WEIFANG, China, Feb. 15, 2012 /PRNewswire-Asia/ -- Shengtai Pharmaceutical, Inc. (OTC Bulletin Board: SGTI) (''Shengtai’’ or ''the Company’’ or “we” or “us”), a manufacturer and distributor in China of glucose and starch as pharmaceutical raw materials and other starch and glucose products, today reported financial results for the second quarter of fiscal 2012 ended December 31, 2011.
“During the quarter ended December 31, 2011, corn prices continued to increase. Shengtai continued its focus on controlling the gross profit,” Qingtai Liu, CEO of Shengtai Pharmaceutical, Inc. stated, “We completed the corn warehouse expansion in October 2011. Currently we have 50,000 tons storage capacity. We refused lower profit sales to keep our long-term success. We put our view for the long term success of the business and we are on the right path toward improvement and success among competition.”
Second Quarter Fiscal Year 2012 Result of Operations
Net sales for the three months ended December 31, 2011 were $42,933,425, a decrease of $6,111,431 or 12.46%, compared with the same period in 2010. The decrease in net sales primarily resulted from decreased sales quantities for the three months ended December 31, 2011, compared to the same period last year. For the three months ended December 31, 2011 compared to the same period last year, the quantity of our glucose products sold decreased about 10.58%, while the average unit selling price of our glucose products increased about 11.91%. For the three months ended December 31, 2011 compared to the same period last year, the quantity of our cornstarch products sold decreased about 47.03%, while the average unit selling price of our cornstarch products increased about 10.45%. For the three months ended December 31, 2011 compared to the same period last year, the quantity of our other products sold decreased about 15.62%, while the average unit selling price of our other products increased about 5.44%. The increased unit selling prices are caused by the increased raw material cost during the quarter ended December 31, 2011 compared to the same period last year. The sales quantity decreased mainly because the Company tried to maintain a certain gross profit while the corn prices increased.
Net sales from exports for the three months ended December 31, 2011 decreased approximately 8.48% compared with the same period in 2010. The decrease is mainly attributable to the decreased sales quantities offset by the increased unit sales ended December 31, 2011 compared to the same period last year. The increased unit price is related to the increased corn prices. The sales quantity decreased mainly because the Company tried to maintain a certain gross profit while corn prices increased.
Cost of sales for the three months ended December 31, 2011 was $38,892,394, an decrease of $4,252,912 or 9.86%, compared with the same period in 2010. The decrease in cost of sales was mainly due to the decrease of sales offset by the increase in the price of corn, our main raw material.
Gross profit for the three months ended December 31, 2011 was $4,041,031, a decrease of $1,858,519, or 31.50%, compared with the same period in 2010. The decrease of gross profit is mainly because the unit selling prices of our products did not increase as fast as corn prices. Gross profit margin for the three months ended December 31, 2011 was 9.41%, a decrease from 12.03% for the same period in 2010. The reason for the decrease of gross profit margin is mainly because the price of corn, our main raw material, increased approximately 17.71% for the three months ended December 31, 2011 compared to the same period last year whereas the average selling prices did not increase as much. The Company believes that the market is taking its time to respond to the increased corn prices and will reach a more profitable price level in the near future. At the same time, the Company believes that the Company’s actions to improve gross profit margin, such as expanding raw material storage facilities to reduce the impact of fluctuation on the price of our raw materials, will benefit us in maintaining our profitability.
For the three months ended December 31, 2011, selling, general and administrative expenses were $3,026,462, an increase of $923,072 or 43.88%, compared to $2,103,390 for the three months ended December 31, 2010. The selling, general, and administrative expenses increased mainly due to increased shipping expenses caused by increased gas prices. The Company incurred $0 and $83,304 non-cash stock option expenses for the three months ended December 31,2011 and 2010, respectively. The option expenses are included in selling, general and administrative expenses.
Net (loss) income for the three months ended December 31, 2011 was $(65,062), a decrease of $2,761,530, compared with $2,696,468 for the same period in 2010. The decrease in net income was primarily attributable to the decreased gross profit and increased selling, general, and administrative expenses.
Financial Condition
As of December 31, 2011, Shengtai Pharmaceutical, Inc. had cash and restricted cash totaling $6.18 million. The Company’s short-term loans totaled $62.95 million and long-term debt totaled $0 million. The Company’s total shareholders’ equity increased to $61.32 million .
Management Comments
Looking forward, Qingtai Liu, CEO of Shengtai Pharmaceutical, Inc. stated, “Even though Shengtai is facing industry pressure caused by continually increasing corn prices, we believe that we are taking the right strategy to keep our competitive position in the industry. We estimate that we still occupy more than 30% of the pharmaceutical glucose market. We are vertically integrated which allows us to provide high quality cornstarch to manufacture glucose. We will continue our focus on keeping our leader position in pharmaceutical glucose market and focus on controlling our gross profit for the cornstarch and other products gross profit margin.
“Going forward we are confident that we will be the dominant player in the industry!” concluded Mr. Liu.
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 http://www.shengtaipharmaceutical.com.
