WEIFANG, China, Sept. 28 /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 and glucose and starch products that serve as raw materials for food, beverage and industrial production, today reported record annual financial results ended June 30, 2007.
Fiscal Year 2007 Highlights
-- Net sales increased 43.5% to $51.7 million
-- Gross profit rose 43.9% to $12.2 million
-- Gross profit margin was 23.6%
-- Operating income increased 62.1% to $7.5 million
-- Net income increased 69.8% to $7.1 million
-- Fully diluted EPS was $0.62 versus $0.42
Fiscal Year 2007 Results
For the fiscal year 2007, net revenues increased 43.5% to $51.7 million from $36.0 million in fiscal 2006. This increase was largely due to strong sales of glucose and cornstarch products, as well as higher product selling prices. In addition, the Company's new cornstarch plant began production in 2007, maximizing the production of its glucose manufacturing facility and the sale of additional cornstarch to outside customers.
"Our 2007 fiscal year was a record for Shengtai Pharmaceutical. We will continue to identify and pursue innovative products and technology to our increase market share and optimize our cost structure," said Chief Financial Officer Philips Zhang. "Our ability to meet increased customer demand and remain profitable will however, still depend on factors such as our production capacity and working capital."
Gross profit in fiscal year 2007 was $12.2 million, an increase of 43.9% from $8.5 million a year ago. Gross profit margin for the year ended June 30, 2007 was 23.6%, a slight improvement from 2006. Shengtai Pharmaceutical produced some new products with higher profit margins, which was offset by rising sales of lower gross margin cornstarch to customers.
Selling, general and administrative expenses for the year ended June 30, 2007 was $4.7 million, an increase of $0.8 million, or 22% 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 domestic sales network, higher worker insurance requirements and environmental related expenditures.
The Company achieved higher operating leverage for the year. Operating income in fiscal year 2007 increased 62.1% to $7.5 million from $4.6 million in prior year. Operating margin during fiscal 2007 was 14.5% in 2006, up from 12.9% a year ago.
Net income for the year ended June 30, 2007 was $7.1 million, an increase of $2.9, or 69.8% compared with 2006. The increase in net income was due to higher production levels, sales volumes, as well as a net gain of approximately $1.3 million derived from both the gain of surrendering its land use rights for property in downtown Changle to the local government and the loss of fixed assets' early retirement. Diluted weighted average earnings per share were $0.62 for fiscal year of 2007, which compared to $0.42 in fiscal year of 2006.
Financial Condition
As of June 30, 2007, Shengtai Pharmaceutical had cash and restricted cash of $12.0 million and working capital of $(7.2) million. In fiscal 2007, the Company generated $5.1 million in cash flow from operations. At June 30, 2007, the Company had $42.1 million in total debt, and $31.6 million of shareholders' equity.
Business Outlook
Shengtai Pharmaceutical's market share in the PRC for pharmaceutical grade glucose products, especially dextrose monohydrate, has increased. Dextrose monohydrate is widely used for restorative and nutritional purposes, as well as for transfusions and intravenous drips. The company's newly established cornstarch production facility with annual capacity to produce 240,000 tons is close to the existing glucose production plant. This allows the company to produce its own cornstarch, replacing other suppliers, reduces shipping costs, and resulting in lower manufacturing costs. The research and development team has been very active to improve production techniques, and to develop new technologies and higher value-added products such as sodium gluconate and Avermectins, which have higher profit margins.
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 planned to develop the land and build a new glucose production complex with an expected production capacity of 150,000 tons per year. The Company commenced construction in early July 2007 and expects construction to be completed in the first half of calendar year 2008. "Nevertheless, among our total 253,746 square meters of land, approximately only 60% is being utilized, leaving room for future expansion," said Mr. Zhang.
"The 2008 fiscal year presents tremendous opportunities for Shengtai Pharmaceutical, as we expect higher living standards, rising purchasing power, public awareness of quality health care products will continue to lead to higher consumption of pharmaceutical dextrose," said Mr. Zhang. "We believe that through manufacturing innovative products to meet market demand, we would be able to command higher profit margins and diversify our operating risks."
