Mr. Li Weiruo, the Chairman of the Group said, “The turnover and profit of the Group were lower than that of last year, mainly because the major manufacturing locations and target market of the Group, Sichuan Province and its peripheries, encountered the most severe drought within the past 50 years in 2006, which led to the decrease in peasants’ incomes and consumption capability. In addition, the severe drought also resulted in reduction of hydroelectric power and shortage of fuel supply, so that the Government limited the electricity supply for the use of industry. The above factors led to the standstill of machineries of approximately 11,630 units/hour and reduction of production of ammonium compound of approximately 8,720 tonnes. Moreover, the provision on employees’ stock option was approximately RMB4,000,000 which further decrease the profit for the year ended 31st December 2006.”

“Although such severe natural disaster is rare, we still need to be well prepared for it. For example, in order to minimize negative effect of natural disaster, we are expanding overseas market shares proactively.” Mr. Li continues.

From January to September 2006, the Group has exported a total of approximately 25,600 tonnes of complex fertilizers. Complex fertilizers are mainly exported to Southeast Asia countries, such as Thailand, Vietnam, Malaysia, Indonesia and Philippines etc.

Calculating based on the crop demand per capita raised by Food and Agriculture Organization of the United Nations, which is 400 kg, by year 2010, the crops demand will reach around 550,000,000 tonnes and the crops production per unit shall increase by 20%, which will still drive the increase of demand for fertilizers. “Communist Party of China Central Committee’s Policies and Advices on Development of Modern Agriculture and Promotion of Socialist New Rural Village Construction” ( 中共中央國務院關於積極發展現代農業扎實推進社會主義新農村建設的若干意見) was announced on 29th January 2007, which was the forth No.1 document about “San Nong” (「三農」) released by Communist Party of China Central Committee since 2004. The document would be the strong motive force for the increase of the production amount and peasant’s income, improvement of comprehensive agricultural production capability, healthy agricultural development and long-term rural development. It was clearly pointed out in the decision of the Ministry of Agriculture: 100,000,000 peasants would be provided with free technology services for testing soil to prescribe and apply suitable fertilizers in 2007, the area coverage of the application of testing soil would be 760,000,000 acreage.

“With the positive macro policies, rural economy, crop production and peasants income would continue to increase steadily in 2007, which would definitely have a positive impact on the need of fertilizers, and create a favorable environment for the business growth of the Group. We will seize these positive factors to further strengthen its leading position in the industry.” Mr. Li concluded.

About Ko Yo Ecological Agrotech (Group) Limited (Stock Code: 8042)

Ko Yo Ecological Agrotech (Group) Limited is principally engaged in R&D and sales of chemical fertilizers, such as BB Fertilizers, urea, ammonium chloride, ammonium bicarbonate, and chemical products including sodium carbonate and ammonia. The Group’s four production bases are located in Sichuan and Shandong, which are awarded ISO9001: 2000 Quality Certifications and ISO 14000:1996 certificate in recognition of its achievement in attaining the standard for the Group’s environmental management system. The Group’s sales network covers 20 provinces and 4 autonomous regions and it has successfully explored the overseas market.

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