tasteless, highly volatile, and flammable liquid alcohol that is toxic if swallowed. It is an important organic chemical raw material which is mainly used to produce formaldehyde, which is a vital raw material for producing various kinds of resin. Methanol is also a good fuel and has been used as an energy resource in some power stations. Methanol is also widely used in the industrial production of synthetic fibre, plastic, pharmaceutical, pesticides, dye and synthetic protein.

In addition to the three main operating segments, the Group is involved in the production of liquid ammonia and ammonia solution.

No operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of the Group’s business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on reportable segment profit or loss which in certain respects, as explained in the table below, is measured differently from profit before tax in the consolidated financial statements.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

Allocation basis

Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly other income, other expenses, depreciation and amortisation, finance income and expenses and income tax expense.

Group assets and liabilities cannot be directly attributable to individual segments as it is impracticable to allocate them to the segments. Assets of the Group are utilised interchangeably between the different segments and there is no reasonable basis to allocate liabilities of the Group between the different segments. Accordingly, it is not meaningful to disclose assets, liabilities and capital expenditure by operating segments.

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For the six months ended 30 June 2011

		Compound
	Urea	fertiliser	Methanol	**Others **	eliminations	total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
REVENUE
Sales to external customers	1,162,149	449,137	175,523	3,544	–	1,790,353
Intersegment sales	147,528	–	–	4,841	(152,369)	–
Total revenue	1,309,677	449,137	175,523	8,385	(152,369)	1,790,353
Segment profit/(loss)	156,599	67,410	(17,341)	203	–	206,871
Interest income						379
Unallocated expenses, net						(108,313)
Finance costs						(36,415)
Profit before tax						62,522
Income tax expense						(12,991)
Net profit attributable to
owners of the parent						49,531
For the six months ended 30 June 2010
		Compound
	Urea	fertiliser	Methanol	Others	Eliminations	Total
	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
REVENUE
Sales to external customers	960,176	206,997	181,612	5,675	–	1,354,460
Intersegment sales	66,162	–	–	2,864	(69,026)	–
Total revenue	1,026,338	206,997	181,612	8,539	(69,026)	1,354,460
Segment profit/(loss)	190,142	23,646	(1,511)	66	–	212,343
Interest income						302
Unallocated expenses, net						(67,482)
Finance costs						(25,668)
Profit before tax						119,495
Income tax expense						(21,345)
Net profit attributable to
owners of the parent						98,150

10

4. reVenUe and Other inCOMe/(eXPenses), net

Revenue, which is also the Group’s turnover, represents the net invoiced value of goods sold, after deduction of relevant taxes and allowances for returns and trade discounts, and the value of services rendered.

An analysis of the Group’s revenue, other income and other expenses is as follows:

revenue Sale of goods Other income Bank interest income Sale of by-products Service fee income from related parties Amortisation of deferred grants Dividend income Others Other expenses Loss on disposal of items of property, plant and equipment Exchange loss, net Impairment loss on an available-for-sale investment Others Other income/(expenses), net FinanCe COsts Interest on bank loans, overdrafts and other loans, wholly repayable within five years Interest on government loans

six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 1,790,353 1,354,460 six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 379 302 2,440 5,200 807 678 247 2,990 720 – 844 393 5,437 9,563 (1,159) (3,617) – (576) (7,861) – (1,150) (3,574) (10,170) (7,767) (4,733) 1,796 six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 36,415 25,539 – 129 36,415 25,668

5. FinanCe COsts

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6. PrOFit beFOre taX

The Group’s profit before tax is arrived at after charging:

