Synutra Reports Fourth Quarter and Full Year Fiscal 2013 Financial Results

  Synutra Reports Fourth Quarter and Full Year Fiscal 2013 Financial Results

PR Newswire

QINGDAO, China and ROCKVILLE, Md., June 13, 2013

QINGDAO, China and ROCKVILLE, Md., June 13, 2013 /PRNewswire/ -- Synutra
International, Inc. (NASDAQ: SYUT), ("Synutra" or the "Company"), which owns
subsidiaries in China that produce, distribute and sell nutritional products
for infants, children and adults, today announced financial results for the
fourth quarter and full year of fiscal 2013 ended March 31, 2013.

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "We were highly
encouraged with our ongoing efforts to stabilize our core branded powdered
formula business and return to profitability in the fiscal fourth quarter. We
believe the short-term negative impact of our price increase implemented in
April 2012 has diminished as we continue to nurture and invest in our brands
to garner broader trust at the retail level. "

"In the fourth quarter of fiscal 2013, we were pleased to have substantially
completed the 'Gold Mining' program which originally started in September
2012. First, as of March 31, 2013, the number of active retail outlets that
sell our products stabilized at approximately 27,000, in line with our
projection. Since these retail outlets were selected for their existing high
levels of sales volume, we believe the marketing and promotional expenditures
incurred by these outlets became more efficient. Second, we have deployed an
effective inventory tracking system, primarily comprised of personal digital
assistant (PDA) devices and cell phone applications, to the majority of our
distributors and retail outlets. Over the past five months, we have gained
greater visibility to distributors' varying inventory levels by helping them
efficiently trace inventory distribution, preventing cross-territorial selling
and providing greater logistical support. The completion of our "Gold Mining"
strategy provides a strong foundation to improve channel inventory visibility,
drive higher efficiency of marketing and promotion expenditures, and ensure
greater operational efficiency. "

"The initiatives we've implemented in FY13 to improve our business performance
has set the stage for strong improvement to our top and bottom line financial
performance in FY14. We believe we can be successful delivering top line
sales growth through higher average selling prices and product volume growth.
By focusing on higher yielding sales outlets as well as our commitment to
support our brands to a more concentrated group of distributors and retail
customers, we believe we can achieve improved levels of sales, gross margin
and net profit in FY14 compared to the prior year period," concluded Mr.
Zhang.

Financial Results for the Fourth Quarter of Fiscal 2013 versus the Third
Quarter of Fiscal 2013

                                 Quarter Ended                QoQ Change
                                 March 31, 2013 December 31,
                                                2012
(in USD 000's except per share
and percentage data)
Net sales                        72,856         73,228        (372)    -1%
Cost of sales                    44,583         41,717        2,866    7%
Gross profit                     28,273         31,511        (3,238)  -10%
Gross margin                     38.8%          43.0%                  -422 bp
Selling and distribution         11,704         14,488        (2,784)  -19%
expenses
Advertising and promotion        5,674          9,910         (4,236)  -43%
expenses
General and administrative       8,234          6,967         1,267    18%
expenses
Gain on disposal and liquidation 1,015          0             1,015    n/a
of subsidiaries
Government subsidies             3,036          216           2,820    1,306%
Total operating expense          21,561         31,149        (9,588)  -31%
Income from operations           6,712          362           6,350    1,754%
Operating margin                 9.2%           0.5%                   870 bp
Interest income, interest
expense and other income (loss), (3,261)        (2,844)       (417)    15%
net
Income tax expense               100            10,971        (10,871) -99%
Net income (loss) attributable   84             (183)         267
to the noncontrolling interest
Net income (loss) attributable   3,267          (13,270)      16,537
to common stockholders
Income (loss) per share - Basic  $0.06          ($0.23)       $0.29
and diluted

Net sales decreased 1% to $72.9 million for the fourth quarter of fiscal 2013
from $73.2 million in the third quarter of fiscal 2013. Net sales from the
Company's branded powdered formula segment were $61.5 million, or 84% of net
sales in the quarter, compared to $62.4 million, or 85% of net sales, in the
previous quarter. By volume, sales of powdered formula products were 5,661
tons in the fourth quarter, which decreased from 5,875 tons in the previous
quarter. Average selling price of powdered formula products improved to
$10,862 per ton from $10,620 per ton in the previous quarter.

