Synutra Reports Second Quarter Fiscal 2014 Financial Results

         Synutra Reports Second Quarter Fiscal 2014 Financial Results

~ Exceeds 2Q14 Sales and Earnings Forecast

~~ Provides 3Q14 Sales and Earnings Guidance Forecast

PR Newswire

QINGDAO, China and ROCKVILLE, Md., Nov. 8, 2013

QINGDAO, China and ROCKVILLE, Md., Nov. 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
second quarter and first half of fiscal 2014 ended September 30, 2013.

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "We are very pleased
with our second quarter performance, particularly given that the summer months
are seasonally slower periods for our business and recent industry events
added to sales volatility. The tailwind of the successful Gold Mining
Strategy continued to strengthen our pricing power with the distributors,
which offset the sequentially lower volume and rising raw material costs. Our
gross margin remained stable on a sequential basis while net margin improved
over last quarter as we continued to exert tight control on sales and general
administrative expenses."

"In addition to the steady execution of our existing production and
distribution, we're making progress on our new drying facility project in
Brittany, France. On the financing side, we have received preliminary approval
from a leading Chinese bank to fund the majority of the project investment in
the form of project financing. On the construction front, we received a key
construction permit in the fiscal second quarter and have also engaged
industry leading engineering and equipment vendors. We are expecting the final
regulatory approval, the environmental impact report for the project in
December and construction is scheduled to commence shortly after that. The
strategic importance of this project has become more and more evident as
China's infant milk formula ("IMF") industry, with the increased involvement
from the Chinese government, puts more and more emphasis on premium-quality
materials, advanced quality control techniques, and professional execution. We
expect this project to create tremendous value for both our customers and
shareholders in the long term."

"This quarter the Chinese government continued to introduce measures to
address product quality concerns and to improve the image of domestic brands.
We welcome the heightened scrutiny from the government, media and consumers
alike as we remain focused on the superior quality and safety standards of our
partners, manufacturing practices, and retail products, as well as ensuring
reasonable pricing on our various product lines for our Chinese consumers. As
we gain greater confidence in our ability to control discounts while
sustaining our shipment volume among fierce market competitions, we remain
confident in our opportunities in the second half of the year. We expect our
top line for the third quarter fiscal 2014 to be in the range of $85 to $90
million, and net income to be in the range of $7.5 to $8.5 million," concluded
Mr. Zhang.

Financial Results for the Second Quarter of Fiscal 2014 versus the First
Quarter of Fiscal 2014
                                Quarter Ended                   QoQ Change
                                September 30,  June 30, 2013
(in USD 000's except per

share and percentage data)
Net sales                       88,556         82,205           6,351   8%
Cost of sales                   49,667         46,124           3,543   8%
Gross profit                    38,889         36,081           2,808   8%
Gross margin                    43.9%          43.9%
Selling and distribution
                                13,496         14,771           (1,275) -9%
Advertising and promotion
                                10,763         8,476            2,287   27%
General and administrative
                                5,831          6,452            (621)   -10%
Gain on disposal and
                                0              367              (367)   -100%
liquidation of subsidiaries
Government subsidies            103            165              (62)    -38%
Total operating expenses        29,987         29,167           820     3%
Income from operations          8,902          6,914            1,988   29%
Operating margin                10.1%          8.4%                     164bps
Interest income, interest

expense and other income        (2,890)        (2,059)          831     40%

(loss), net
Income tax expense              14             79               (65)    -82%
Net income (loss) attributable
                                (75)           1                (76)    -7600%
to the noncontrolling interest
Net income attributable to
                                6,073          4,775            1,298   27%
common stockholders
Earnings per share – Basic      $0.11          $0.08            $0.03   27%

Net sales increased 8% to $88.6 million for the second quarter of fiscal 2014
from $82.2 million in the first quarter of fiscal 2014. Net sales from the
Company's branded powdered formula segment were $71.7 million, or 81% of net
sales in the quarter, compared to $68.1 million, or 83% of net sales, in the
previous quarter. By volume, sales of powdered formula products were 5,004
tons in the second quarter, compared to 5,744 tons in the previous quarter.
The decrease is due to the seasonality we usually experience in July and
August, the reluctance to order by distributors and stores after the
regulatory changes in June and the promotional campaigns launched by
competitors as two market leading brands had bacteria contamination issues in
August. This decrease in volume was offset by an increase in average selling
price of powdered formula products, which improved to $14,319 per ton from
$11,852 per ton in the previous quarter mainly due to lower levels of
discounts and rebates to distributors and retail stores.