Cost of inventories sold Depreciation of property, plant and equipment Amortisation of prepaid land lease payments Minimum lease payments under operating leases: Land Buildings Employee benefit expenses (including directors’ Remuneration): Salaries and bonuses Contributions to defined contribution plans Welfare expenses Auditors’ remuneration Exchange loss, net Impairment loss on an available-for-sale investment Loss on disposal of items of property, plant and equipment	six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 1,583,482 1,142,117 84,187 81,060 993 834 176 153 270 240 446 393 66,635 46,778 9,589 8,153 4,293 3,162 80,517 58,093 710 549 – 576 7,861 – 1,159 3,617	six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 1,583,482 1,142,117 84,187 81,060 993 834 176 153 270 240 446 393 66,635 46,778 9,589 8,153 4,293 3,162 80,517 58,093 710 549 – 576 7,861 – 1,159 3,617
		393
		46,778 8,153 3,162
		58,093
		549 576 – 3,617

7. inCOMe taX

The Company is incorporated in Singapore and is subject to an income tax rate of 17% for the six months ended 30 June 2011 (six months ended 30 June 2010: 17%).

Taxes on profits assessable elsewhere have been calculated at the rates of tax prevailing in the countries in which the Group operates.

The Company’s subsidiaries in Mainland China are subject to an income tax rate of 25% (2010: 25%). Based on the “Income Tax Law of the PRC for Enterprises with Foreign Investments and Foreign Enterprises”, the subsidiaries are entitled to full exemption from income tax for the first two profitable years and a 50% reduction in income tax for the following three years. The major subsidiary, Henan XLX, had elected the financial year ended 31 December 2007 as the first profitable year for the purpose of determining the tax holiday period. Accordingly, that subsidiary was exempted from income tax during the years ended 31 December 2007 and 2008. For the six months ended 30 June 2010 and 2011, that subsidiary was in its fourth and fifth profitable years, respectively and hence became subject to a concessionary tax rate of 12.5%.

The major components of income tax expense for the six months ended 30 June 2010 and 2011 are:

Current – PRC Charge for the period Deferred tax Total tax charge for the period	six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 9,703 15,796 3,288 5,549 12,991 21,345	six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 9,703 15,796 3,288 5,549 12,991 21,345
		21,345

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8. diVidends

Final dividend of RMB30,317,000 (year ended 31 December 2009: RMB29,726,000) for the year ended 31 December 2010 was declared and paid during the six months ended 30 June 2011.

The Company did not recommend or declare any interim dividend for the six months ended 30 June 2011 (six months ended 30 June 2010: Nil).

9. earninGs Per share attribUtabLe tO OrdinarY eQUitY hOLders OF the Parent

Earnings per share is calculated by dividing the Group’s profit for the period attributable to ordinary equity holders of the parent by the weighted average number of 1,000,000,000 (six months ended 30 June 2010: 1,000,000,000) ordinary shares outstanding during the period.

There were no potentially dilutive ordinary shares in existence during the six months ended 30 June 2010 and 2011 and therefore the diluted earnings per share amounts for those periods were the same as the basic earnings per share amounts.

10. PrOPertY, PLant and eQUiPMent

During the period, the additions and disposals of the items of property, plant and equipment of the Group amounted to approximately RMB115,363,000 and RMB3,766,000 (six months ended 30 June 2010: RMB131,697,000 and RMB6,272,000), respectively.

11. PrePaYMents

nOn-CUrrent Prepayments: Prepayments for purchases of plant and equipment CUrrent Prepayments: Advanced deposits to suppliers Current portion of prepaid land lease payments Other prepayments	30 June 2011 (Unaudited) RMB’000 41,925 138,935 2,055 436 141,426	31 December 2010 (Audited) RMB’000 4,098
		71,535 1,985 437
		73,957

13

12. aVaiLabLe-FOr-saLe inVestMent

nOn-CUrrent Listed equity investment, at fair value: Singapore CUrrent Listed equity investment, at fair value: Singapore	30 June 2011 (Unaudited) RMB’000 – 13,917	31 December 2010 (Audited) RMB’000 21,778
		–

The above investment in equity securities is designated as an available-for-sale financial asset and has no fixed maturity or coupon rate.

