Shengtai Pharmaceutical, Inc. Reports Second Quarter Fiscal 2011 Financial Results

WEIFANG, China, Feb. 14, 2011 /PRNewswire-Asia-FirstCall/ -- Shengtai Pharmaceutical, Inc. (OTC Bulletin Board: SGTI) (“Shengtai” or “the Company”), a leading manufacturer and distributor of high-quality, pharmaceutical grade glucose products in China, and a manufacturer and distributor in China of starch products, today reported financial results for the second quarter of fiscal 2011 ended December 31, 2010.

“Sales of our glucose products, corn products, and by products all increased during the second quarter compared with the September quarter 2011 and compared to the same quarter last year,” said Mr. Qingtai Liu, Shengtai Pharmaceutical’s CEO. “Sales increased due to higher demand of our products from both international and domestic markets. We expect that the demand will continue in the second half of fiscal year 2011. With the growth of our business, we look to improve our sales and net income greatly in 2011.”

“On the sales side, we had developed more large customers, both domestically and internationally. With our new state-of-the-art facilities, we now have the production capacity to meet the anticipated increase in demand.” Mr. Liu concluded.

Second Quarter Fiscal 2011 Financial Results

Net sales for the three months ended December 31, 2010 were $49,044,856, an increase of $20,535,997, or 72.03%, compared with the same period in 2009. The increase in net sales primarily resulted from increased demand of our products in all product lines and increased unit selling prices of our glucose and cornstarch products. For the three months ended December 31, 2010 compared to the same period last year, the quantity of our glucose products sold increased about 21.44%, while the average unit selling price of our glucose products increase about 19.42%. For the three months ended December 31, 2010 compared to the same period last year, the quantity of our cornstarch products sold increased about 100%, while the average unit selling price of our cornstarch products increase about 13%. Especially our Slurry sales increased approximately $5,361,000 or 660% for the three months ended December 31, 2010 compared to the same period last year. For the three months ended December 31, 2010 compared to the same period last year, the quantity of our other products sold increased about 63%, while the average unit selling price of our other products maintained the same. The increase in domestic sales is due to the improved economic environment compared with the same period last year, increased demand for glucose products due to the government stimulus plan execution, as well as company’s effort in developing new clients.

Net sales from exports for the three months ended December 31, 2010 increased approximately 14.89% compared with the same period in 2009. The increase is mainly attributable to the recovery of the global economy resulting in an increase in the international demand for the Company’s glucose products compared to the same period last year.

Gross profit for the three months ended December 31, 2010 was $5,899,550, an increase of $1,430,203, or 32%, compared with the same period in 2009. The increase of gross profit is mainly in line with the increased sales.

Gross profit margin for the three months ended December 31, 2010 was 12.03%, a decrease from 15.68% for the same period in 2009. The reason for the decrease of gross profit margin is mainly because the price of corn, our main raw material, increased approximately 12% for the three months ended December 31, 2010 compared to the same period last year where the average selling prices did not increase much. The decrease is also due to the change of product mix. In the three months ended December 31, 2010, more lower profit products such as Slurry were sold compared to the same period last year when more profitable products such as glucose accounted for a larger percentage of total revenue. The Company believes that increased sales of cornstarch and byproducts are bringing more positive cash flow to the Company. The Company is also working on improving pricing and profit control to improve gross profit margin. At the same time, the Company has built and is building more raw material storage to reduce the impact of the fluctuating cost of raw materials.

For the three months ended December 31, 2010, selling, general and administrative expenses were $2,103,390, a decrease by $92,286, or 4.20%, compared to $2,195,676 for the three months ended December 31, 2009. The selling, general, and administrative expenses remained stable as selling expenses increased due to increased sales while general and administrative expenses decreased due to cost control.

The Company incurred $83,304 and $158,818 non-cash stock option expenses for the three months ended December 31, 2010 and 2009, respectively. The option expenses are included in selling, general and administrative expenses.

Net income for the three months ended December 31, 2010 was $2,696,468, an increase of $1,644,242 compared with $1,052,226 for the same period in 2009. The increase in net income was primarily attributable to the increased sales.

Business Outlook

“For the second half of fiscal year 2011, we expect sales of our glucose, cornstarch and other products will continue to grow in both domestic and international markets,” stated Mr. Qingtai Liu, Shengtai Pharmaceutical’s CEO. “As we look further into the second half of our fiscal year 2011, we expect our newly expanded cornstarch manufacturing facility will be utilized over 50% by the end of fiscal year 2011. The newly expanded cornstarch manufacturing facilities will help us to satisfy the increasing demand of our cornstarch products and byproducts. We have already built relatively large back orders for our glucose and cornstarch products. In order to stabilize our gross profit, we have continued to construct additional storage facilities to better control the impact of fluctuating corn prices. Looking forward, we are also confident with our cash position, which is enhanced by the increased sales and good accounts receivable collection. In the coming year, we will focus on providing high quality products as well as continue searching for higher profit high-tech products.” Mr. Liu concluded.

Financial Condition

As of December 31, 2010, the Company’s cash and cash equivalents increased to $6.8 million. The Company’s total shareholders’ equity amounted to $55.21 million.

Conference Call

The Company will host a conference call on Tuesday February 15, 2011 at 7:00 P.M. Eastern Standard Time. A question and answer session will follow management’s presentation. Mr. Qingtai Liu(Chief Executive Officer), Mr. Yongqiang Wang (Chief Financial Officer), Mr. Weijie Liu, and Ms. Yukie Ying Gao (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 replay of the call will be available through Wednesday, February 23, 2011, 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), and the Chinese operating company of Weifang Shengtai Pharmaceutical Co., Ltd., is a manufacturer and distributor in China of glucose and starch products as pharmaceutical raw materials, other starch products and other glucose products such as corn meals, food and beverage glucose and dextrin. For more information about Shengtai Pharmaceutical, Inc., please visit www.shengtaipharmaceutical.com.

Forward Looking Statements

Certain statements in this press release and oral statements made by the Company constitute 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 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.