WEIFANG, China, Nov. 15 /Xinhua-PRNewswire-FirstCall/ -- Shengtai Pharmaceutical, Inc. (OTC Bulletin Board: SGTI) ("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 Highlights
-- Net sales increased 82.8% to $19.4 million
-- Gross profit rose 88.3% to $4.6 million
-- Gross profit margin was 23.7%
-- Operating income increased 97.4% to $2.9 million
-- Net income increased 51.8% to $2.3 million
-- Weighted avg. diluted shares outstanding were 18.9 million vs. 10.1
million
-- Fully diluted EPS was $0.11 versus $0.15
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 --
SHENGTAI PHARMACEUTICAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2007 AND JUNE 30, 2007
A S S E T S
September 30, June 30,
2007 2007
(Unaudited)
CURRENT ASSETS:
Cash $ 1,382,647 $ 6,420,439
Restricted cash 2,634,400 5,628,500
Accounts receivable, net of
allowance for doubtful accounts of
$437,408and $431,178 as of
September 30, and June 30, 2007,
respectively 6,384,033 5,779,967
Notes receivable 1,854,093 984,675
Other receivables 2,821,218 3,484,484
Other receivables - related
parties 1,006,789 2,491,656
Other receivables - shareholder 1,282,378 1,229,625
Loan to related party 667,000 657,500
Inventories 3,729,407 4,449,267
Prepayments 108,250 140,376
Total current assets 21,870,215 31,266,489
PLANT AND EQUIPMENT, net 35,204,072 30,178,074
OTHER ASSETS:
Investment in Changle Shengshi
Redian Co., Ltd. 2,990,876 2,675,678
Loan to related party -
non-current 400,200 394,500
Prepayments - non-current 7,992,765 7,429,371
Intangible assets - land use
right, net of accumulated
amortization 2,146,489 1,816,021
Total other assets 13,530,330 12,315,570
Total assets $ 70,604,617 $ 73,760,133
L I A B I L I T I E S A N D
S H A R E H O L D E R S’ E Q U I T Y
CURRENT LIABILITIES:
Accounts payable $ 3,195,664 $ 3,807,997
Accounts payable - related party 1,122,569 949,992
Notes payable - banks 4,268,800 8,942,000
Short term loans 16,394,860 18,870,250
Accrued liabilities 183,695 229,643
Other payable 1,741,194 1,526,903
Employee loans 513,584 596,516
Third party loan 322,872 318,274
Customer deposit 2,008,691 796,228
Long term loan - current maturity 386,860 381,350
Taxes payable 2,726,465 2,048,932
Total current liabilities 32,865,254 38,468,085
LONG TERM LIABILITIES
Other payable - non-current 3,411,179 3,661,472
Total long term liabilities 3,411,179 3,661,472
Total liabilities 36,276,433 42,129,557
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,
18,875,000 and 18,875,000
shares issued and outstanding
as of September 30, and June 30,
2007, respectively 18,875 18,875
Paid-in capital 19,163,549 19,163,549
Statutory reserves 1,735,484 1,735,484
Retained earnings 12,138,181 9,885,670
Accumulated other comprehensive
income 1,272,095 826,998
Total shareholders’ equity 34,328,184 31,630,576
Total liabilities and
shareholders’ equity $ 70,604,617 $ 73,760,133
SHENGTAI PHARMACEUTICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(UNAUDITED)
Three months ended
September 30,
2007 2006
SALES REVENUE $ 19,373,069 $ 10,599,321
COST OF SALES 14,779,032 8,159,877
GROSS PROFIT 4,594,037 2,439,444
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,696,555 971,868
INCOME FROM OPERATIONS 2,897,482 1,467,576
OTHER (EXPENSE) INCOME:
Earnings on equity investment 148,779 4,524
Non-operating income 39,747 58,794
Non-operating expense (177,349) --
Interest expense and other charges (416,464) (17,415)
Interest income 66,161 27,967
Other income (expense), net (339,126) 73,870
INCOME BEFORE PROVISION FOR INCOME
TAXES 2,558,356 1,541,446
PROVISION FOR INCOME TAXES 305,845 57,415
NET INCOME 2,252,511 1,484,031
OTHER COMPREHENSIVE INCOME:
Foreign currency translation
adjustments 445,097 106,845
COMPREHENSIVE INCOME $ 2,697,608 $ 1,590,876
EARNINGS PER SHARE
Basic $ 0.12 $ 0.15
Diluted $ 0.11 $ 0.15
WEIGHTED AVERAGE NUMBER OF SHARES
Basic 18,875,000 10,125,000
Diluted 19,697,359 10,125,000
SHENGTAI PHARMACEUTICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
(UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES: 2007 2006
Net income $ 2,252,511 $ 1,484,031
Adjustments to reconcile net
income to cash provided by
(used in) operating activities:
Depreciation 686,653 354,249
Amortization 11,809 10,502
Allowance for bad debts -- 136,128
Loss on disposal of land use
right 5,903 --
Earnings on equity investment (148,779) (4,524)
Change in operating assets and
liabilities:
Accounts receivable (516,885) (436,640)
Notes receivable (860,590) (375,932)
Other receivables 479,437 (129,626)
Other receivables - related party 1,510,151 --
Other receivables - shareholder (34,668) --
Inventories 778,620 (283,529)
Prepayments 33,913 (458,101)
Prepayments - related party -- (437,828)
Accounts payable (1,529,592) 267,953
Accounts payable - related party 31,921 (195,129)
Accrued liabilities (77,963) 88,400
Other payable (110,003) 65,193
Customer deposit 1,192,497 (13,240)
Taxes payable 643,363 (166,804)
Net cash provided by (used
in) operating activities 4,348,297 (94,897)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Acquisition of equity investment -- (912,332)
Purchase plant and equipment (19,671) (131,565)
Additions to construction in
progress (2,469,967) (3,247,404)
Acquisition of land use right (314,500) --
Purchase of software program (5,298) --
Advances on plant and equipment
purchase (2,076,530) (827,866)
Net cash used in investing
activities (4,885,965) (5,119,167)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Decrease in restricted cash 3,046,580 656,289
Borrowings on notes payable -
banks 1,324,600 4,245,232
Payments on notes payable -
banks (6,093,160) (5,529,920)
Borrowings on short term loans 887,482 7,754,456
Payments on short term loans (3,616,158) (842,056)
Borrowings on employee loans -- 17,595
Payments on employee loans (90,905) (164,641)
Payments on long term loans -- (879,760)
Net cash (used in)
provided by financing
activities (4,541,561) 5,257,195
EFFECTS OF EXCHANGE RATE CHANGE
IN CASH 41,437 5,932
(DECREASE) INCREASE IN CASH (5,037,792) 49,063
CASH, beginning of period 6,420,439 502,457
CASH, end of period $ 1,382,647 $ 551,520
For more information, please contact:
Company Contact:
Mr. Philips Zhang
CFO
Shengtai Pharmaceutical, Inc.
Tel: +86-536-629-5728
Email: shengtaicfo@hotmail.com
Investor Relations Contact:
Mr. Crocker Coulson
President
CCG Elite Investor Relations
Tel: +1-646-213-1915 (NY Office)
Email: crocker.coulson@ccgir.com
