EX-99.1 2 v103977_ex99-1.htm
 
Exhibit 99.1

Company Contact:
Investor Relations Contact:
Mr. Yizhao Zhang
Mr. Crocker Coulson
CFO
President
Shengtai Pharmaceutical, Inc.
CCG Elite Investor Relations
Tel: +86- 536-629-5728
Tel: +1-646-213-1915 (NY Office)
E-mail: shengtaicfo@hotmail.com
E-mail: crocker.coulson@ccgir.com

FOR IMMEDIATE RELEASE

Shengtai Pharmaceutical, Inc. Reports Strong Second Quarter Results
of Fiscal Year 2008

Weifang, Shandong Province, China - February 14, 2008 - Shengtai Pharmaceutical, Inc. (OTC Bulletin Board: SGTI.OB) (“Shengtai Pharmaceutical” or “the Company”), a leading manufacturer and distributor of high-quality, pharmaceutical grade glucose products in China, today reported financial results for the three months ended December 31, 2007.
 
Second Quarter of Fiscal 2008 Highlights
 
·
Net sales increased 102.7% to $25.0 million
·
Gross profit rose 91% to $5.9 million
·
Gross profit margin was 23.5%
·
Operating income increased 121.2% to $4.1 million
·
Net income increased 97% to $3.1 million
·
Weighted avg. diluted shares outstanding were 20.3 million vs. 10.1 million
·
Fully diluted EPS was $0.15 versus $0.16
 
Second Quarter of Fiscal 2008 Results
 
For the second quarter of fiscal 2008, net revenues increased 102.7% to $25.0 million from $12.3 million for the second quarter of fiscal 2007. This increase was largely due to more cornstarch production, higher product prices, diversification of product lines and the expansion of higher-value products.
 
The Company raised the sales of cornstarch, which constituted a higher proportion of total sales revenue compared to the same reporting period last year. Although cornstarch had a lower gross profit margin, the Company nevertheless increased its production to generate necessary working capital and funds for construction of its new glucose complex.
 
In addition to its  pharmaceutical glucose series of products and cornstarch, the Company also produced significant amounts of other non-medicinal glucose or cornstarch related products. The sales revenues generated from these products were approximately 5.9 times of those the same period last year, and constituted approximately 26.6% of its total sales revenues for the six months ended December 31, 2007.
 
 
“We continued to see strong growth in second quarter of fiscal 2008,” said Chairman and CEO, Mr. Qingtai Liu. “Our revenues and net income kept growing dramatically during this quarter due to higher glucose product prices, increased cornstarch production and sales, improved sales of higher value products and the benefits from our vertically integrated production line. We believe that through manufacturing innovative products to meet market demand, we would be able to command better profit margins, diversify our product lines and minimize our operating risks.”
 
Gross profit for the three months ended December 31, 2007 was $5.9 million, an increase of 91% from $3.1 million for the same period of the prior year. Gross margin for the second quarter of fiscal 2008 was 23.5%. The increased gross profit was mostly due to economies of scale resulting from the expansion of production output and enhanced operating efficiencies. Although product cost increased as a result of commodity price increases and other raw material price increases, the selling price was higher than the price increase of raw materials, thus making its gross profit higher.
 
Selling, general and administrative expenses for the three months ended December 31, 2007 were $1.8 million, an increase of $0.9 million, or 89.4% compared with the corresponding period in 2006. The increase in selling, general and administrative expenses was the result of the increase of our production output, expansion of its domestic sales network and increased shipping costs due to higher sales of cornstarch.
 
Shengtai Pharmaceutical’s operating income in the three months ended December 31, 2007 increased 121.2% to $4.1 million from $1.8 million in the prior year, while the operating margin increased to 16.2% from 14.9%.
 
Net income for the three months ended December 31, 2007 was $3.1 million, an increase of $1.5 million, or 97% compared with the corresponding period in 2006. The increase in net income was due to an increase in our product prices, sales volume and the introduction of new products. Weighted average diluted earnings per share were $0.15 for the three months ended December 31, 2007, compared to $0.16 for the three months ended December 31, 2006. The higher share count in the second fiscal quarter of 2008 was due to a private placement of stock in May 2007.
 