During the period, a provision for impairment of RMB7,861,000 was made for an available-for-sale investment with a carrying value (before impairment) of RMB21,778,000 because there was a significant decline in the fair value of the available-for-sale investment.

The available-for-sale investment was transferred from non-current assets to current assets at 30 June 2011 because the directors of the Company are of the opinion that the investment could be disposed of in the forthcoming year.

13. inVentOries

Raw materials Parts and spares Work in progress Finished goods	30 June 2011 (Unaudited) RMB’000 137,561 16,882 4,240 88,870 247,553	31 December 2010 (Audited) RMB’000 216,373 13,129 6,758 117,662
		353,922

14

14. trade and biLLs reCeiVabLes

Trade receivables Bills receivable	30 June 2011 (Unaudited) RMB’000 42,693 36,379 79,072	31 December 2010 (Audited) RMB’000 13,567 18,720
		32,287

Trade receivables are non-interest-bearing and are normally settled on terms of 30 to 90 days. They are recognised at their original invoice amounts which represent their fair values on initial recognition. The Group’s bills receivable are non-interest-bearing and are normally settled on terms of 90 to 180 days. Trade and bills receivables are denominated in Renminbi (“RMB”).

The Group’s trading terms with its customers are mainly payment in advance or on credit for certain customers. Each customer has a maximum credit limit. The Group seeks to maintain strict control over its outstanding receivables and to minimise credit risk. Overdue balances are reviewed regularly by senior management. In view of the aforementioned and the fact that the Group’s trade receivables relate to a large number of diversified customers, there is no significant concentration of credit risk.

An aged analysis of the trade receivables at the end of the reporting period, based on the invoice due date and net of provisions, is as follows:

Within 1 month 1 to 3 months 3 to 6 months 6 to 12 months	30 June 2011 (Unaudited) RMB’000 41,168 1,211 303 11 42,693	31 December 2010 (Audited) RMB’000 13,131 276 160 –
		13,567

15

15. Cash and Cash eQUiVaLents and PLedGed dePOsits

Time deposits Less: Pledged time deposits Cash at banks and on hand Cash and cash equivalents	30 June 2011 (Unaudited) RMB’000 29,000 (29,000) 309,118 309,118	31 December 2010 (Audited) RMB’000 18,780 (18,780) 162,773
		162,773

At 30 June 2011, the cash and bank balances of the Group denominated in RMB amounted to RMB331,618,000 (31 December 2010: RMB180,717,000). The RMB is not freely convertible into other currencies, however, under Mainland China’s Foreign Exchange Control Regulations and Administration of Settlement, Sale and Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term time deposits are made for varying periods of between one day and three months depending on the immediate cash requirements of the Group, and earn interest at the respective short-term time deposit rates. The bank balances and pledged deposits are deposited with creditworthy banks with no recent history of default.

16. trade PaYabLes

An aged analysis of the trade payables as at the end of the reporting period, based on the invoice date, is as follows:

Within 1 month 1 to 3 months 3 to 6 months 6 to 12 months Over 12 months	30 June 2011 (Unaudited) RMB’000 4,416 31,654 5,837 410 812 43,129	31 December 2010 (Audited) RMB’000 3,223 34,696 688 239 1,306
		40,152

The trade payables are non-interest-bearing and are normally settled on terms of 30 to 90 days. Trade payables are denominated in RMB.

