Synutra Reports First Quarter Fiscal 2014 Financial Results
~ Formula Sales Recovery Demonstrates Effectiveness of Gold Mining Program
~~ Exceeds 1Q14 Sales Forecast
QINGDAO, China and ROCKVILLE, Md., Aug. 8, 2013
QINGDAO, China and ROCKVILLE, Md., Aug. 8, 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
first quarter of fiscal 2014 ended June 30, 2013.
Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "We are very pleased
with our overall performance and the ongoing recovery of our core business
this quarter, highlighted by our better than forecasted quarterly sales
results and improved profitability during a seasonally slower period. We
continued to strengthen the sales operation in our core branded powdered
formula segment and also experienced significant results within our
nutritional ingredients segment. As our sales organization and outlet network
continued to stabilize, we experienced year-over-year as well as sequential
increases to both our shipment volume and average selling price."
"We also experienced notable progress in our Nutritional Ingredients and
Supplements segment, winning substantial orders that propelled us into the
leading market share position of chondroitin sulfate materials in the world
for the first time. Our capacity utilization in this business segment
increased to approximately 70% in the first quarter and is expected to
increase further in the coming quarters."
"The Chinese infant formula industry has experienced some major changes in
recent months. We are closely watching and evaluating any impact this may
have on Synutra, while also capitalizing on opportunities that could come with
the changes. We will proactively communicate any risk factors we perceive
with the investment market. With our strong supply chain, our
state-of-the-art production facility, our brand equity and our solid sales
operation after the Gold Mining program, we remain confident in Synutra's
ability to be a leading player in the Chinese infant milk formula industry."
concluded Mr. Zhang.
Financial Results for the First Quarter of Fiscal 2014 versus the Fourth
Quarter of Fiscal 2013
Quarter Ended QoQ Change
June 30, 2013 March 31, 2013
(in USD 000's except per share
and percentage data)
Net sales 82,205 72,856 9,349 13%
Cost of sales 46,124 44,583 1,541 3%
Gross profit 36,081 28,273 7,808 28%
Gross margin 43.9% 38.8% 510 bps
Selling and distribution 14,771 11,704 3,067 26%
Advertising and promotion 8,476 5,674 2,802 49%
General and administrative 6,452 8,234 (1,782) -22%
Gain on disposal and liquidation 367 1,015 (648) -64%
Government subsidies 165 3,036 (2,871) -95%
Total operating expenses 29,167 21,561 7,606 35%
Income from operations 6,914 6,712 202 3%
Operating margin 8.4% 9.2% -80bps
Interest income, interest
expense and other income (loss), (2,059) (3,261) 1,202 -37%
Income tax expense 79 100 (21) -21%
Net income attributable to the 1 84 (83) -99%
Net income attributable to 4,775 3,267 1,508 46%
Earnings per share – Basic $0.08 $0.06 $0.02 46%
Net sales increased 13% to $82.2 million for the first quarter of fiscal 2014
from $72.9 million in the fourth quarter of fiscal 2013. Net sales from the
Company's branded powdered formula segment were $68.1 million, or 83% of net
sales in the quarter, compared to $61.5 million, or 84% of net sales, in the
previous quarter. By volume, sales of powdered formula products were 5,744
tons in the first quarter, which increased from 5,661 tons in the previous
quarter. Average selling price of powdered formula products improved to
$11,852 per ton from $10,862 per ton in the previous quarter mainly due to
less discounts and rebates to distributors.
Net sales from Nutritional ingredients and supplements, which is comprised of
external sales of chondroitin sulfate to third parties, was $6.3 million, or
8% of net sales, in the first quarter of fiscal 2014, compared to $3.2
million, or 4% of net sales in the previous quarter.
Net sales from Other Products, which includes imported whole milk powder and
whey protein powder sold to industrial customers, was $7.7 million, or 9% of
net sales, in the first quarter of fiscal 2014, compared to $8.0 million, or
11% of net sales in the previous quarter. As explained in detail in the
Company's 10-K for fiscal year 2013, Synutra expects to continuously incur
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 $36.1 million in the first quarter of fiscal 2014, compared
to $28.3 million in the previous quarter. Gross margin in the first quarter of
fiscal 2014 was 44% compared to 39% in the previous quarter. Powdered formula
margin increased to 53% from 48% in the previous quarter. At 53%, the powdered
formula segment margin reached the higher end of the Company's historical
range, driven mainly by a higher average selling price.
Income from operations was $6.9 million, compared to income from operations of
$6.7 million in the previous quarter.
Selling and distribution expenses were $14.8 million, compared with $11.7
million in the fourth quarter of fiscal 2013, reflecting reduced sales staff
bonuses in the previous quarter as full year fiscal 2013 sales targets were
Advertising and promotional expenses were $8.5 million, compared with $5.7
million in the previous quarter, reflecting increased expenses associated with
the nation-wide promotional events organized in May 2013.
