China XLX Fertiliser (1866.HK; CXLX.SG) says its shares on the Hong Kong Stock Exchange (HKEx) will start trading tomorrow at 9:30 a.m. local time in board lots of 1,000 each. The closing price China XLX Fertiliser on the SGX was 51 cents (HK$2.836) last Friday.

China XLX is one of the leading coal-based urea and compound fertiliser producers in China. Its production capacity of urea was about 1.25 million tonnes per annum as of Sept 30. The company was the largest in Henan Province and the 4th largest among all other coal-based urea producers in China. The production capacities of other main products of the company are 600,000 tonnes for compound fertilisers and 200,000 tonnes for methanol per annum.

For the three years ended Dec 31 2008, the company recorded a revenue of RMB890 million ($181 million), RMB1,541 million and RMB2,085 million respectively, representing a CAGR of about 53% over the period. For the same period, the company’s net profit amounted to about RMB129 million, RMB 268million and RMB 332million respectively, representing a CAGR of about 60%. Urea, the most commonly used nitrogen fertiliser in China, is the company’s major product which accounted for about 55.4% of the total revenue in 2008.

The fertiliser industry of China is highly fragmented with 2,000 manufacturers as of May. Due to the recent Chinese government policies which are favourable to agricultural related industries and the cancellation of price control, the fertiliser industry would experience an industry consolidation and a steady growth in the near future, says China XLX. In addition,  government has implemented limitations on the use of natural gas to produce urea. As it is one of the largest coal-based urea manufacturers in China, China XLX says it could capitalise on the upside trend of the industry and benefit from the potential consolidation.

China is the largest fertiliser producing and consuming country in the world, accounting for about 30% of the world’s total fertiliser consumption. Fertiliser is a necessity due to the lack of arable land. China accounts for only about 7% of world’s arable land to feed nearly 20% of the world’s population.