WEIFANG, China, Nov. 15 /Xinhua-PRNewswire-FirstCall/ -- Shengtai Pharmaceutical, Inc. (“Shengtai Pharmaceutical” or “the Company”), a leading manufacturer and distributor of high-quality, pharmaceutical grade glucose products in China, today reported financial results for the three months ended September 30, 2007.
First Quarter of Fiscal 2008 Results
For the first quarter of fiscal 2008, net revenues increased 82.8% to $19.4 million from $10.6 million in the first quarter of fiscal 2007. This increase was largely due to increased sales of glucose and as well as higher product selling prices. In addition, sales of excess cornstarch produced from the Company’s own cornstarch manufacturing facility and sold to customers comprised 31.2% of total revenue for the reporting period.
“We had a good start to our business operations for the fiscal year of 2008,” said Chairman and CEO, Mr. Qingtai Liu. “Both our revenues and net income are growing dramatically due to strong market demand, and as we benefit from our strategy of becoming vertically integrated, to focus on achieving operating efficiencies and introducing higher-value products.”
Gross profit for the three months ended September 30, 2007 was $4.6 million, an increase of 88.3% from $2.4 million for the same period of the prior year. Gross profit margin was 23.7%, a slight improvement from 2006. The improved gross profit was mostly due to economies of scale resulting from the expansion of production output and enhanced operating efficiencies. An increase in raw material prices resulted in higher production costs, but the increase in selling prices were however, higher than the increase in raw material prices.
Selling, general and administrative expenses for the three months ended September 30, 2007 were $1.7 million, an increase of $0.7 million, or 74.6% compared with the corresponding period in 2006. The increase in selling, general and administrative expenses was the result of the expansion of the Company’s production output, but especially the strengthening of its domestic sales network. The costs associated with being a public company and higher worker insurance requirements and environment related expenditures also contributed to the increase.
Shengtai Pharmaceutical’s operating income in the three months ended September 30, 2007 increased 97.4% to $2.9 million from $1.5 million in the prior year, while the operating margin increased to 15.0% from 13.8%.
Net income for the three months ended September 30, 2007 was $2.3 million, an increase of $0.8 million, or 51.8% compared with the corresponding period in 2006. The increase in net income was due to higher selling prices, sales volumes, as well as the sale of new, higher margin new products. Weighted average diluted earnings per share were $0.11 for the three months ended September 30, 2007, compared to $0.15 for the three months ended September 30, 2006. The higher share count in the first fiscal quarter of 2008 was due to a private placement of stock in May 2007.
Financial Condition
As of September 30, 2007, Shengtai Pharmaceutical had cash and restricted cash of $4.0 million and working deficit of $11.0 million. During the three months ended September 30, 2007, the Company generated $4.3 million in cash flow from operations. As of September 30, 2007, the Company had $36.3 million in total debt, and $34.3 million of shareholders’ equity.
Business Outlook
Shengtai Pharmaceutical began to decrease purchases of cornstarch from its outside supplier, Shouguang Shengtai, since January 2007, when its new 240,000 ton annual capacity plant started production. The Company was fully self- sufficient in so far as it relates to its cornstarch supply beginning in the past quarter. This has allowed the Company to reduce its raw material shipping costs, and has resulted in lower manufacturing costs. During calendar year 2007, approximately 50% of the new cornstarch production plant’s output will be used as raw materials for the Company’s own glucose production, and the rest of output will be sold to customers in the food and beverage, pharmaceutical and industrial industries.
After acquiring the rights to use 85,880 square meters of new land in Changle Economic and Technology Development Zone in April 2007, Shengtai Pharmaceutical set up to develop the land and build a new glucose production complex with an expected production capacity of 150,000 tons per year. The manufacturing plant’s machines will be equipped with state-of-the-art technology, and the quality of glucose produced will, the Company believes, be able to match that produced in the rest of the world. The Company commenced construction in early July 2007 and expects construction to be completed in the first half of calendar year 2008.
The Company’s existing glucose production facility which has annual capacity of 60,000 tons has been operating at full capacity and has been insufficient to meet the strong market demand. Therefore, the Company began a capacity upgrade of its existing facility to more than 90,000 tons from October 2006 which is expected to be completed in May 2008.
“The research and development team has been very active in improving our production techniques, and in developing new technologies and higher value- added products such as sodium gluconate and Avermectins, which have higher profit margins. We anticipate that from this, along with our increasing capacity utilization, should result in expanding profit margins over the next several years,” commented Mr. Zhang, the Company’s Chief Financial Officer.
Teleconference Information
The conference call will take place at 8:00 a.m. Eastern (U.S.) time on Thursday, November 15, 2007. Anyone interested in participating should call 888-419-5570 if calling from within the United States, or 617-896-9871 if calling internationally; the passcode is 17815721.
There will be a replay available until November 22, 2007. To listen to the playback, please call 888-286-8010 if calling within the United States, or 617-801-6888 if calling internationally. Please use passcode 96335341 for the replay.
About Shengtai Pharmaceutical, Inc.
Shengtai Pharmaceutical, Inc. through its wholly-owned subsidiary Shengtai Holding, Inc. (SHI), a New Jersey corporation, and the holding company for Weifang Shengtai Pharmaceutical Co., Ltd., is a leading manufacturer and supplier of glucose products, which include pharmaceutical grade glucose used for medical purposes, and glucose and cornstarch products for the food and beverage industry and for industrial production in China. For more information about Shengtai Pharmaceutical, Inc. please visit http://www.shengtaipharmaceutical.com .
Safe Harbor Statement
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release and oral statements made by the Company, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our ability to prepare the company for growth, the Company’s planned capacity expansion in 2007 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.
-- Financial Tables Follow --
shengtaicfo@hotmail.comcrocker.coulson@ccgir.com
CONTACT: Company Contact, Mr. Philips Zhang, CFO of Shengtai
Pharmaceutical, Inc., +86-536-629-5728, or shengtaicfo@hotmail.com; or
Investor Relations Contact, Mr. Crocker Coulson, President of CCG Elite
Investor Relations, +1-646-213-1915 (NY Office), or
crocker.coulson@ccgir.com, for SGTI
Web site: http://www.shengtaipharmaceutical.com/
