WEIFANG, Shandong, China, Nov. 13 /Xinhua-PRNewswire-FirstCall/ -- Shengtai Pharmaceutical, Inc. (“Shengtai” or “the Company”), a leading manufacturer and distributor of high-quality, pharmaceutical grade glucose products in China, today reported financial results for the first quarter of fiscal 2009 ended September 30, 2008.
“Sales of our cornstarch and glucose products during the first quarter were impacted by the events of the Beijing Olympics. Our cornstarch products sales to the food and beverage industry were disrupted, as the Chinese government placed multiple restrictions on manufacturing and transportation during the weeks leading up to the events in August in an effort to reduce pollution,” said Mr. Qingtai Liu, Shengtai Pharmaceutical’s CEO. “However, we believe these events are temporary in nature and do not pose a long-term challenge to our operations. In the coming quarters, we expect a gradual recovery of the food and beverage industry. Moreover, the recent restructuring of the international sales team will position us to take advantage of opportunities in targeted overseas markets. The international sales team recently attended the Guangzhou International Fair and presented Shengtai’s products. The response from potential customers was positive and we are encouraged by this positive feedback.”
First Quarter Fiscal 2009 Financial Results
First quarter 2009 revenues were $18.12 million, a 6.4% decrease year- over-year compared to the $19.37 million reported in the first quarter of fiscal 2008. Sales of glucose products totaled $8.2 million during the first quarter as it accounted for 45.3% of sales. Cornstarch sales for the quarter totaled $5.2 million or 28.6% of revenues. Sales of other products totaled $4.7 million or 26.1% of revenues.
Gross profit for the three months ended September 30, 2008 was $3.19 million compared with $4.59 million the same period last year. Gross margin was 17.6%, a decline from 23.7% in the first quarter of fiscal 2008. The decline in gross margin in the first quarter was primarily driven by a decrease in the sales of our cornstarch products. We also experienced an increase in competition in the market for cornstarch, which lowered the average selling price of our cornstarch products.
Selling, general and administrative (SG&A) expenses for the three months ended September 30, 2008 were $2.43 million, an increase of $733,235 compared with the same period last year. The increase in selling, general and administrative expenses was partly the result of higher labor cost and increased in bad debt expenses. In addition, the Company incurred higher administrative expenses such as stock-based compensation and other professional fees as a publicly listed company. Non-cash stock option expenses totaled $158,818 during the 2009 fiscal first quarter.
First quarter 2009 net income was $629,796 or 3 cents per diluted share, compared to first quarter 2008 net income of $2.25 million or 11 cents per diluted share.
Financial Condition
As of September 30, 2008, Shengtai Pharmaceutical had cash and restricted cash totaling $7.19 million. The Company generated $2.46 million in positive cash flow from operations during the first quarter. The Company’s short-term debt totaled $21.74 million and long-term debt totaled $2.27 million. The Company’s total shareholders’ equity increased to $47.71 million.
Business Outlook
Based on its current outlook, and existing and anticipated business conditions, Shengtai expects net income for the fiscal year ending June 30, 2009 to grow by approximately 20%. Mr. Qingtai Liu, Shengtai Pharmaceutical’s CEO commented, “Over the past few years, due to our production capacity constraint, we were unable to meet the demand from our customers. With the new facility opened in October 2008, we have the ability to meet the growing demand for our pharmaceutical grade glucose products. We continue to improve our product mix, and focus on higher-margin sustainable pharmaceutical grade glucose products sales. The recently announced stimulus package by the Chinese government came just in time to bolster the healthcare market growth. As one of only three licensed dextrose monohydrate glucose manufacturers, with nearly a 40% share of the existing market in China, we already enjoy a high barrier of entry and a well-established reputation with our customers. With all these favorable elements, we are confident that we will achieve continuous growth in fiscal year 2009.”
“The $586 billion stimulus package announced by the Chinese government should help to stabilize the overall domestic economy. The stimulus package should improve the nation’s healthcare system by increasing healthcare-related spending in the urban markets, in community clinics as well as medical insurance establishments in rural areas. We stand to benefit as the government invests to open up potentially bigger and untapped rural end- markets,” Mr. Liu concluded.
The approaching winter months are normally the high season for cold and flu. Management expects to see an increase in the demand for the Company’s pharmaceutical graded glucose products. In China, IV drips are widely used in hospitals to treat the symptoms of cold and flu. Management also believes that cornstarch inventories in the marketplace are decreasing, a favorable condition which may lead to higher average selling prices of cornstarch going forward. The Company believes the sales of pharmaceutical grade glucose and cornstarch products will benefit from these trends in the coming quarters.
Conference Call
The Company will host a conference call and webcast on Friday November 14, 2008 at 9:00 A.M. Eastern Standard Time / 10:00 P.M. Beijing Time. A question and answer session will follow management’s presentation. Mr. Qingtai Liu (Chief Executive Officer), Ms. Melody Shi (Chief Financial Officer), and Ms. Michelle Wang (Investor Relations Manager) will be the primary speakers on the call.
To participate, please call the following numbers ten minutes before the call start time:
A live webcast of the conference call will be available on the Investor Relations page of Shengtai Pharmaceutical’s web site at http://www.shengtaipharmaceutical.com . Please visit the Web site at least 15 minutes early to register for the webcast and download any necessary audio software.
A replay of the call will be available through Friday, November 21, 2008, at 11:59 P.M. Eastern Standard Time. For the replay, please call:
About Shengtai Pharmaceutical, Inc.
Shengtai Pharmaceutical, Inc. through its wholly owned subsidiary, Shengtai Holding, Inc. (SHI), a New Jersey corporation, and the Chinese operating company of Weifang Shengtai Pharmaceutical Co., Ltd., is a leading manufacturer and supplier of pharmaceutical grade glucose used for medical purposes. It also manufactures and supplies glucose and cornstarch products to the food, beverage and industrial production industries in China. For more information about Shengtai Pharmaceutical, Inc., please visit http://www.shengtaipharmaceutical.com .
Forward-looking Statements
Certain statements made in this news release, may contain forward-looking statements concerning the Company’s business and products. These statements include, without limitation, statements regarding our ability to prepare the Company for growth, the Company’s planned capacity expansion in 2008 and predictions and guidance relating to the Company’s future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs, but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the pharmaceutical industry, pricing and demand trends for the Company’s products, changes to government regulations, risk associated with operation of the Company’s new facilities, risk associated with large-scale implementation of the Company’s business plan, the ability to attract new customers, ability to increase its product’s applications, cost of raw materials, downturns in the Chinese economy, and other information detailed from time to time in the Company’s filings and future filings with the United States Securities and Exchange Commission. Investors are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations.
CONTACT: Shengtai Pharmaceutical, Inc. - Ms. Yiru Melody Shi, Chief
Financial Officer, +1-949-468-7078, or shengtaicfo@hotmail.com; Grayling
Global - Eddie Cheung of Investor Relations, +1-646-284-9414, or
echeung@hfgcg.com
Web site: http://www.shengtaipharmaceutical.com/