Financial Condition

As of December 31, 2007, Shengtai Pharmaceutical had cash and restricted cash of $2.9 million and working deficit of $14.7 million. During the three months ended December 31, 2007, the Company generated $9.6 million in cash flow from operations. As of December 31, 2007, the Company had $36.2 million in total debt, and $38.9 million of shareholders’ equity.
 

 
Business Outlook

Shengtai Pharmaceutical’s new cornstarch production facility, with a maximum production capacity of 240,000 metric tons per year, was completed at the end of October 2007. With these cornstarch production facilities, which are close to the Company’s existing glucose production plant and new glucose production complex, the Company is able to ensure the adequacy and quality of the cornstarch as the main component of pharmaceutical glucose and lower shipping costs to improve its profit margins.

After acquiring the rights to use 85,880 square meters of new land in Changle Economic and Technology Development Zone in April 2007, Shengtai Pharmaceutical set out to build a new glucose production complex with an expected production capacity of 120,000 tons per year. The new facility will be equipped with state-of-the-art machinery and technology, and the Company will apply international quality control standards over the production. The new construction commenced in early July 2007 and is expected to be complete in the first half of calendar year 2008.

Shengtai Pharmaceutical continued to strengthen its domestic sales network through the establishment of four representative offices in Chengdu, Guangzhou, Hangzhou and Nanchang. However, international sales may be impacted somewhat due to more strict government policies to discourage food and natural resources processing exports, and the appreciation of the Renminbi against the U.S. dollar.

“By identifying and pursuing innovative products and technology, we intend to improve our cost structure, increase our market share, command better profit margins and reduce our operating risks,” commented Mr. Zhang, the Company's Chief Financial Officer, “After we upgrade our existing facilities and complete the new glucose production complex in the first half of 2008, we will shift excess cornstarch to be utilized internally for pharmaceutical glucose production and other higher value-added products, which should further increase our profitability.”

“We project that for the fiscal year ending June 30, 2008 we will achieve an after-tax net income of at least $9,000,000 or fully diluted earnings per share of at least $0.43,” said Mr. Zhang.
 
Teleconference Information

A conference call will take place at 9:00 a.m. Eastern (U.S.) time on Friday, February 15, 2008. Anyone interested in participating should call 866-800-8648 if calling from within the United States, or 617-614-2702 if calling internationally; the passcode is 835 628 35.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Friday, February 15 at 11:00 a.m. Eastern Time. To listen to the playback, please call 888-286-8010 if calling within the United States, or 617-801-6888 if calling internationally. Please use passcode 497 603 34 for the replay.
 

 
About Shengtai Pharmaceutical, Inc.

Shengtai Pharmaceutical, Inc. through its wholly-owned subsidiary Shengtai Holding, Inc. (SHI), a New Jersey corporation, and the Chinese operating company of Weifang Shengtai Pharmaceutical Co., Ltd., is a leading manufacturer and supplier of glucose products, which include pharmaceutical grade glucose used for medical purposes, and glucose and cornstarch products for the food and beverage industry and for industrial production in China. For more information about Shengtai Pharmaceutical, Inc. please visit http://www.shengtaipharmaceutical.com.
 
Forward looking Statements
 
Certain statements in this press release and oral statements made by the Company, constitute forward-looking statements. These statements include, without limitation, statements regarding our ability to prepare the company for growth, the Company's planned capacity expansion in 2008 and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the pharmaceutical industry, pricing and demand trends for the Company's products, changes to government regulations, risk associated with operation of the Company's new facilities, risk associated with large scale implementation of the company's business plan, the ability to attract new customers, ability to increase its product's applications, cost of raw materials, downturns in the Chinese economy, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. Investors are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.
 
