WEIFANG, China, Sept. 29 /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 record financial results for the fourth quarter and fiscal year ended June 30, 2008.
Fourth Quarter 2008 Highlights
Fiscal Year 2008 Highlights
Mr. Qingtai Liu, Shengtai Pharmaceutical’s CEO, said, “I am very pleased by the progress we have made during fiscal year 2008 towards achieving our long-term goals. Our record annual sales validated the market recognition of our high quality products and our strong sales execution to gain shares in the domestic pharmaceutical grade glucose market. With the completion of our new glucose production facility, we are now able to not only expand our mass production capability for high-quality glucose products, but also leverage our in-house cornstarch production facility to strengthen our cost management.”
Fiscal Fourth Quarter 2008 Financial Results
For the fiscal 2008 fourth quarter, record sales revenue was $25.84 million, a 59% increase as compared with $16.23 million for the same period in 2007.
Gross profit for the fourth quarter of fiscal 2008 was $5.31 million, an increase of 56% as compared with $3.40 million in the same period in 2007. Gross margin was 20.6% for the 2008 fourth quarter as compared with 20.9% for the same period in 2007.
Operating income for the fiscal 2008 fourth quarter was $3.04 million, an increase of 77% as compared with $1.71 million for the same quarter a year ago. The operating margin reached 11.8% in the fourth quarter of 2008 as compared to 10.6% for the same period in 2007.
Net income was $3.14 million, an increase of 38% as compared with net income of $2.28 million in the fourth quarter last year. Net income margin was 12.2% in the fourth quarter of 2008 compared with 14.1% for the same quarter in 2007. The fully diluted earnings per share were $ 0.16, a 23% increase as compared to $ 0.13 for the same quarter a year ago.
Fiscal Year 2008 Results
For the fiscal year 2008 ended June 30th, record net revenues increased 76% to $90.87 million from $51.71 million in fiscal year 2007. The growth in sales was largely due to higher sales of cornstarch and other products including fibers, dextrin, corn embryo, protein powders, and phytin. As the new cornstarch facility gradually reached higher production capacity, the Company increased the sale of cornstarch and other products. Glucose sales remain the same as in FY07, as we have reached full annual production capacity of 60,000 to 90,000 tons. Glucose products still accounted for 38.04% of the total net revenues in FY08. Revenue from exports accounted for approximately 10% of total revenue in FY08.
Gross profit in fiscal year 2008 was $20.26 million, an increase of 66% from $12.18 million a year ago. Gross profit margin was 22.3%, a decline from 23.6% for fiscal year 2007. The gross margin decline was mainly due to higher corn prices and more sales from lower gross margin cornstarch. The new glucose production facility, which was completed at July 2008, with an annual production capacity of 120,000 tons, will increase the Company’s glucose production in the near future. As a result, the majority of cornstarch we produced will be consumed internally, thus improving the gross profit margin in the future.
Selling, general and administrative (SG&A) expenses for the fiscal year ended June 30, 2008 were $7.39 million, an increase of $2.72 million, or 58% compared with fiscal year 2007. The Company incurred higher SG&A expenses as it expanded the domestic sales network. Selling expenses accounted for 4.7% of total revenue in FY08, as compared 5.7% of total revenue in FY07. In addition, the Company also recorded a non-cash stock option expense totaling $317,636 during FY2008. Overall, SG&A expenses accounted for 8.1% of total revenue in FY2008 as compared to 9.0% in FY2007 as the increased spending help generate greater sales revenue.
Operating income increased 71% to $12.87 million from $7.50 million in the prior year. Operating margin during fiscal 2008 was 14.2%, a slight decline when compared with 14.5% from a year ago.
Interest expenses grew from $ 1.27 million in the FY07 to $ 2.45 million in the FY08 reflecting a 92.7% year-over-year increase. The interest expenses growth was mainly due to increased short-term revolving loans and short term notes payables with the local branches of seven national banks.
Tax rate for Shengtai’s China operations in FY08 was 12%, same as in the FY07. As a Sino-foreign joint venture, Shengtai Pharmaceutical enjoyed the 2 year tax holiday and 3 year 50% tax reduction. For FY08, Shengtai was in the fourth year of tax benefit program granted by the government. The prevailing corporate income tax rate in China is now 25%.