Net sales from Other Products, which includes imported whole milk powder and
whey protein powder sold to industrial customers, was $8.0 million, or 11% of
net sales, in the fourth quarter of fiscal 2013, compared to $10.6 million, or
14% of net sales in the previous quarter. As explained in detail in the
Company's 10-K for fiscal year 2013, Synutra incurs ancillary sales of raw
milk / whey protein powder due to its production methods, and such sales may
vary from quarter to quarter.

Gross profit was $28.3 million in the fourth quarter of fiscal 2013, compared
to $31.5 million in the previous quarter. Gross margin in the fourth quarter
of fiscal 2013 was 39% compared to 43% in the previous quarter. Powdered
formula margin decreased to 48% from 52% in the previous quarter. At 48%, the
powdered formula segment margin is in line with the Company's historical
levels.

Income from operations was $6.7 million, compared to income from operations of
$362 thousand in the previous quarter. This sequential increase reflects lower
sales and marketing expenses after the Gold Mining project, a $3.0 million
government subsidy and a $1.0 million gain on liquidation and disposal of
subsidiaries.

Selling and distribution expenses were $11.7 million, compared with $14.5
million in the previous quarter, reflecting the lower overhead at our sales
team, in particular the decreased bonus for sales staff as full year fiscal
2013 sales targets were not met.

Advertising and promotional expenses were $5.7 million, compared with $9.9
million in the previous quarter, reflecting more efficient allocation of
market expenses after the Gold Mining project.

General and administrative expenses were $8.2 million, compared with $7.0
million in the previous quarter.

Fiscal 2013 fourth quarter income tax expense decreased to $100 thousand from
an income tax expense of $11.0 million (including income tax expense from
valuation allowance of $11.1 million) in the fiscal third quarter.
Considering the accumulated loss as of March 31, 2013, we recognized income
tax expense of $36.5 million from valuation allowance for deferred tax assets
existed at opening of fiscal 2013, and did not recognize income tax benefit
for the loss incurred in fiscal 2013. As of March 31, 2013, we had deferred
tax assets of $57.0 million and we had fully provided valuation allowance for
it. Tax benefits relating to future reversals of the valuation allowance on
deferred tax assets, if any, will be recognized as a reduction of income tax
expense.

Net income attributable to common stockholders was $3.3 million in the fourth
quarter of fiscal year 2013, or $0.06 per diluted share, compared with a net
loss of $13.3 million, which included $11.1 million income tax expense from
valuation allowance for deferred tax assets, or $(0.23) per diluted share, in
the previous quarter.

Full Year Ended March 31, 2013 Financial Results

Net sales for the full year of fiscal 2013 ended March 31, 2013 decreased to
$265.8 million from $342.5 million in the prior year period. Net sales from
branded powdered formula products decreased to $224.4 million, or 84% of net
sales, compared to $301.7 million, or 88% of net sales in the prior year
period. The decrease was primarily due to the significant purchases by
distributors prior to our retail price increase effective April 1, 2012, and
the short-term impact on orders as we implemented the Gold Mining program
throughout fiscal year 2013.

Net sales from Other Products, which consists mainly of sales of imported
whole milk powder and whey protein sold to industrial customers, were $34.2
million, or 13% of net sales, compared to $39.7 million, or 12% of net sales,
in the prior year period.

Gross profit decreased 33% to $94.6 million for full year of fiscal 2013 from
$140.9 million in the prior year period. Gross margin was 36% compared to 41%
for the prior year period. The gross margin decline was primarily attributable
to the decline in average sales price in our Powdered Formula segment and the
margin decrease in our Others segment.

Loss from operations was $14.0 million for the full year of fiscal 2013,
compared to an operating income of $42.8 million in the prior year period.

Net loss attributable to common stockholders was $63.9 million for the full
year of fiscal 2013, including $36.5 million income tax expense from valuation
allowance for deferred tax assets, or $(1.11) per diluted share, compared to a
net income of $16.7 million, or $0.29 per diluted share, in the prior year
period.

Balance Sheet

As of March 31, 2013, the Company had cash and cash equivalents of $79.1
million and restricted cash of $108.3 million, including the current and
non-current portion. Net account receivables decreased to $30.2 million on
March 31, 2013 from $45.2 million on December 31, 2012 while the Company's
sequential inventory position increased 11% to $87.7 million from $79.2
million.