--Financial Tables Follow--
 



CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2007 AND JUNE 30, 2007
 
A S S E T S
  
   
December 31,
  
June 30,
  
   
2007
  
2007
  
   
(Unaudited)
      
CURRENT ASSETS:
          
Cash
  
$
1,046,004
  
$
6,420,439
  
Restricted cash
    
1,885,500
    
5,628,500
 
Accounts receivable, net of allowance for doubtful accounts of $319,887
              
and $431,178 as of December 31, and June 30, 2007, respectively
    
6,345,988
    
5,779,967
 
Notes receivable
    
1,799,285
    
984,675
 
Other receivables
   
2,155,536
    
3,484,484
 
Other receivables - related parties
    
-
   
2,491,656
 
Other receivables - shareholder
    
-
   
1,229,625
 
Loan to related party
    
-
   
657,500
 
Inventories
    
4,474,855
    
4,449,267
 
Prepayments
    
631,130
    
140,376
 
Total current assets
    
18,338,298
   
31,266,489
 
           
PLANT AND EQUIPMENT, net
    
38,350,904
    
30,178,074
 
               
OTHER ASSETS:
              
Investment in Changle Shengshi Redian Co., Ltd.
    
3,188,822
    
2,675,678
 
Loan to related party - non-current
    
411,300
    
394,500
 
Prepayments - non-current
    
12,640,708
    
7,429,371
 
Intangible assets - land use right, net of accumulated amortization
    
2,193,801
    
1,816,021
 
Total other assets
    
18,434,631
   
12,315,570
 
               
 Total assets
  
$
75,123,833
  
$
73,760,133
  
               
L I A B I L I T I E S   A N D   S H A R E H O L D E R S'   E Q U I T Y
               
CURRENT LIABILITIES:
              
Accounts payable
  
$
3,408,140
  
$
3,807,997
  
Accounts payable - related party
    
935,077
    
949,992
 
Notes payable - banks
    
1,371,000
    
8,942,000
 
Short term loans
    
15,697,950
    
18,870,250
 
Accrued liabilities
    
164,386
    
229,643
 
Other payable
    
1,937,205
    
1,526,903
 
Employee loans
    
1,785,196
    
596,516
 
Employee loan - officer
    
36,963
    
-
 
Third party loan
    
2,160,193
    
318,274
 
Customer deposit
    
1,258,155
    
796,228
 
Long term loan - current maturity
    
397,590
    
381,350
 
Taxes payable
    
3,856,304
    
2,048,932
 
Total current liabilities
    
33,008,159
   
38,468,085
 
               
LONG TERM LIABILITIES
              
Other payable - noncurrent
    
3,183,858
    
3,661,472
 
Total long term liabilities
    
3,183,858
   
3,661,472
 
               
Total liabilities
    
36,192,017
   
42,129,557
 
           
COMMITMENTS AND CONTINGENCIES
    
-
   
-
 
               
SHAREHOLDERS' EQUITY:
              
Preferred stock, $0.001 par value, 5,000,000 shares authorized,
              
no shares issued and outstanding
    
-
   
-
 
Common stock, $0.001 par value, 100,000,000 shares authorized,
              
19,069,805 and 18,875,000 shares issued and outstanding as of
             
December 31, and June 30, 2007, respectively
    
19,070
   
18,875
 
Paid-in capital
    
19,669,847
   
19,163,549
 
Statutory reserves
    
1,735,484
   
1,735,484
 
Retained earnings
    
15,267,766
   
9,885,670
 
Accumulated other comprehensive income
    
2,239,649
   
826,998
 
Total shareholders' equity
    
38,931,816
   
31,630,576
 
               
 Total liabilities and shareholders' equity
  
$
75,123,833
  
$
73,760,133
  
 

 

SHENGTAI PHARMACEUTICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
FOR THE SIX AND THREE MONTHS ENDED DECEMBER 31, 2007 AND 2006
(UNAUDITED)
 
