Businessweek

Changda International Holdings, Inc. engages in developing, manufacturing, and selling microbial organic and inorganic compound fertilizers, and chemical products primarily consisting of snow melting products in the People’s Republic of China (the PRC). The company has approximately 10 fertilizer product lines. Its proprietary product lines are marketed and sold to distributors, which in turn sell its products to farmers. FERTILIZER PRODUCTS The company’s organic and inorganic fertilizer products are classified in various categories, such as complex fertilizers, compound fertilizers, and slow-release compound fertilizers. Complex Fertilizers: These fertilizers contain two or three of the primary nutrients of nitrogen, phosphorus, and potassium and are made by a process involving chemical reactions between raw materials and intermediates. Compound Fertilizers: These fertilizers are produced by initiating chemical reactions between the three primary nutrients of nitrogen, phosphorous, and potassium during the production process. The company has expanded its product offerings to include a microbial organic-inorganic compound fertilizer, which helps plants secure nitrogen from the air; facilitates plants’ absorption of useful minerals, such as phosphorus and potassium from the soil; and improves stress resistance by the plants. The combination of the organic and inorganic elements improves soil fertility and crop yield. Slow-Release Compound Fertilizer: This group of fertilizers allows fertilizer nutrients to be released over a period of time, enabling plants to absorb majority of the nutrients and improve yield rate. The company has also developed controlled-release fertilizers. Customers, Sales, and Distribution The company distributes its fertilizer products to farmers through various distribution centers of China Post Logistics (Shandong) Limited, a subsidiary of the China Postal Service, or China Post, which provides postal services in the PRC. Its other distribution channels include agricultural goods wholesalers and other countryside goods suppliers, such as Shandong RuiFuYuan Agricultural Materials Chains Co., Ltd. The company also supplies geographically limited franchise–type distributors in three different cities located in the PRC. In Japan, its wholesale distribution partner is Seiwa Fertilizer Ind. Co. Ltd. Seasonality of Sales The company experiences seasonal variations in its revenues and its operating costs due to the farming season. The peak selling seasons for its fertilizer products are the first, second and fourth quarters of the year ended December 31, 2011. These periods are the planting and crop-growing months, which boost fertilizer sales. The third quarter of the year is harvest season, hence the low demand for its fertilizer products. The peak selling seasons for the company’s chemical products have been typically the first and fourth quarters of the year, which are the winter season in China when there is strong demand for deicing salt, calcium chloride and salt. The third quarter of the year is typically its slowest due to the low demand for its chemical products. During the fiscal year ended December 31, 2011, approximately 76% of the company’s annual chemical sales volume occurred in the first, second, and third fiscal quarters. This unusual change in the chemical sales pattern was primarily a result of the substantial increase in the sales of the new flame retardant product during the first through the third quarters. Suppliers The company’s supplier is Haihua Potassium Sulfate Co., Ltd. CHEMICAL PRODUCTS Products The company’s principal chemical products are snow melting agents, flame retardant, and various other industrial chemicals. Snow melting agents are de-icing salt, consisting of a combination of sodium chloride, calcium chloride, magnesium chloride and additives in varying levels for different customer segments and uses. The snow melting agents are a white, odorless and soluble solid compound and are used primarily to de-ice airports, roads and golf courses in the winter seasons, spread by winter service vehicles. The company’s industr