Conference Call Details

The Company will hold a conference call on Friday, June 14, 2013 at 8:00 a.m.
Eastern Time to discuss the financial results. Listeners may access the call
by dialing the following numbers:

United States Toll Free: +1 (855) 500-8701
International:           +65 6723-9385
Conference ID:           77618119

A webcast and replay of the conference call will be available through the
Company's IR website at 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 through its
operating subsidiaries 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 all provinces and provincial-level municipalities in mainland
China. As of March 31, 2013, this network comprised over 670 independent
distributors and over 680 independent sub-distributors who sell Synutra
products in approximately 27,000 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 Synutra's products; the safety and quality of
Synutra's products; 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 Synutra's filings with
the Securities and Exchange Commission. 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.

FOR FURTHER INFORMATION:

Synutra International, Inc.
Investor Relations Department
ir@synutra.com or 646-328-2552



Synutra International, Inc.
Consolidated Balance Sheets
Dollars and shares in thousands, except per share data
                                               March 31, 2013   March 31, 2012
ASSETS
Current Assets:
Cash and cash equivalents                    $ 79,050         $ 64,793
Restricted cash                                68,410           30,425
Accounts receivable, net of allowance          30,183           38,753
Inventories                                    87,707           75,499
Due from related parties                       2,696            12,262
Income tax receivable                          5                227
Receivable from assets disposal                -                1,037
Prepaid expenses and other current assets      18,404           16,320
Deferred tax assets                            -                17,827
Total current assets                           286,455          257,143
Property, plant and equipment, net             130,121          134,902
Land use rights, net                           10,829           10,198
Intangible assets, net                         4,135            4,377
Restricted cash                                39,883           21,019
Due from related parties                       2,981            -
Other assets                                   1,740            1,367
Deferred tax assets                            0                18,907
TOTAL ASSETS                                 $ 476,144        $ 447,913
LIABILITIES AND EQUITY
Current Liabilities:
Short-term debt                              $ 127,449        $ 86,614
Long-term debt due within one year             82,663           40,831
Accounts payable                               48,717           70,927
Due to related parties                         1,862            1,655
Advances from customers                        12,982           5,991
Other current liabilities                      52,788           40,560
Total current liabilities                      326,461          246,578
Long-term debt                                 102,164          92,745
Deferred revenue                               4,402            4,377
Capital lease obligations                      7,848            4,726
Other long-term liabilities                    6,062            2,395
Total liabilities                              446,937          350,821
Equity:
Synutra International, Inc. shareholders'
equity
Common stock, $.0001 par value: 250,000
authorized; 57,301 and 57,301 issued and       6                6
outstanding at March 31, 2013 and 2012,
respectively
Additional paid-in capital                     135,440          135,440
Accumulated deficit                            (135,508)        (71,620)
Accumulated other comprehensive income         28,828           32,201
Total Synutra common shareholders' equity      28,766           96,027
Noncontrolling interest                        441              1,065
Total equity                                   29,207           97,092
TOTAL LIABILITIES AND EQUITY                 $ 476,144        $ 447,913







Synutra International, Inc.
Consolidated Statements of Operations
Dollars in thousands, except per share data
                             Three Months Ended March   Year Ended March 31,
                             31,
                             2013            2012        2013         2012
Net sales                  $ 72,856     $    85,367    $ 265,770   $  342,539
Cost of sales                44,583          49,808      171,211      201,618
Gross profit                 28,273          35,559      94,559       140,921
Selling and distribution     11,704          13,813      53,607       51,221
expenses
Advertising and promotion    5,674           5,804       32,574       28,442
expenses
General and administrative   8,234           3,332       30,220       23,948
expenses
Gain on disposal of          1,015           -           3,625        -
subsidiaries
Other operating income,      3,036           3,583       4,217        5,484
net
Income (loss) from           6,712           16,193      (14,000)     42,794
operations
Interest expense             3,507           3,151       15,018       14,276
Interest income              645             466         2,326        1,870
Other income (expense),      (399)           83          (343)        146
net
Income (loss) before
income tax expense           3,451           13,591      (27,035)     30,534
(benefit)
Income tax expense           100             6,140       37,186       13,510
(benefit)
Net income (loss)            3,351           7,451       (64,221)     17,024
Net income (loss)
attributable to the          84              (71)        (333)        287
noncontrolling interest
Net income (loss)
attributable to Synutra    $ 3,267      $    7,522     $ (63,888)  $  16,737
International, Inc. common
stockholders
Earnings (loss) per share  $ 0.06       $    0.13      $ (1.11)    $  0.29
- basic and diluted
Weighted average common
stock outstanding - basic    57,301          57,301      57,301       57,301
and diluted





SOURCE Synutra International, Inc.

Website: http://www.synutra.com
 
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