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17. interest-bearinG banK and Other bOrrOwinGs

		30	June 2011		31 December 2010	31 December 2010	31 December 2010	31 December 2010
	Contractual				Contractual
	**interest rate **		Maturity	RMB’000	interest rate	Maturity		RMB’000
				(Unaudited)				(Audited)
CUrrent
Bank loans
– unsecured_(note (a))_		6.4%	2012	90,000	5.4%		2011	30,000
– unsecured	5.4% to 6.87%		2012	355,000	4.86% to 5.4%		2011	170,000
				445,000				200,000
nOn-CUrrent
Bank loans
– secured		–	–	–	5.4%		2012	90,000
– unsecured	5.4% to 6.8%		2012	1,013,000	5.4% to 5.85%		2012	923,000
			to 2018			to	2013
Loan from the government
– unsecured_(note (b))_	Floating rate at		–	10,000	Floating rate at		–	10,411
	0.3% above the				0.3% above the
	market prime				market prime
	lending rate				lending rate
				1,023,000				1,023,411
				1,468,000				1,223,411
					30 June		31 December
					2011			2010
					(Unaudited)			(Audited)
					RMB’000			RMB’000
Analysed into:
Bank loans repayable:
Within one year or on demand					445,000			200,000
In the second year					250,000			625,000
In the third to fifth years,	inclusive				763,000			388,000
					1,458,000			1,213,000
Other borrowings repayable:
In the third to fifth years,	inclusive				10,000			10,411
					1,468,000			1,223,411

Notes:

• (a) Certain bank loans of the Group were supported by the guarantee of independent third parties.

• (b) The loan from the government bears interest at a floating rate of 0.3% above the market prime lending rate and is not due to be repaid within the next 12 months.

The fair values of the Group’s interest-bearing bank and other borrowings approximate to their carrying values.

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18. nOte tO the COndensed COnsOLidated stateMent OF Cash FLOws

Major non-cash transaction – purchases of property, plant and equipment:

Additions to property, plant and equipment Less: Prepayments made in the prior period Less: Payable to creditors Add: Prepayments made in the current period Add: Payments for the prior year purchases	six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 115,363 131,697 (4,098) (6,515) (46,462) (83,238) 64,803 41,944 41,925 30,389 57,016 146,036 163,744 218,369	six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 115,363 131,697 (4,098) (6,515) (46,462) (83,238) 64,803 41,944 41,925 30,389 57,016 146,036 163,744 218,369
		41,944 30,389 146,036
		218,369

19. COntinGent LiabiLities

At the end of the reporting period, the Group did not have any significant contingent liabilities.

20. OPeratinG Lease arranGeMents

The Group had operating lease agreements for buildings in Mainland China. Certain of these leases have options for renewal. Future minimum rentals payable under non-cancellable operating leases at the end of the reporting period are as follows:

Within one year In the second to fifth years, inclusive After five years	30 June 2011 (Unaudited) RMB’000 3,083 11,486 81,770 96,339	31 December 2010 (Audited) RMB’000 3,083 11,513 83,203
		97,799

The Group had no material operating lease arrangements at the end of the reporting period.

21. COMMitMents

In addition to the operating lease commitments detailed in note 20 above, the Group had the following capital and other commitments at the end of the reporting period:

Capital commitments: Plant and machinery Other commitments: Purchases of raw materials	30 June 2011 (Unaudited) RMB’000 71,535 41,982	31 December 2010 (Audited) RMB’000 44,224
		–

The Group had no other material commitments at the end of the reporting period.

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22. reLated PartY transaCtiOns

• (a) In addition to the transactions detailed elsewhere in this interim financial information, the Group had the following transactions with related parties during the period:

