China XLX Fertiliser : ANNOUNCEMENT OF UNAUDITED BUSINESS UPDATE FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2019

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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)

ANNOUNCEMENT OF UNAUDITED BUSINESS UPDATE

FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2019

The board of directors (the "Board") of China XLX Fertiliser Ltd. (the "Company") hereby announces the unaudited business update of the Company and its subsidiaries (the "Group") for the nine months ended 30 September 2019 ("9M2019") and the three months ended 30 September 2019 ("3Q2019").

The unaudited consolidated revenue of the Group for 9M2019 was approximately RMB7,035 million, which remained stable as compared against approximately RMB7,083 million for the nine months ended 30 September 2018 ("9M2018"). The unaudited consolidated revenue of the Group for 3Q2019 decreased by approximately 9.9% to approximately RMB2,239 million from approximately RMB2,484 million for the three months ended 30 September 2018 ("3Q2018")

The unaudited consolidated net profit of the Group decreased by approximately 25% to approximately RMB412 million for 9M2019 from RMB552 million from 9M2018. For 3Q2019, the unaudited consolidated net profit of the Group decreased by approximately 50% to approximately RMB95 million as compared against that of 3Q2018.

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The Group's main products, urea and compound fertiliser continued to contribute profit growth for 9M2019. Nevertheless, the decrease in the Group's unaudited net profit for 9M2019 was mainly due to: (1) the decrease in the average selling price of melamine and dimethyl ether ("DME") of 28% and 22% respectively year on year ("YoY"). In 2019, international economic environment has been rapidly changing and China domestic consumption remained weak; we have seen a decline in China's export of chemical products. These factors have negatively impacted the domestic chemical products market, lowering average selling prices and profit margin of melamine, DME and methanol (2) the increase in general administrative expenses of approximately RMB166 million YoY, which comprised mainly the increase in staff costs by RMB65 million, depreciation by RMB34 million, environment safety expenses by RMB10 million, research and development expenses by RMB9 million and staff training cost by RMB7 million. The increase in staff costs and staff training cost were mainly due to the increase in production staff and management team for the Jiang Xi production base and the relocation project of the Group's Xinxiang production facilities. The increase in environment safety expenses and research and development expenses was the result of the Group's continued development of high efficient fertilisers and increase of production scale.

The decrease in the Group's unaudited net profit for 3M2019 of approximately 50% YoY was due mainly to the annual maintenance of the Production Plant III and the reduction of average selling price of the petrol chemical products such as melamine and DME.

UREA

Revenue derived from the sales of urea decreased by approximately 1.1% YoY to approximately RMB2,677 million for 9M2019 due mainly to a decrease in the sales volume of urea of approximately 4.2% YoY to approximately 1,520,000 tons. This resulted from the closure of Plant I during the relocation of the Group's Xinxiang production facilities in 9M2019.

Gross profit margin of urea of the Group increased to approximately 30.2% in 9M2019 from approximately 29% in 9M2018. The increase was mainly due to a higher percentage of 50% of high efficient fertiliser sold for 9M2019 as compared to the 43% sold for 9M2018 and an increase in the average selling price of urea by approximately 3.2%.

COMPOUND FERTILISERS

Revenue derived from the sales of compound fertilisers increased by approximately 4.9% YoY to approximately RMB2,337 million for 9M2019, due mainly to the increase in average selling price by approximately 5.6% as a result of a higher percentage of high-efficient fertilisers sold. The sales volume of compound fertilisers remained relatively stable at 1,115,000 tons for 9M2019.

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Gross profit margin of compound fertilisers of the Group increased to approximately 15.4% in 9M2019 from approximately 13.4% in 9M2018. The increase was mainly due to the increase in average selling price of approximately 5.6% YoY.

METHANOL

Revenue derived from the sales of methanol decreased by approximately 84% YoY to approximately RMB54 million for 9M2019, mainly because the Group chose to further process methanol products into dimethyl ether products which enjoyed a higher profit margin. As a result, sales volume of methanol decreased by 80.1% to 28,000 tons for 9M2019. In line with the weakened international energy prices, average selling price of methanol decreased by 20% YoY.

Gross profit margin of methanol of the Group decreased to approximately 1.7% in 9M2019 from approximately 15% in 9M2018, mainly due to the declined in the average selling price and reduced scale of production.

DIMETHYL ETHER (DME)

Revenue derived from the sales of DME decreased by approximately RMB99 million or 12.8% from approximately RMB775 million for 9M2018 to RMB676 million for 9M2019. The decrease was due mainly to a decrease in the average selling price of DME by 21.8% YoY which was in line with the weakened international energy prices. The impacts of the decrease in DME price was partially offset by an increase in the sales volume of 11.5% YoY to 236,000 tones.

As a result of the decrease of average selling price of DME, the gross profit margin decreased from 24% in 9M2018 to 6.8% in 9M2019.

MELAMINE

Revenue derived from the sales of melamine increased by approximately RMB136 million or 37.1% from approximately RMB365 million for 9M2018 to RMB501 million for 9M2019 mainly due to the increase in sales volume by 81%. In July 2018, the Group's melamine project Phase II in Xinjiang Plant V with an annual production capacity of 60,000 tons successfully commenced operation, enabling the Group's total annual melamine production increase to 120,000 tons. The increase in sales volume was partially offset by a decrease in average selling price of melamine by approximately 24.2% YoY.

Gross profit margin of melamine decreased from approximately 53.8% in 9M2018 to 36.2% in 9M2019. This was due mainly to the decrease in the average selling price.

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FURFURYL ALCOHOL

Revenue derived from the sales of furfuryl alcohol decreased by approximately RMB100 million or 24.4% from approximately RMB411 million for 9M2018 to RMB311 million for 9M2019. The decrease was mainly due to the decrease in the average selling prices of furfuryl alcohol by approximately 31% YoY as a result of the oversupply in the market. This was partially offset by the increase in sales volume of approximately 9.6% YoY to approximately 33,000 tons for 9M2019.

Gross profit margin of furfuryl alcohol increased from approximately 9.1% in 9M2018 to 10.7% in 9M2019. This was due mainly to (1) the decline in cost of raw materials and (2) reduction of wastage of raw materials during production through research and development.

Despite the challenging macro-economic environment, the Group will continue to steadfastly implementing low cost and product differentiation strategy to further increase sale of high-efficient fertilisers, hence elevate the Group's competitiveness in the market. Furthermore, the Group will leverage on our coal gasification production competitive advantage to further increase its product offerings. The Group is able to flexibly adjust the fertiliser and chemical product mix according to changing market conditions, hence improving overall profitability and its ability to withstand market volatility.

By Order of the Board

Liu Xingxu

Chairman of the Board

22 November 2019

As at the date of this announcement, the executive directors of the Company are Mr. Liu Xingxu, Mr. Zhang Qingjin and Ms. Yan Yunhua; the independent non-executive directors of the Company are Mr. Ong Kian Guan, Mr. Li Shengxiao, Mr. Ong Wei Jin and Mr. Li Hongxing; and the non- executive director of the Company is Mr. Zheng Jiaqi.

* for identification purpose only

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