Net sales from Nutritional ingredients and supplements, which is comprised of
external sales of chondroitin sulfate to third parties, was $5.3 million, or
6% of net sales, in the second quarter of fiscal 2014, compared to $6.3
million, or 8% of net sales in the previous quarter. We continue to execute
under long term purchase orders signed with major customers, and the quarter
to quarter variance reflects the timing difference of shipments.

Net sales from Other Products, which includes imported whole milk powder and
whey protein powder sold to industrial customers, was $11.6 million, or 13% of
net sales, in the second quarter of fiscal 2014, compared to $7.7 million, or
9% of net sales in the previous quarter. 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 $38.9 million in the second quarter of fiscal 2014, compared
to $36.1 million in the previous quarter. Gross margin in the second quarter
of fiscal 2014 remained stable at 44% from the previous quarter. Powdered
formula margin also remained at 53% from the previous quarter, the higher end
of the Company's historical range, as the higher average selling price was
offset by increased raw material cost, mainly the cost of raw milk powder.

Income from operations was $8.9 million, compared to income from operations of
$6.9 million in the previous quarter.

Selling and distribution expenses were $13.5 million, compared with $14.8
million in the first quarter of fiscal 2014. The sales expense ratio was
lower in the fiscal second quarter as the fiscal first quarter reflected a
onetime compensation cost related to the Company's restructuring of its sales
team as part of the Gold Mining Strategy. 

Advertising and promotional expenses were $10.8 million, compared with $8.5
million in the previous quarter, reflecting Synutra's limited participation in
promotional activities in August 2013 after the aforementioned contamination
event affected competitors.

General and administrative expenses were $5.8 million, compared with $6.5
million in the previous quarter, reflecting less bad-debt expenses.

Net income attributable to common stockholders was $6.1 million in the second
quarter of fiscal year 2014, or $0.11 per basic share, compared with a net
income of $4.8 million, or $0.08 per basic share, in the previous quarter.

First Half Ended September 30, 2013 Financial Results

Net sales for the first half of fiscal 2014 ended September 30, 2013 increased
to $170.8 million from $119.7 million in the prior year period. Net sales from
branded powdered formula products increased to $139.7 million, or 82% of net
sales, compared to $100.5 million, or 84% of net sales in the prior year

Gross profit increased 116% to $75.0 million for first half of fiscal 2014
from $34.8 million in the prior year period. Gross margin was 44% compared to
29% for the prior year period.

Income from operations was $15.8 million for the first half of fiscal 2014,
compared to a loss from operation of $21.1 million in the prior year period.

Net income attributable to Synutra International, Inc. common stockholders was
$10.8 million for the first half of fiscal 2014, or $0.19 per basic share,
compared to a net loss of $53.9 million, or $(0.94) per basic share, in the
prior year period.

Balance Sheet

As of September 30, 2013, the Company had cash and cash equivalents of $77.5
million and restricted cash of $130.2 million, including the current and
non-current portion. Net account receivables increased to $26.3 million on
September 30, 2013 from $24.7 million on June 30, 2013 while the Company's
sequential inventory position decreased 6% to $75.3 million from $79.9 million
during the same period. Total debt was $308.5 million, including $103.4
million of short-term debt and $79.4 million of long term debt due within one
year, a decrease from the total debt of $317.6 million as of June 30, 2013,
which included $116.4 million of short-term debt and $90.8 million of long
term debt due within one year.