	six months ended	six months ended
	30 June
	2011	2010
	(Unaudited)	(Unaudited)
	RMB’000	RMB’000
Sales of electricity, water and steam to:
– Henan Shenzhou Heavy Sealing Co., Ltd. #	515	470
– Xinxiang Xinlianxin Gas Products Co., Ltd. #	4,081	1,159
– Xinxiang Xinlianxin Lifting Equipment Co., Ltd. #	3	3
– Xinxiang Xinlianxin Chemical Equipment Co., Ltd. #	120	105
– Xinxiang Yuyuan Chemical Co., Ltd. #	338	292
– Xinxiang Xinlianxin Hotel Co., Ltd. #	63	38
Service fee income for provision of calibration
and testing services to:
– Henan Shenzhou Heavy Sealing Co., Ltd. #	14	24
– Xinxiang Xinlianxin Gas Products Co., Ltd. #	4	4
– Xinxiang Xinlianxin Chemical Equipment Co., Ltd. #	2	7
– Xinxiang Yuyuan Chemical Co., Ltd. #	7	26
Purchases of raw materials and consumables from:
– Xinxiang Xinlianxin Gas Products Co., Ltd. #	119	113
– Xinxiang Xinlianxin Chemical Equipment Co., Ltd. #	1,114	4,270
Service fee expenses for provision of lifting services from:
– Xinxiang Xinlianxin Lifting Equipment Co., Ltd.	1,238	824
Operating lease expenses to:
– Henan Xinlianxin Chemicals Group Co., Ltd.	240	240
Service fee expenses to:
– Xinxiang Xinlianxin Hotel Co., Ltd. #	1,545	983
Interest expense to:
– Henan Xinlianxin Chemicals Group Co., Ltd.	439	408

These companies are subsidiaries of Henan Xinlianxin Chemicals Group Co., Ltd. (“Henan Chemicals”), which has common shareholders with the Company. The Company’s executive directors and executive officers have certain equity interests and significant influence in Henan Chemicals.

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22. reLated PartY transaCtiOns (COntinUed)

• (b) Compensation of directors and key management personnel of the Group:

Directors’ fee Salaries and bonuses Contributions to defined contribution plans Total compensation paid to key management personnel	six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 400 400 1,660 1,163 30 37 2,090 1,600	six months ended 30 June 2011 2010 (Unaudited) (Unaudited) RMB’000 RMB’000 400 400 1,660 1,163 30 37 2,090 1,600
		1,600

23. seasOnaLitY OF OPeratiOns

Due to the seasonal weather conditions, the sales of compound fertiliser are subject to seasonal fluctuations, with peak demand in the third quarter of the year.

ManaGeMent disCUssiOn and anaLYsis

(i) bUsiness reView

Revenue

Revenue for 1H2011 increased significantly by about RMB436 million or 32% from approximately RMB1,354 million in 1H2010 to approximately RMB1,790 million in 1H2011. The increase was mainly due to the increase in urea and compound fertiliser sales volume and increase in urea, methanol and compound fertiliser average selling prices.

Urea

Revenue derived from the sales of urea increased by approximately RMB202 million or approximately 21% from approximately RMB960 million for the half year ended 30 June 2010 to RMB1,162 million for the half year ended 30 June 2011. Such increase was mainly due to the increase in average selling price by approximately 16% due to high international selling prices and low industry production utilisation which was affected by the shortage of electricity supply. The sales quantity of urea also increased by approximately 4% due to sales from inventory carried over from December 2010.

Methanol

Revenue derived from the sales of methanol decreased by approximately RMB6 million or approximately 3% from approximately RMB182 million for the half year ended 30 June 2010 to RMB176 million for the half year ended 30 June 2011. Such decrease was mainly due to the decrease in sales quantity by approximately 18% as methanol is loss-making. The decrease was partially offset by an increase in average selling prices.

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Compound fertiliser

Revenue derived from the sales of compound fertiliser increased by approximately RMB242 million or approximately 117% from approximately RMB207 million for the half year ended 30 June 2010 to RMB449 million for the half year ended 30 June 2011. Such increase was primarily resulted from the increase in sales volume by about 78% in the six months ended 30 June 2011 due to change in sales mix towards more compound fertiliser as compared to urea which had lower gross margins. The average selling price for compound fertiliser also rose 22% in the half year ended 30 June 2011 as compared to the same period in 2010.

Profitability

Overall gross profit margin decreased from approximately 16% in 1H2010 to 12% in 1H2011 due to the decrease in gross profit margins of urea and methanol.