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.chinaglucose.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 below--
SHENGTAI PHARMACEUTICAL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2007 AND 2006
A S S E T S
2007 2006
CURRENT ASSETS:
Cash $ 6,420,439 $ 502,457
Restricted cash 5,628,500 3,881,200
Accounts receivable, net of allowance for
doubtful accounts of
$431,178, $357,970 and $233,976 as of
June 30, 2007, 2006 and 2005, respectively 5,779,967 3,531,810
Notes receivable 984,675 358,920
Other receivables 3,484,484 369,884
Other receivables - related parties 2,491,656 --
Other receivables - shareholder 1,229,625 --
Loan to related party 657,500 --
Inventories 4,449,267 1,895,878
Prepayments 140,376 231,352
Prepayments - related party -- 1,378,133
Total current assets 31,266,489 12,149,634
PLANT AND EQUIPMENT, net 30,178,074 14,562,974
OTHER ASSETS:
Investment in Changle Shengshi Redian
Co., Ltd. 2,675,678 2,245,086
Loan to related party - non-current 394,500 --
Prepayments - non-current 7,429,371 1,166,998
Intangible assets - land use right, net
of accumulated amortization 1,816,021 1,146,765
Total other assets 12,315,570 4,558,849
Total assets $ 73,760,133 $ 31,271,457
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 $ 3,807,997 $ 1,582,812
Accounts payable - related party 949,992 348,366
Notes payable - banks 8,942,000 7,011,200
Short term loans 18,870,250 8,576,200
Investment payable - 888,920
Accrued liabilities 229,643 92,862
Other payable 1,526,903 256,291
Employee loans 596,516 640,667
Employee loan - officer -- 93,149
Third party loan 318,274 57,319
Dividends payable -- 389,216
Customer deposit 796,228 276,609
Long term liabilities - current
maturities 381,350 876,400
Payable - officer -- 1,925,996
Taxes payable 2,048,932 596,420
Total current liabilities 38,468,085 23,612,427
LONG TERM LIABILITIES
Other payable - noncurrent 3,661,472 --
Long term loans -- 1,001,600
Total long term liabilities 3,661,472 1,001,600
Total liabilities 42,129,557 24,614,027
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,
18,875,351, 10,125,351, and 10,125,351
shares issued and outstanding as June 30,
2007, 2006 and 2005, respectively 18,875 10,125
Paid-in capital 19,163,549 3,915,871
Capital contribution receivable -- (1,925,996)
Statutory reserves 1,735,484 1,001,088
Retained earnings 9,885,670 3,470,940
Accumulated other comprehensive income 826,998 185,402
Total shareholders' equity 31,630,576 6,657,430
Total liabilities and shareholders'
equity $ 73,760,133 $ 31,271,457
SHENGTAI PHARMACEUTICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE YEARS ENDED JUNE 30, 2007 AND 2006
2007 2006
SALES REVENUE $ 51,706,215 $ 36,029,179
COST OF SALES 39,527,662 27,568,092
GROSS PROFIT 12,178,553 8,461,087
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 4,674,679 3,831,778
INCOME FROM OPERATIONS 7,503,874 4,629,309
OTHER (EXPENSE) INCOME:
Earnings (loss) on equity investment 131,420 41,635
Other income 1,769,631 181,874
Other expense (225,898) (214,641)
Interest expense and other charges (1,270,418) (555,572)
Interest income 119,353 128,306
Other income (expense), net 524,088 (418,398)
INCOME BEFORE PROVISION FOR INCOME TAXES 8,027,962 4,210,911
PROVISION FOR INCOME TAXES 878,836 --
NET INCOME 7,149,126 4,210,911
OTHER COMPREHENSIVE INCOME:
Foreign currency translation
adjustments 641,596 185,402
COMPREHENSIVE INCOME $ 7,790,722 $ 4,396,313
Earning per share - basic $ 0.64 $ 0.42
Earning per share - diluted $ 0.62 $ 0.42
Weighted average number of shares
outstanding - basic 11,252,063 10,125,351
Weighted average number of shares
outstanding - diluted 11,477,896 10,125,351
SHENGTAI PHARMACEUTICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2007 AND 2006
2007 2006
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $7,149,126 $4,210,911
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation 2,239,157 1,478,734
Amortization 42,644 41,454
Allowance for bad debts 271,602 114,780
Loss on building disposal 186,470 --
Gain on disposal of land use right (1,647,833) --
(Earnings) loss on equity investment (131,420) (41,635)
Change in assets and liabilities:
Accounts receivable (2,288,351) (261,286)
Notes receivable (591,936) (126,992)
Other receivables (1,082,008) 1,567
Other receivables - related party (2,427,043) --
Other receivables - shareholder (366,185) --
Inventories (2,394,250) 173,225
Prepayments 99,957 (28,710)
Prepayments - related party 1,409,944 301,037
Accounts payable 1,773,031 176,458
Accounts payable - related party 390,986 200,660
Accrued liabilities 130,238 (65,014)
Other payable 410,174 166,860
Customer deposit 492,586 201,045
Taxes payable 1,385,613 (14,792)
Net cash provided by operating activities 5,052,502 6,528,302
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equity investment (909,439) (124,020)
Purchase plant and equipment (731,295) (418,498)
Additions to construction in progress (10,308,985) (5,814,096)
Acquisition of land use right (949,900) --
Purchase of software program (1,281) --
Advance on plant and equipment purchase (7,225,790) (1,155,999)
Loan to related party (1,024,720) --
Net cash used in investing activities (21,151,410) (7,512,613)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in restricted cash (1,524,720) (279,045)
Borrowings on notes payable - banks 8,710,120 12,201,088
Payments on notes payable - banks (7,173,040) (10,743,853)
Borrowings on short term loans 24,785,415 8,979,048
Payments on short-term loans (15,178,665) (8,358,948)
Borrowings on employee loans 384,224 431,111
Payments on employee loans (458,632) (113,060)
Borrowings on employee loan - officer 1,281 --
Payments on employee loan - officer (96,580) --
Borrowings on third party loan 251,378 57,319
Borrowings on long term loans -- 992,160
Payments on long-term loans (1,549,889) (868,140)
Cash proceeds from issuance of common stock 15,256,428 --
Payments of amounts due officer (1,925,996) --
Proceeds from capital contribution receivable 696,371 --
Dividend paid to shareholders -- (1,664,503)
Net cash provided by financing activities 22,177,695 633,177
EFFECTS OF EXCHANGE RATE CHANGE IN CASH (160,805) 25,408
INCREASE (DECREASE) IN CASH 5,917,982 (325,726)
CASH, beginning of year 502,457 828,183
CASH, end of year $6,420,439 $ 502,457