Conference Call Details

The Company will hold a conference call on Monday, November 11, 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:           75358807

A webcast and replay of the conference call will be available through the
Company's IR website at

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 September 30, 2013, this network comprised over 710 independent
distributors and over 700 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,
particularly the progress on the new drying facility project in France; 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.
Investor Relations Department or 646-328-2552

Synutra International, Inc.
Consolidated Balance Sheets
Dollars and shares in thousands, except per share data
                                           September 30, 2013   March 31, 2013
Current Assets:
Cash and cash equivalents                $ 77,511             $ 79,050
Restricted cash                            83,235               68,410
Accounts receivable, net of allowance      26,317               30,183
Inventories                                75,276               87,707
Due from related parties                   3,277                2,696
Income tax receivable                      2                    5
Prepaid expenses and other current         15,329               18,404
Assets held for sale                       3,263                0
Total current assets                       284,210              286,455
Property, plant and equipment, net         127,726              130,121
Land use rights, net                       9,431                10,829
Intangible assets, net                     3,884                4,135
Restricted cash                            46,978               39,883
Due from related parties                   2,771                2,981
Other assets                               3,863                1,740
TOTAL ASSETS                             $ 478,863            $ 476,144
Current Liabilities:
Short-term debt                          $ 103,443            $ 127,449
Long-term debt due within one year         79,352               82,663
Accounts payable                           47,512               48,717
Due to related parties                     1,564                1,862
Advances from customers                    13,473               12,982
Other current liabilities                  48,307               52,788
Total current liabilities                  293,651              326,461
Long-term debt                             125,720              102,164
Deferred revenue                           4,297                4,402
Capital lease obligations                  7,953                7,848
Other long-term liabilities                6,265                6,062
Total liabilities                          437,886              446,937
Synutra International, Inc.
shareholders' equity
Common stock, $.0001 par value: 250,000
authorized; 57,301 and 57,301 issued and
outstanding at September                   6                    6

30, 2013 and March 31, 2013,
Additional paid-in capital                 135,440              135,440
Accumulated deficit                        (124,660)            (135,508)
Accumulated other comprehensive income     29,824               28,828
Total Synutra common shareholders'         40,610               28,766
Noncontrolling interest                    367                  441
Total equity                               40,977               29,207
TOTAL LIABILITIES AND EQUITY             $ 478,863            $ 476,144

Synutra International, Inc.
Consolidated Statements of Operations
Dollars in thousands, except per share data
                                      Three Months Ended   Six Months Ended
                                      September 30,        September 30,
                                      2013       2012       2013      2012
Net sales                           $ 88,556  $  66,100   $ 170,761 $ 119,686
Cost of sales                         49,667     48,626     95,791    84,911
Gross profit                          38,889     17,474     74,970    34,775
Selling and distribution expenses     13,496     14,298     28,267    27,415
Advertising and promotion expenses    10,763     10,186     19,239    16,990
General and administrative expenses   5,831      7,162      12,283    15,019
Gain on disposal and liquidation of   0          2,190      367       2,610
Government subsidy                    103        80         268       965
Income (loss) from operations         8,902      (11,902)   15,816    (21,074)
Interest expense                      4,024      3,934      7,911     7,490
Interest income                       1,023      590        2,110     1,077
Other income (expense), net           111        (79)       852       (517)
Income (loss) before income tax       6,012      (15,325)   10,867    (28,004)
expense (benefit)
Income tax expense (benefit)          14         29,018     93        26,115
Net income (loss)                     5,998      (44,343)   10,774    (54,119)
Net income (loss) attributable to
the                                   (75)       (157)      (74)      (234)

noncontrolling interest
Net income (loss) attributable to   $ 6,073   $  (44,186) $ 10,848  $ (53,885)
common stockholders
Earnings (loss) per share - basic   $ 0.11    $  (0.77)   $ 0.19    $ (0.94)
Weighted average common stock         57,301     57,301     57,301    57,301
outstanding - basic

SOURCE Synutra International, Inc.

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