Record net income grew 46% to $10.41 million and fully diluted earnings per share were $0.52, compared with $7.15 million, or fully diluted earnings per share of $0.62 in fiscal year 2007. The weighted average number of shares on fully diluted basis increased by 73% to 19,874,486 shares in fiscal year 2008 versus 11,477,545 shares in fiscal year 2007. The disparity between the growth of the amount of net income and that of diluted EPS is due to the increase in the weighted average number of common stock for the purpose of calculating EPS on fully diluted basis, which was caused by the issuance of stocks and warrants in the $17.5 million financing closed in May 2007. The net income margin was 11.5% compared with 13.8% same period last year.
Financial Condition
As of June 30, 2008, Shengtai Pharmaceutical had cash and restricted cash totaled $10.17 million. In fiscal 2008, the Company generated $7.48 million in cash flow from operations as compared to $5.55 million in the same period in FY07. DSO as of FY08 was 30 days as compared to 38 days for FY07. At June 30, 2008, the Company has short-term debt totaled $22.66 million and $2.65 million of long-term debt outstanding. The Company’s total shareholders’ equity increased to $46.76 million from $31.63 million at June 30, 2007.
Business Outlook
Ms. Yiru Shi, Chief Financial Officer of Shengtai Pharmaceutical, commented, “Over the past two years, we have invested heavily for growth through major capital investments to vertically integrate our business and expand our glucose production capacity. We are now nearing the end of this major transformation. We are not planning any in house projects in fiscal year 2009 that will require additional large capital expenditures. As a result, our day-to-day operating cash flows and liquidity positions should improve considerably. In addition, our vertically integrated in house cornstarch production facility will relatively lower our exposure to raw material and commodity pricing volatility. With this new production capacity, we expect to increase the sales of our higher-margin products such as pharmaceutical grade glucose which will help improve the overall gross margin.”
“We are very excited about the prospects and opportunities in 2009, as our recent expansion has positioned the Company to capture shares in the growing market for pharmaceutical grade glucose products in China,” stated Mr. Qingtai Liu, Shengtai Pharmaceutical’s CEO. “Shengtai Pharmaceutical is already one of the top domestic producers of pharmaceutical graded glucose products such as dextrose monohydrate and dextrose anhydrous. We will continue to fuel the strong demand from urban populations who are in need of higher quality pharmaceutical product offerings and better living standards. As for other potential markets, we see the Chinese government subsidized rural healthcare system is creating greater demand for pharmaceutical products in rural areas. We also see a great opportunity in international markets, as we have already exported to developed countries such as Japan, Korea and Australia. As a result, our pharmaceutical graded glucose business is poised for solid growth in the coming years.”
Mr. Liu added, “In order to better serve the growing number of domestic and international customers, we have proactively recruited a number of new sales staff as well as made exciting new changes to our sales department. As part of this new realignment, we divided the original glucose sales department into three separate units along product lines: 1) monohydrate glucose, 2) anhydrous glucose and 3) food and beverage grade glucose. We believe these steps will help to ensure the anticipated ramp up in sales as we enter fiscal year 2009. “
Conference Call
The Company will host a conference call and webcast on Tuesday September 30, 2008 at 9:00 A.M. Eastern Daylight Time / 9:00 P.M. Beijing Time. A question and answer session will follow management’s presentation. Mr. Qingtai Liu (Chief Executive Officer), Ms. Yiru 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:
Phone Number + 1 (877) 407-8035 (North America)
Phone Number + 1 (201) 689-8035 (International)
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 Tuesday, October 7, 2008, at 11:59 P.M. Eastern Daylight Time/ Wednesday, October 8, 2008, 11:59 A.M. Beijing Time. For the replay, please call:
Phone Number +1 (877) 660-6853 (North America)
Phone Number +1 (201) 612-7415 (International)
Account Number: 286
Conference ID Number: 297898
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.
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 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.
Shengtai Pharmaceutical, Inc. And Subsidiaries
Consolidated Statements of Income and Other Comprehensive Income
For years ended June 30, 2008 and 2007
Shengtai Pharmaceutical, Inc. And Subsidiaries
Consolidated Balance Sheets
As of June 30, 2008 and June 30, 2007
Shengtai Pharmaceutical, Inc. And Subsidiaries
Consolidated statements of Cash Flows
For the years ended June 30, 2008 and 2007
CONTACT: Ms. Yiru Shi, Chief Financial Officer of Shengtai Pharmaceutical,
Inc., +1-949-468-7078, shengtaicfo@hotmail.com; or Eddie Cheung, Investor
Relations, of Grayling Global for Shengtai Pharmaceutical, Inc.,
+1-646-284-9414, echeung@hfgcg.com
Web site: http://www.shengtaipharmaceutical.com/