Urea

Gross profit margin of urea decreased from 20% in 1H2010 to 14% in 1H2011 due to higher coal prices which resulted in urea average cost of sales being 25% higher than 1H2010. But urea average selling prices only increased 16%. However, if compared against the gross profit margin of urea in 1Q2011 and 4Q2010, urea gross margins in 2Q2011 increased approximately 3% and 4% respectively, led primarily by the increase in average selling prices by approximately 4% and 5% respectively.

Methanol

Gross profit margin of methanol decreased from negative 1% in 1H2010 to negative 10% in 1H2011. This due to higher coal prices which resulted in methanol average cost of sales being 29% higher than 1H2010. Methanol average selling prices only increased 18%. However, if compared against the gross profit margin of methanol in 1Q2011, it has increased approximately 12%, led primarily by the increase in average selling prices by approximately 2%, together with a decline in average cost of sales by approximately 9% due to lower coal prices.

Compound fertiliser

Gross profit margin of compound fertiliser increased from 11% in 1H2010 to 15% in 1H2011. This was mainly due to increase in average selling prices by 22% while cost of sales only increased 17% as the Group had purchased its raw materials before the raw material price increase.

Other income and expenses

Other income and expenses reduced approximately RMB7 million from other income of RMB2 million to other expenses of RMB5 million due mainly to impairment loss in available-for-sale investment by approximately RMB8 million.

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Selling and distribution expenses

Selling and distribution expenses increased by approximately RMB21 million or 109% from approximately RMB19 million in 1H2010 to RMB40 million in 1H2011. This was mainly due to increase transportation costs related to compound fertiliser sales which had increased by about 88k tons. Out of this, about 40k tons of compound fertiliser was exported in 1H2011 as compared to none in 1H2010. Hence, included in selling and distribution expenses were also transportation costs incurred to bring the goods to port, port handling, export tariff and freight costs.

General and administrative expenses

General and administrative expenses increased by approximately RMB13 million or 27% from approximately RMB50 million in 1H2010 to RMB63 million in 1H2011. This was due increase in staff cost due to wage increase in July 2010 and April 2011 and increase in the number of employees for the 4th plant. Consultation expenses also increased due to the expansion in the 4th plant and utilities increased in 1H2011 due to increase in water price and waste treatment price.

Finance costs

Finance costs increased by RMB11 million or 42% from approximately RMB25 million in 1H2010 to RMB36 million in 1H2011. The increase was due to higher interest rates and more interest-bearing loans and borrowings in 1H2011 as compared against 1Q2010.

Income tax expense

Income tax expense decreased by approximately RMB8 million or 39% from approximately RMB21 million in 1H2010 to RMB13 million in 1H2011 due to lower profits.

Net profit attributable to owners of the Company

The net profit attributable to owners of the Company decreased by approximately RMB48 million or 50% from RMB98 million in 1H2010 to RMB50 million in 1H2011. This was mainly due to the increase in other expenses, selling and distribution expenses, general and administrative expenses and finance costs by approximately RMB7 million, RMB21 million, RMB13 million and RMB11 million respectively.

Quarterly performance review

Net profits increased RMB6 million in 2Q2011 when compared to 2Q2010. This was mainly due to increase in gross profits by approximately RMB60 million due to increase in compound fertiliser sales volume by approximately 144%. This was due to only 1 plant being shut down for maintenance purposes in 2Q2011 as compared to all 3 plants being shutdown in 2Q2010. However, operating expenses such as other expenses, selling and distribution expenses, general and administrative expenses and finance costs increased by approximately RMB13 million, RMB22 million, RMB11 million and RMB7 million respectively.

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(ii) FinanCiaL reView

Gearing

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group’s policy is to keep the gearing ratio below 90%.

