Synutra Reports First Quarter 2011 Financial Results
1Q11 Net Sales Up 77.0% to $83.8 Million from the Prior Year Period
1Q11 Net Income of $10.1 Million, or $0.19 per Diluted Share
QINGDAO, China and Rockville, Md., Aug. 9 /PRNewswire-Asia/ -- Synutra International, Inc. (Nasdaq: SYUT), a leading infant formula company in China and a producer, marketer and seller of nutritional products for infants, children and adults, today announced financial results for the first quarter of fiscal 2011, ended June 30, 2010.
First Quarter Fiscal 2011 Financial Highlights
-- Net sales up 77.0% to $83.8 million from $47.4 million in the prior
year period
-- Gross profit increased 136.9% to $46.4 million from $19.6 million in
the prior year period
-- Gross margin up substantially to 55.3% from 41.4% in the prior year
period
-- Operating income increased to $16.3 million from an operating loss of
$10.6 million in the prior year period
-- Net income attributable to Synutra International, Inc. common
shareholders increased to $10.1 million, or $0.19 per diluted share,
from a net loss of $9.9 million or ($0.18) per diluted share, in the
prior year period
Mr. Liang Zhang, Chairman and CEO of Synutra stated, "Our fiscal first quarter financial results continue to demonstrate our return to growth and profitability. Last quarter marked the significant milestone of our return to profitability. This quarter, we have continued to leverage our robust information network and innovative, consumer driven marketing strategy to further improve our revenue mix and drive profitability."
First Quarter Fiscal 2011 Financial Results
Net sales were $83.8 million in the first quarter of fiscal 2011, a 77.0% increase from $47.4 million in the first quarter of fiscal 2010. Net sales from the Company's branded powdered formula segment were $79.2 million, or 94.6% of net sales in the quarter, up significantly from $42.5 million, or 89.7% of net sales, in the prior year period. On a sequential basis, net sales from the branded powdered formula segment improved 13.5% from $69.8 million in the fourth quarter of fiscal year 2010. Net sales of the Company's Super series infant formula accounted for approximately 65.3% of the volume of sales and 74.5% of the net sales of the powdered formula segment for the first quarter of fiscal year 2011.
Net sales from Other products, which mainly consist of the surplus milk powder to industrial customers, was $4.5 million, or 5.3% of net sales, in the first quarter of fiscal 2011, compared to $4.5 million, or 9.5% of net sales in the prior year period, and down sequentially from $11.6 million, or 14.1% of net sales in the fourth quarter of fiscal 2010.
Gross profit increased 136.9% to $46.4 million in the first quarter of fiscal 2011, from $19.6 million in the prior year period. Gross margin in the first quarter of fiscal 2011 was 55.3%, up from 41.4% in the prior year period.
Operating income was $16.3 million in the first quarter of fiscal 2011, compared with an operating loss of $10.6 million in the prior year period. Selling and distribution expenses increased 20.5% to $12.6 million in the first quarter of fiscal 2011 from $10.5 million in the prior year period. Advertising and promotion expenses decreased 34.0% to $10.0 million in the first quarter of fiscal 2011 from $15.1 million in the prior year period. This decrease primarily reflects a continued shift in the Company's marketing strategy from a historical reliance on aggressive advertising and promotional campaigns to a more customer-centric approach, built through promotional and educational activities for customers, communities, and medical and healthcare facilities. General and administrative expenses increased 61.9% to $7.5 million in the first quarter of fiscal 2011 from $4.6 million in the prior year period. The increase is primarily due to a $1.7 million impairment loss of good will and intangible assets related to a reduction of expected future cash flows from the baby food segment.
Net income attributable to Synutra International, Inc. common shareholders was $10.1 million, or $0.19 per diluted share in the first quarter of fiscal 2011, compared with a net loss of $9.9 million or ($0.18) per diluted share, in the prior year period.
Balance Sheet
As of June 30, 2010, the Company had cash and cash equivalents of $105.5 million and restricted cash of $40.8 million.
Follow-On Offering and Expansion Plan
On June 30, 2010, the Company completed a follow-on public offering of 3.3 million shares at $19.00 per share, raising net proceeds of $58.8 million. The Company paid down approximately $35.0 million of debt outstanding on July 16, 2010.
Mr. Donghao Yang, the Chief Financial Officer of Synutra, stated, "We are pleased to move forward through fiscal 2011 in a stronger and more flexible financial position. As we continue to drive growth and profitability, we believe we are well-positioned to capture additional opportunities in China's growing infant formula market."
Conference Call Details
The Company will hold a conference call on August 10, 2010 at 8:00 am Eastern Time to discuss the financial results. Listeners may access the call by dialing the following numbers:
United States toll free: +1 (877) 312-8817
International: +1 (253) 237-1180
Conference ID: 90057227
The replay will be accessible through August 17, 2010 by dialing the following numbers:
United States toll free: +1 (800) 642-1687
International: +1 (706) 645-9291
Conference ID: 90057227
A webcast of the conference call will be available through the Company's IR website at http://www.synutra.com .
About Synutra International, Inc.
