Synutra Reports Financial Results for the Fourth Quarter and Full Year Fiscal 2010
QINGDAO, China and ROCKVILLE, Md., June 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 fourth quarter and fiscal year ended March 31, 2010.
Fourth Quarter Fiscal 2010 Financial Highlights -- Net sales up 13.4% to $82.4 million from $72.7 million in the prior year period -- Gross profit increased 69.1% to $38.9 million from $23.0 million in the prior year period -- Gross margin up substantially to 47.2% from 31.7% in the prior year period -- Operating income increased to $11.8 million from an operating loss of $19.4 million in the prior year period -- Net income increased to $9.1 million, or $0.17 per diluted share, from a net loss of $17.2 million, or ($0.32) per diluted share, in the prior year period
Mr. Liang Zhang, Chairman and CEO of Synutra stated, "We are very pleased with our fiscal fourth quarter financial results, which demonstrate a return to growth and profitability and the initial success of the significant operational improvements we implemented over the past year. Today's results also demonstrate a more normalized market environment for our infant formula products. We believe our market position is gaining strength and that there are also strong signs of recovery in the end market.
"We were also able to lower the risk profile of our Company with additional progress on two fronts. First, the improvement in our liquidity position led to the removal of the 'going concern' emphasis expressed in the prior year's audit. Second, after appropriately addressing past legal actions in China, our motion to dismiss the outstanding product liability lawsuit in the U.S. was granted."
Fourth Quarter Fiscal 2010 Financial Results
Net sales were $82.4 million in the fourth quarter of fiscal 2010, a 13.4% increase from $72.7 million in the fourth quarter of fiscal 2009. Net sales from the Company's branded powdered formula segment were $69.8 million, or 84.7% of net sales in the quarter, up slightly from $69.2 million, or 95.2% of net sales in the prior year period. On a sequential basis, net sales from the branded powdered formula segment improved 74.1% from $40.1 million in the third quarter of fiscal year 2010. Net sales of the Company's Super series infant formula accounted for approximately 56.6% of the volume of sales and 68.9% of the net sales for the segment for the fourth quarter of fiscal year 2010.
Net sales from Other products, which mainly consist of the surplus milk powder to industrial customers, was $11.6 million, or 14.1% of net sales in the fourth quarter of fiscal 2010, up from $3.2 million, or 4.4% of net sales in the prior year period, and was down 79.5% sequentially from $56.5 million, or 58.4% of total sales in the third quarter of fiscal 2010.
Gross profit increased 69.1% to $38.9 million in the fourth quarter of fiscal 2010, from $23.0 million in the prior year period. Gross margin in the fourth quarter of fiscal 2010 was 47.2%, up from 31.7% in the prior year period.
Operating income was $11.8 million in the fourth quarter of fiscal 2010, compared with an operating loss of $19.4 million in the prior year period. Selling and distribution expenses increased 7.4% to $11.5 million in the fourth quarter of fiscal 2010 from $10.8 million in the prior year period. Advertising and promotion expenses decreased 78.1% to $6.6 million in the fourth quarter of fiscal 2010 from $30.2 million in the prior year period. The decrease primarily reflects a shift in the Company's marketing strategy from a historical reliance on aggressive advertising and promotional campaigns to increased consumer focused promotional and educational activities in communities, medical facilities and healthcare clinics. General and administrative expenses increased 45.2% to $9.5 million in the fourth quarter of fiscal 2010 from $6.5 million in the prior year period. The increase primarily reflects the incurrence of $3.0 million in bad debt allowance in the fourth fiscal quarter as the Company strengthened its distribution network following the melamine contamination incident by extending credit terms to help the recovery of distributors and strategically terminated select distributor relationships.
Net income was $9.1 million, or $0.17 per diluted share in the fourth quarter of fiscal 2010, compared with a net loss of $17.2 million or ($0.32) per diluted share in the prior year period.
Full Year Ended March 31, 2010 Financial Results
Net sales for the fiscal year ended March 31, 2010 decreased 6.6% to $291.9 million from $312.5 million in the prior fiscal year. Net sales from branded powdered formula products decreased 31.8% to $194.4 million, or 66.6% of net sales in the fiscal year ended March 31, 2010, from $284.8 million, or 91.1% of net sales in the prior fiscal year.
Net sales from Other products, which consist mainly of the surplus milk powder to industrial customers, were $95.2 million, or 32.6% of net sales in the fiscal year 2010, compared to $27.4 million, or 8.8% of net sales in the prior fiscal year. The change in revenue mix primarily reflects the impact from the melamine contamination incident on the Company's branded powdered formula segment.
Gross profit was $83.4 million in fiscal year 2010, which increased 56.1% from $53.4 million in the prior fiscal year. Gross margin increased to 28.6% in fiscal year 2010 from 17.1% in the prior year period.