Due to related companies Trade payables Bills payable Accruals and other payables Interest-bearing bank and other borrowings Less: Cash and cash equivalents Less: Pledged deposits Net debt Shareholders’ equity Less: Statutory reserve fund Total capital Capital and net debt Gearing ratio	30 June 2011 RMB’000 (Unaudited) 627 43,129 19,000 258,784 1,468,000 (309,118) (29,000) 1,451,422 1,608,704 (117,269) 1,491,435 2,942,857 49.3%	31 December 2010 RMB’000 (Audited) 723 40,152 37,500 265,049 1,223,411 (162,773) (18,780) 1,385,282 1,589,490 (110,678) 1,478,812 2,864,094 48.4%

The Group includes within net debt, loans and borrowings, trade and other payables, other liabilities, less cash and cash equivalents. Capital includes equity attributable to the equity holders of the parent less the above-mentioned restricted statutory reserve fund.

Loans

Amount payable in one year or less, or on demand

	as at 30/6/2011	as at 30/6/2011	As at 31/12/2010	As at 31/12/2010
	secured	Unsecured	Secured	Unsecured
	RMB’000	RMB’000	RMB’000	RMB’000
	**(Unaudited) **	(Unaudited)	(Audited)	(Audited)
Bank loans	90,000	355,000	30,000	170,000

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Amount payable after one year

as at 30/6/2011 secured Unsecured RMB’000 RMB’000 (Unaudited) (Unaudited) Bank loans – 1,013,000 Loan from government – 10,000 – 1,023,000	As at 31/12/2010 Secured Unsecured RMB’000 RMB’000 (Audited) (Audited) 90,000 923,000 – 10,411 90,000 933,411	As at 31/12/2010 Secured Unsecured RMB’000 RMB’000 (Audited) (Audited) 90,000 923,000 – 10,411 90,000 933,411
		933,411

Details of guarantee

As at 30 June 2011, the Group has total of RMB90.0 million short-term loans (31 December 2010: RMB30.0 million short-term loans and RMB90.0 million long-term loans) guaranteed by Xinxiang Xinya Paper Group Ltd, an independent third party.

(iii) PrOsPeCts

Due to inflationary pressure, our raw material and average selling prices for urea increased in 1H2011 as compared against 1H2010. Unfortunately, urea margins declined as coal prices increased more than the increase in urea prices. However, given the third quarter is the seasonal peak for urea and especially compound fertiliser, we believe that the profitability in 3Q2011 should be better than 2Q2011.

We already noted moderate recovery in urea gross margins for 2 consecutive quarters from 4Q2010 to 2Q2011 due to increase in urea prices and a decrease in coal prices. We are hopeful for coal prices to be stable with the reopening of small mines after consolidation. We also expect urea prices to remain strong in 3Q11 due to the export window that will open in the third quarter.

Methanol prices in FY2011 are expected to be better than FY2010 due to higher oil prices and better demand from the downstream industries such as the Dimethoxyethane (DME) industry. The use of methanol as a fuel additive should also boost demand in FY2011.

We expect compound fertiliser demand to grow in 2011 as farmers become more sophisticated and increasingly adopt more balanced application of chemical fertilisers. We expect the third quarter of 2011 to continue to be the seasonal peak for compound fertiliser.

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(iV) sUPPLeMentarY inFOrMatiOn

1. reconciliation between sFrss and international Financial reporting standards (“iFrss”)

For the six months ended 30 June 2011, there were no material differences between the consolidated financial statements of the Group prepared under SFRSs and IFRSs (which include all IFRS, International Accounting Standards and Interpretations).

2. Operational and Financial risks

(i) Market risk

The major market risks of the Group include changes in the average selling prices of key products, changes in the costs of raw materials (mainly coal) and fluctuations in interest and exchange rates.

(ii) Commodity Price risk

The Group is also exposed to commodity price risk arising from fluctuations in product sale prices and costs of raw materials.

(iii) interest rate risk

The major market interest rate risk that the Group is exposed to includes the Group’s long-term debt obligations which are subject to floating interest rates.