Synutra International Inc. (Nasdaq: SYUT) is a leading infant formula company in China. It principally produces, markets and sells its products under the "Shengyuan" or "Synutra" name, together with other complementary brands. It focuses on selling premium infant formula products, which are supplemented by more affordable infant formulas targeting the mass market as well as other nutritional products and ingredients. It sells its products through an extensive nationwide sales and distribution network covering 30 provinces and provincial-level municipalities in China. As of June 30, 2010, this network comprised over 560 independent distributors and over 1,000 independent sub-distributors who sell Synutra products in over 74,000 retail outlets.
Forward-looking Statements
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on our current expectations, assumptions, estimates and projections about Synutra International Inc. and its industry. All statements other than statements of historical fact in this release are forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as "anticipate," "believe," "continue," "estimate," "expect," "intend," "is/are likely to," "may," "plan," "should," "will," "aim," "potential," "continue," or other similar expressions. The forward-looking statements included in this press release relate to, among others, Synutra's goals and strategies; its future business development, financial condition and results of operations; the expected growth of the nutritional products and infant formula markets in China; market acceptance of the Company's products; adverse effects associated with the melamine contamination incident; Synutra's expectations regarding demand for its products; Synutra's ability to stay abreast of market trends and technological advances; competition in the infant formula industry in China; PRC governmental policies and regulations relating to the nutritional products and infant formula industries, and general economic and business conditions in China. These forward-looking statements involve various risks and uncertainties. Although Synutra believes that the expectations expressed in these forward-looking statements are reasonable, these expectations may turn out to be incorrect. Synutra's actual results could be materially different from the expectations. Important risks and factors that could cause actual results to be materially different from expectations are generally set forth in the "Item 1. Business," "Item 1A. Risk Factors," "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations," and other sections in Synutra's Form 10-K filed with the Securities and Exchange Commission on June 9, 2010. The forward- looking statements are made as of the date of this press release. Synutra International Inc. undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.
Synutra International, Inc.
Condensed Consolidated Statements of Income
Unaudited
Three Months Ended June 30,
2010 2009
(in thousands except earnings per
share date)
Net sales 83,787 47,350
Cost of sales 37,426 27,778
Gross profit 46,361 19,572
Selling and distribution expenses 12,626 10,477
Advertising and promotion expenses 10,002 15,145
General and administrative expenses 7,516 4,641
Other operating income, net 73 117
Income (loss) from operations 16,290 (10,574)
Interest expense 2,662 2,378
Interest income 108 518
Other income (expense), net 167 (784)
Income (loss) before income tax
expense (benefit) 13,903 (13,218)
Income tax expense (benefit) 3,795 (3,223)
Net income (loss) 10,108 (9,995)
Net income (loss) attributable to the
noncontrolling interest 2 (49)
Net income (loss) attributable to
Synutra International, Inc. common
shareholders 10,106 (9,946)
Earnings (loss) per share-basic 0.19 (0.18)
Earnings (loss) per share-diluted 0.19 (0.18)
Weighted average common share
outstanding-basic 54,037 54,001
Weighted average common share
outstanding-diluted 54,274 54,001
Synutra International, Inc.
Consolidated Balance Sheets
Unaudited
Jun 30, 2010 Mar 31, 2010
(in thousands, except share par
value)
ASSETS
Current Assets:
Cash and cash equivalents 105,464 48,693
Restricted cash 40,841 33,384
Accounts receivable, net of allowance
for doubtful accounts 41,671 26,013
Inventories 57,089 52,134
Due from related parties 9,153 8,111
Income tax receivable -- 523
Receivable from assets disposal 5,315 5,879
Prepaid expenses and other current
assets 9,040 8,209
Deferred tax assets-current 33,574 33,390
Total current assets 302,147 216,336
Property, plant and equipment, net 109,042 110,037
Land use rights, net 5,992 5,996
Intangible assets, net 3,141 3,394
Goodwill -- 1,437
Receivable from assets disposal -- 4,404
Other assets 3,355 3,575
Deferred tax assets 4,183 4,178
TOTAL ASSETS 427,860 349,357
LIABILITIES AND EQUITY
Current Liabilities:
Short-term debt 80,336 98,069
Long-term debt due within one year 49,726 61,194
Accounts payable 49,211 49,947
Due to related parties 2,604 2,670
Advances from customers 7,553 9,375
Income tax payable 3,086 --
Other current liabilities 21,796 22,674
Total current liabilities 214,312 243,929
Long-term debt 79,518 41,018
Deferred revenue 4,712 4,688
Capital lease obligations 5,394 5,372
Other long-term liabilities 1,432 1,419
Total liabilities 305,368 296,426
Equity:
Synutra International, Inc.
shareholders' equity
Common stock, $.0001 par value:
250,000 authorized; 57,301 and
54,001 issued and outstanding at
June 30, 2010 and March 31, 2010,
respectively 6 5
Additional paid-in capital 135,440 76,607
Accumulated deficit (38,183) (48,289)
Accumulated other comprehensive
income 24,592 24,015
Total Synutra common shareholders'
equity 121,855 52,338
Noncontrolling interest 637 593
Total equity 122,492 52,931
TOTAL LIABILITIES AND EQUITY 427,860 349,357
SOURCE Synutra International, Inc.
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