Operating loss was $23.9 million in fiscal year 2010, compared to an operating loss of $125.9 million in the prior fiscal year. Net loss was $24.6 million in fiscal year 2010, or ($0.46) per diluted share, compared with a net loss of $100.5 million, or ($1.86) per diluted share in the prior year.
As of March 31, 2010, the Company had cash and cash equivalents of $48.7 million and restricted cash of $33.4 million.
Conference Call Details
The Company will hold a conference call on June 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: 77338127 The replay will be accessible through June 17, 2010 by dialing the following numbers: United States toll free: +1 (800) 642-1687 International: +1 (706) 645-9291 Conference ID: 77338127
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 March 31, 2010, this network comprised over 540 independent distributors and over 1000 independent sub-distributors who sell Synutra products in over 71,000 retail outlets. Additional information about Synutra International, Inc. can be found at http://www.synutra.com .
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.
FOR FURTHER INFORMATION: Synutra International, Inc. Investor Relations Department Email: firstname.lastname@example.org Tel: +1-301-840-3888 Synutra International, Inc. CONSOLIDATED STATEMENTS OF INCOME (unaudited) In USD thousands, except per share data Three Three Twelve Twelve Months Months Months Months Ended Ended Ended Ended March March March March 31, 2009 31, 2010 31, 2009 31, 2010 Net sales 72,699 82,411 312,528 291,886 Cost of sales 49,669 43,472 259,086 208,476 Gross profit 23,030 38,939 53,442 83,410 Selling and distribution expenses 10,750 11,543 44,178 43,989 Advertising and promotion expenses 30,163 6,606 115,478 33,854 General and administrative expenses 6,538 9,493 25,455 24,509 Impairment loss (reversal) from assets disposal -- (80) -- 5,894 Other operating income, net 4,987 396 5,790 894 Income (loss) from operations (19,434) 11,773 (125,879) (23,942) Interest expense 2,413 2,386 4,857 8,603 Interest income (153) 246 341 1,850 Other income (expense), net 205 10 (580) (1,081) Income (loss) before income tax expense (benefit) (21,795) 9,643 (130,975) (31,776) Income tax expense (benefit) (4,608) 593 (30,386) (6,904) Net income (loss) (17,187) 9,050 (100,589) (24,872) Net loss attributable to the noncontrolling interest 16 28 40 257 Net income (loss) attributable to Synutra International, Inc. common shareholders (17,171) 9,078 (100,549) (24,615) Earning (loss) per share-basic (0.32) 0.17 (1.86) (0.46) Earning (loss) per share-diluted (0.32) 0.17 (1.86) (0.46) Weighted average common share outstanding-basic 54,001 54,001 54,001 54,001 Weighted average common share outstanding-diluted 54,001 54,187 54,001 54,001 Synutra International, Inc. CONSOLIDATED BALANCE SHEETS (unaudited) In USD thousands, except per share data March 31, 2009 March 31, 2010 ASSETS Current Assets: Cash and cash equivalents 37,736 48,693 Restricted cash 84,338 33,384 Accounts receivable, net of allowance of $1,452 and $4,355, respectively 23,826 26,013 Inventories 114,724 52,134 Due from related parties 2,463 8,111 Income tax receivable 1,476 523 Receivable from assets disposal -- 5,879 Prepaid expenses and other current assets 13,436 8,209 Deferred tax assets 16,276 33,390 Total current assets 294,275 216,336 Property, plant and equipment, net 144,481 110,037 Land use rights, net 6,374 5,996 Intangible assets, net 3,136 3,394 Goodwill 1,435 1,437 Receivable from assets disposal -- 4,404 Other assets 4,406 3,575 Deferred tax assets 18,464 4,178 TOTAL ASSETS 472,571 349,357 LIABILITIES AND EQUITY Current Liabilities: Short-term debt 224,647 98,069 Long-term debt due within one year -- 61,194 Accounts payable 112,968 49,947 Due to related parties 5,172 2,670 Advances from customers 5,448 9,375 Product recall provision 4,547 -- Other current liabilities 21,925 22,674 Total current liabilities 374,707 243,929 Long-term debt 8,777 41,018 Deferred revenue 4,681 4,688 Capital lease obligations 5,254 5,372 Other long-term liabilities 1,756 1,419 Total liabilities 395,175 296,426 Equity: Synutra International, Inc. shareholders' equity Common stock, $.0001 par value: 250,000 authorized; 54,001 and 54,001 issued and outstanding at March 31, 2009 and 2010, respectively 5 5 Additional paid-in capital 76,607 76,607 Accumulated deficit (23,674) (48,289) Accumulated other comprehensive income 23,921 24,015 Total Synutra common shareholders' equity 76,859 52,338 Noncontrolling interest 537 593 Total equity 77,396 52,931 TOTAL LIABILITIES AND EQUITY 472,571 349,357
SOURCE Synutra International, Inc.