General and administrative expenses were $6.5 million, compared with $8.2
million in the previous quarter, reflecting less bad-debt expenses.
Fiscal 2014 first quarter income tax expense was $79 thousand compared to $100
thousand in the fourth quarter of fiscal 2013, which was mainly withholding
income tax paid on intercompany services. The Company fully provided
valuation allowance for the deferred tax assets as of June 30, 2013 and March
31, 2013. The Company had released the valuation allowance on deferred tax
assets of $1.2 million which was equal to the income tax expense generated
from this quarter's profit.
Net income attributable to common stockholders was $4.8 million in the first
quarter of fiscal year 2014, or $0.08 per basic share, compared with a net
income of $3.3 million, or $0.06 per basic share, in the previous quarter.
As of June 30, 2013, the Company had cash and cash equivalents of $80.9
million and restricted cash of $111.7 million, including the current and
non-current portion. Net account receivables decreased to $24.7 million on
June 30, 2013 from $30.2 million on March 31, 2013 while the Company's
sequential inventory position decreased 9% to $79.9 million from $87.7
million. Total debt was $317.6 million, including $207.2 million of
short-term debt, as compared to $312.3 million as of March 31, 2013, which
included $210.1 million of short-term debt.
Conference Call Details
The Company will hold a conference call on Friday, August 9, 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
United State Toll: +1 (845) 675-0438
International Toll: + 65 6723-9385
China Toll Free: 400-120-0654
Conference ID: 20101746
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 June 30, 2013, this network comprised over 670 independent
distributors and over 710 independent sub-distributors who sell Synutra
products in approximately 27,000 retail outlets.
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.
Synutra International, Inc.
Consolidated Balance Sheets
Dollars and shares in thousands, except per share data
June 30, 2013 March 31, 2013
Cash and cash equivalents $ 80,934 $ 79,050
Restricted cash 63,108 68,410
Accounts receivable, net of allowance 24,651 30,183
Inventories 79,894 87,707
Due from related parties 3,020 2,696
Income tax receivable 6 5
Prepaid expenses and other current assets 22,520 18,404
Total current assets 274,133 286,455
Property, plant and equipment, net 129,934 130,121
Land use rights, net 10,923 10,829
Intangible assets, net 4,123 4,135
Restricted cash 48,557 39,883
Due from related parties 2,908 2,981
Other assets 2,938 1,740
TOTAL ASSETS $ 473,516 $ 476,144
LIABILITIES AND EQUITY
Short-term debt $ 116,400 $ 127,449
Long-term debt due within one year 90,823 82,663
Accounts payable 48,455 48,717
Due to related parties 1,629 1,862
Advances from customers 9,878 12,982
Other current liabilities 42,858 52,788
Total current liabilities 310,043 326,461
Long-term debt 110,414 102,164
Deferred revenue 4,371 4,402
Capital lease obligations 7,938 7,848
Other long-term liabilities 6,215 6,062
Total liabilities 438,981 446,937
Synutra International, Inc. shareholders'
Common stock, $.0001 par value: 250,000
57,301 and 57,301 issued and outstanding at 6 6
2013 and March 31, 2013, respectively
Additional paid-in capital 135,440 135,440
Accumulated deficit (130,733) (135,508)
Accumulated other comprehensive income 29,380 28,828
Total Synutra common shareholders' equity 34,093 28,766
Noncontrolling interest 442 441
Total equity 34,535 29,207
TOTAL LIABILITIES AND EQUITY $ 473,516 $ 476,144
Synutra International, Inc.
Consolidated Statements of Operations
Dollars in thousands, except per share data
Three Months Ended June 30,
Net sales $ 82,205 $ 53,586
Cost of sales 46,124 36,285
Gross profit 36,081 17,301
Selling and distribution expenses 14,771 13,117
Advertising and promotion expenses 8,476 6,804
General and administrative expenses 6,452 7,857
Gain on disposal and liquidation of 367 420
Government subsidy 165 885
Income (loss) from operations 6,914 (9,172)
Interest expense 3,887 3,556
Interest income 1,087 487
Other income (expense), net 741 (438)
Income (loss) before income tax expense 4,855 (12,679)
Income tax expense (benefit) 79 (2,903)
Net income (loss) 4,776 (9,776)
Net income (loss) attributable to the
Net income (loss) attributable to common
$ 4,775 $ (9,699)
Earnings (loss) per share - basic $ 0.08 $ (0.17)
Weighted average common stock outstanding -
SOURCE Synutra International, Inc.
Contact: Synutra International, Inc., Investor Relations Department,
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