In 2009, global fertilizer consumption was dampened by the international financial crisis and the downturn in the prices of agricultural products substantially affected the demand for fertilizers, which resulted in an overall weak and sluggish fertilizer market. The oversupply of fertilizer also went from bad to worse in the Chinese fertilizer market as production capacity continued to expand rapidly. According to statistics, China’s annual fertilizer output reached 67.06 million tons (converted to 100% nutrients), up by 16% from the previous year, and the output of nitrogen, phosphate and potash fertilizers increased by 14%, 22% and 24%, respectively. Restricted by a high export tax and a relatively weak international market, China’s exports of nitrogen and phosphate fertilizers fell sharply, exacerbating the oversupply situation in the domestic market. Statistics also show that China’s annual production capacity of nitrogen and phosphate fertilizers was 20% and 50% respectively in excess. The potash market was also oversupplied because of increased domestic production capacity and imported potash inventory carried over from the previous year. Consequently, nitrogen, phosphate and potash fertilizer prices experienced the biggest fall from the peak in 2008, decreasing by 42%, 53% and 50% respectively.
Facing these severe adversities, the Company endeavored to bring the advantages of our integrated business model-strengthened efforts in customer relationship management, market development, and marketing and sales services-into full play. Even though sales volume for the year was 15.23 million tons, falling 6.07% since 2008, we still maintained leading status as the largest fertilizer distributor and service provider in China.
The Company made great efforts to ensure market supply by strengthening both domestic and overseas supplier systems and taking full advantage of its extensive distribution network. The Company actively pushed forward the integrated operations of various agricultural inputs, and achieved continuous progress in promoting “one-stop shopping” services with enriched product mix covering fertilizers and pesticides. In addition, our integrated distribution and service platform have been improved and strengthened.
The Company focused on the implementation of low-cost strategy for sustainable growth by carrying out lean management and technological innovations to bring down energy consumption. Its production subsidiaries performed better than the industry average, and the company was still able to further reduce their energy consumption and maintain safe production. The Company adhered to the principle of “safety first, prevention first, and comprehensive harnessing” to improve its Health, Safety and Environment (HSE) management systems, and actively implemented responsibility systems for both safety and energy conservation at all levels.
To overcome these severe challenges, the Company paid greater attention to the security of shareholders’ assets by improving internal control and management by adhering to a sound financial policy, actively expanding financing options, and maintaining a balanced financing structure to meet its capital requirements. The Company also continuously made efforts to fully utilize financing resources both domestically and abroad, to optimize capital structure in order to bring down financing costs, and to actively implement total risk management.
The Company’s capital input for technological innovation continues to increase. Its subsidiaries and affiliated enterprises invested a total of RMB 180 million in technological innovations and transformation in 2009. The Company established a Technology Management Committee to coordinate its R&D and technological transformation efforts. In 2009, the Company made nine new patent applications and was awarded three patents.
The Company made great efforts to optimize its agrichemical service system that focused on “the agrichemical dissemination system, the field service and support system, and the soil testing and formulated fertilization service system”. It conducted frequent agrichemical lectures and seminars, field instructions, formulated fertilization, etc.  Meanwhile, the Company responded to the central government’s call to support agricultural development by actively participating in technological service programs initiated by the Ministry of Agriculture and directly serving “the agricultural sector, the rural areas and the farmers”.
In 2010, Sinofert will grasp the opportunities of further deepening the development strategy of “centering on marketing and distribution, and expanding into both production and network distribution”. The Company will continue to consolidate its industrial base and enhance the competitiveness of its products; take advantage of exploring new marketing models based on its extensive distribution network; and enrich its product mix by implementing the integrated operations of various agricultural inputs and increasing the comprehensive value of its distribution network. The Company will also bring the advantages of integrated development into full play, and will continuously increase its market share and strengthen its leading market position. The Company is committed to creating value for its shareholders and wealth for society, which requires the company to play a greater role in ensuring China’s food security and serving China’s agricultural development.

Du Keping
CEO, Sinofert Holdings Limited