WEIFANG, Shandong, China, Nov. 14 /Xinhua-PRNewswire-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, today reported financial results for the first quarter of fiscal 2009 ended September 30, 2008.
First Quarter 2009 Financial Summary
-- First quarter 2009 revenues totaled $18.12 million
-- First quarter had positive operating cash flow of $2.46 million
-- Cash and restricted cash of $7.19 million
"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. 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:
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 Friday, November 21, 2008, at 11:59 P.M. Eastern Standard 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: 302820
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.
Shengtai Pharmaceutical, Inc.
Consolidated Statements of Income and Other Comprehensive Income
For the three months ended September 30, 2008 and 2007
(Unaudited)
Three months ended
September 30,
2008 2007
SALES REVENUE $ 18,123,728 $ 19,373,069
COST OF SALES 14,931,187 14,779,032
GROSS PROFIT 3,192,541 4,594,037
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,429,790 1,696,555
INCOME FROM OPERATIONS 762,751 2,897,482
OTHER INCOME (EXPENSE):
Earnings on equity investment 1,851 148,779
Other income 11,869 39,747
Other expense (8,910) (177,349)
Interest expense and other
charges (21,839) (416,464)
Interest income 17,293 66,161
Other income (expense), net 264 (339,126)
INCOME BEFORE PROVISION FOR
INCOME TAXES 763,015 2,558,356
PROVISION FOR INCOME TAXES 133,219 305,845
NET INCOME 629,796 2,252,511
OTHER COMPREHENSIVE INCOME:
Foreign currency translation
adjustments 164,273 445,097
COMPREHENSIVE INCOME $ 794,069 $ 2,697,608
EARNINGS PER SHARE
Basic $ 0.03 $ 0.12
Diluted $ 0.03 $ 0.11
WEIGHTED AVERAGE NUMBER OF
SHARES
Basic 19,094,805 18,875,000
Diluted 19,353,448 19,697,359
Shengtai Pharmaceutical, Inc.
Consolidated Balance Sheets
As of September 30, 2008 and June 30, 2008
ASSETS
September 30, June 30,
2008 2008
(Unaudited)
CURRENT ASSETS:
Cash $ 1,621,671 $ 3,405,606
Restricted cash 5,570,525 6,763,500
Accounts receivable, net of
allowance for doubtful accounts
of $486,406 and $440,701 as of
September 30, 2008 and June 30,
2008, respectively 5,189,101 7,614,236
Notes receivable 822,513 458,630
Other receivables 699,333 691,215
Inventories 4,626,569 5,039,278
Loan to related party -
non-current 438,900
Prepayments 195,058 310,381
Total current assets 19,163,670 24,282,846
PLANT AND EQUIPMENT, net 72,326,330 69,943,021
OTHER ASSETS:
Investment in Changle Shengshi
Redian Co., Ltd. 3,620,009 3,607,912
Loan to related party -
non-current -- 437,700
Intangible assets - land use
right, net of accumulated
amortization 3,037,480 3,042,183
Total other assets 6,657,489 7,087,795
Total assets $ 98,147,489 $ 101,313,662
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,662,624 $ 7,669,728
Accounts payable - related
parties 534,740 714,776
Notes payable - banks 8,543,920 10,942,500
Short term loans 21,740,180 22,658,270
Accrued liabilities 303,357 261,187
Other payable 2,361,874 2,146,108
Employee loans 1,294,292 1,382,287
Employee loan - officer 53,738 53,605
Third party loan 362,521 640,228
Customer deposit 1,412,531 804,323
Taxes payable 3,902,402 4,631,252
Total current liabilities 48,172,179 51,904,264
LONG TERM LIABILITIES:
Other payable - noncurrent 2,267,020 2,653,995
Total long term liabilities 2,267,020 2,653,995
Total liabilities 50,439,199 54,558,259
COMMITMENTS AND CONTINGENCIES -- --
SHAREHOLDERS' EQUITY:
Preferred stock, $0.001 par
value, 5,000,000 shares authorized,
no shares issued and outstanding -- --
Common stock, $0.001 par value,
100,000,000 shares authorized,
19,094,805 shares issued and
outstanding as of September 30,
2008 and June 30, 2008, respectively 19,095 19,095
Paid-in capital 20,146,526 19,987,708
Statutory reserves 2,894,902 2,894,902
Retained earnings 19,766,373 19,136,577
Accumulated other comprehensive
income 4,881,394 4,717,121
Total shareholders' equity 47,708,290 46,755,403
Total liabilities and
shareholders' equity $ 98,147,489 $ 101,313,662
Shengtai Pharmaceutical, Inc.
Consolidated Statements of Cash Flows
For the three months ended September 30, 2008 and 2007
(Unaudited)
2008 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 629,796 $ 2,252,511
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation 951,659 686,653
Amortization 13,051 11,809
Allowance for bad debts 226,911 --
Loss on disposal of land use
right -- 5,903
Share based compensation to
employees 158,818 --
Earnings on equity investment (2,207) (148,779)
Change in operating assets and
liabilities:
Accounts receivable 2,220,604 (516,885)
Notes receivable (685,757) (860,590)
Other receivables (10,957) 479,437
Other receivables - related
parties -- 1,510,151
Other receivables - shareholder -- (34,668)
Inventories 426,788 778,620
Prepayments 175,061 33,913
Deferred assets (58,966) --
Accounts payable (1,069,660) (1,529,592)
Accounts payable - related
parties (727,816) 31,921
Accrued liabilities 535,069 (77,963)
Other payable (184,454) (110,003)
Customer deposit 606,375 1,192,497
Taxes payable (742,003) 643,363
Net cash provided by operating
activities 2,462,312 4,348,298
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of plant and equipment (1,723,339) (2,489,638)
Acquisition of intangible assets -- (319,798)
Advances on plant and equipment
purchase -- (2,076,530)
Net cash used in investing
activities (1,723,339) (4,885,966)
CASH FLOWS FROM FINANCING ACTIVITIES:
Release of restricted cash 1,211,722 3,046,580
Borrowings on notes payable - banks 1,961,626 1,324,600
Payments on notes payable - banks (4,391,700) (6,093,160)
Borrowings on short term loans 1,463,900 887,482
Payments on short term loans (2,444,713) (3,616,158)
Borrowings on employee loans 201,287 --
Payments on employee loans (293,128) (90,905)
Payments on third party loan (279,634) --
Net cash used in financing
activities (2,570,640) (4,541,561)
EFFECTS OF EXCHANGE RATE CHANGE IN
CASH 47,732 41,437
DECREASE IN CASH (1,783,935) (5,037,792)
CASH, beginning of period 3,405,606 6,420,439
CASH, end of period $ 1,621,671 $ 1,382,647
SUPPLEMENTAL DISCLOSURE
Cash paid for Interest, net of
capitalized interest $ -- $ 406,325
Cash paid for Income taxes $ 731,950 $ 13,445
Non-cash investing and financing
activities -
Acquisition of plant and equipment
through advances on plant and
and equipment purchase $ 1,093,496 $ 2,754,637
Acquisition of plant and equipment
in exchange for note receivable
and other receivables $ 327,638 $ --
For more information, please contact:
Shengtai Pharmaceutical, Inc.
Ms. Yiru Melody Shi
Chief Financial Officer
Tel: +1-949-468-7078
Email: shengtaicfo@hotmail.com
Grayling Global
Eddie Cheung
Investor Relations
Tel: +1-646-284-9414
Email: echeung@hfgcg.com