(iv) Foreign exchange risk

The Group’s revenue and costs are primarily denominated in RMB. Some costs may be denominated in Hong Kong dollars, United States dollars or Singapore dollars.

(v) inflation and Currency risk

According to the data released by the National Bureau of Statistics of China, the consumer price index of the PRC increased by 5.4% in the six months ended 30 June2011 as compared to an increase of 2.6% in the same period in 2010. Such inflation in the PRC did not have a significant effect on the Group’s operating results.

(vi) Liquidity risk

The Group monitors its risk exposure to shortage of funds. The Group considers the maturity of both its financial investments and financial assets (e.g., trade receivables and other financial assets) and projected cash flows from operations. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts and bank loans. As at 30 June 2011, approximately RMB445 million (31 December 2010: RMB200 million), or 30.3% (31 December 2010: 16.3%) of the Group’s debts will mature in less than one year based on the carrying value of the borrowings reflected in the financial statements.

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(vii) Gearing risk

The Group monitors its capital ratios in order to support its business and maximise shareholder value. The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may raise new debt or issue new shares. No changes were made in the objectives, policies or processes for managing capital in 2010 and 2011. The gearing ratio of the Group as at 30 June 2011 (calculated as net debt divided by total capitalisation plus net debt) was 49.3%, representing a decrease of 0.9% as compared to 31 December 2010. As at 30 June 2011, the Group had no pledge of non-current assets.

3. Contingent Liabilities

As at 30 June 2011, the Group has no material contingent liabilities (2010: Nil).

4. Material Litigation and arbitration

As at 30 June 2011, the Group was not involved in any material litigation or arbitration.

5. audit Committee

The audit committee of the Company (the “ audit Committee ”) has reviewed the accounting principles and standards adopted by the Group, and has discussed and reviewed the internal control and reporting matters. The interim results for the six months ended 30 June 2011 have been reviewed by the Audit Committee.

6. Compliance with the Code on Corporate Governance Practices

The Company devotes to best practice on corporate governance, and has complied with the code provisions of the Code on Corporate Governance Practices as set out in Appendix 14 of the Rules Governing the Listing of Securities on the SEHK (the “ Listing rules ”) for the six months ended 30 June 2011.

7. Compliance with the Model Code for securities transactions by directors of Listed issuer

The Board has adopted the Model Code for Securities Transactions by Directors of Listed Issuer (the “ Model Code ”) as set out in Appendix 10 of the Listing Rules and its amendments from time to time as its own code of conduct regarding securities transaction by the Directors. The Board confirms that, having made specific enquiries with all Directors, during the six months ended 30 June 2011, all Directors have complied with the required standards of the Model Code.

8. Purchase, sales or redemption of the Company’s securities

For the six months ended 30 June 2011, neither the Company nor its subsidiary has purchased, sold or redeemed any of the securities of the Company.

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9. employees and remuneration Policy

As at 30 June 2011, there were 3,477(2010: 3,302) employees in the Group. Staff remuneration packages are determined in consideration of market conditions and the performance of the individuals concerned, and are subject to review from time to time. The Group also provides other staff benefits including medical and life insurance, and grants discretionary incentive bonuses and share options to eligible staff based on their performance and contributions to the Group.

10. disclosure on the website of the sehK

This announcement shall be published on the website of the SEHK (http://www.hkex.com.hk) and on the website of the Company (http://www.chinaxlx.com.sg) in due course.

By Order of the Board China XLX Fertiliser Ltd. Yan Yunhua Executive Director and Chief Financial Officer

Singapore, 3 August 2011

As at the date of announcement, the executive Directors are Mr. Liu Xingxu, Ms. Yan Yunhua and Mr. Li Buwen; and the independent non-executive Directors are Mr. Ong Kian Guan, Mr. Li Shengxiao and Mr. Ong Wei Jin.

• for identification purpose only

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