   
Three months ended
  
Six months ended
  
   
December 31,
  
December 31,
  
   
2007
  
2006
  
2007
  
2006
  
SALES REVENUE
  
$
24,954,288
  
$
12,310,489
  
$
44,327,357
  
$
22,909,810
  
                           
COST OF SALES
    
19,086,274
   
9,237,442
   
33,865,306
   
17,397,319
 
                           
GROSS PROFIT
   
5,868,014
   
3,073,047
   
10,462,051
   
5,512,491
 
                           
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
   
1,814,376
   
958,077
   
3,510,931
   
1,929,945
 
                           
INCOME FROM OPERATIONS
    
4,053,638
   
2,114,970
   
6,951,120
   
3,582,546
 
                           
OTHER (EXPENSE) INCOME:
                          
Earnings on equity investment
    
977
   
17,683
   
149,756
   
22,207
 
Non-operating income
   
69,962
   
38,369
   
109,709
   
97,163
 
Non-operating expense
    
(26,495
)
  
(2,783
)
  
(203,844
)
  
(2,783
)
Interest expense and other charges
    
(519,417
)
  
(351,223
)
  
(935,881
)
  
(368,638
)
Interest income
    
32,243
   
15,678
   
98,404
   
43,645
 
Other (expense), net
    
(442,730
)
  
(282,276
)
  
(781,856
)
  
(208,406
)
                           
INCOME BEFORE PROVISION FOR INCOME TAXES
    
3,610,908
   
1,832,694
   
6,169,264
   
3,374,140
 
                           
PROVISION FOR INCOME TAXES
    
481,323
   
243,723
   
787,168
   
301,138
 
                           
NET INCOME
   
3,129,585
   
1,588,971
   
5,382,096
   
3,073,002
 
 
                          
OTHER COMPREHENSIVE INCOME:
                          
Foreign currency translation adjustments
    
140,556
   
246,971
   
1,412,651
   
246,971
 
                           
COMPREHENSIVE INCOME
 
$
3,270,141
  
$
1,835,942
  
$
6,794,747
  
$
3,319,973
  
                           
EARNINGS PER SHARE
                          
Basic
  
$
0.17
  
$
0.16
  
$
0.28
  
$
0.30
  
Diluted
  
$
0.15
  
$
0.16
  
$
0.27
  
$
0.30
  
                           
WEIGHTED AVERAGE NUMBER OF SHARES
                          
Basic
    
18,961,992
   
10,125,000
   
18,918,496
   
10,125,000
 
Diluted
    
20,296,006
   
10,125,000
   
20,000,956
   
10,125,000
 
 

 

SHENGTAI PHARMACEUTICAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2007 AND 2006
(UNAUDITED)
 
   
2007
  
2006
  
               
CASH FLOWS FROM OPERATING ACTIVITIES:
              
Net income
 
$
5,382,096
  
$
3,073,002
  
Adjustments to reconcile net income to cash
             
provided by operating activities:
              
Depreciation
    
1,187,166
   
802,766
 
Amortization
    
23,820
   
21,159
 
Allowance for bad debts
    
(126,334
)
  
718
 
Gain on equipment disposal
    
(90,098
)
  
-
 
Loss on disposal of land use right
    
5,954
   
-
 
Earnings on equity investment
    
(149,757
)
  
(22,207
)
Change in operating assets and liabilities:
              
Accounts receivable
    
(185,355
)
  
(1,042,970
)
Notes receivable
    
(772,571
)
  
(569,932
)
Other receivables
    
1,186,223
   
(975
)
Other receivables - related party
    
2,531,257
   
(502,261
)
Other receivables - shareholder
    
1,254,248
   
-
 
Inventories
    
159,692
   
(393,469
)
Prepayments
    
(472,365
)
  
(139,392
)
Prepayments - related party
    
-
   
(39,024
)
Accounts payable
    
(1,668,080
)
  
896,568
 
Accounts payable - related party
    
(293,176
)
  
(412,070
)
Accrued liabilities
    
(150,906
)
  
43,689
 
Other payable
    
(313,162
)
  
299,581
 
Customer deposit
    
417,062
   
398,934
 
Payable - officer
    
31,145
       
Taxes payable
    
1,671,334
   
33,746
 
 Net cash provided by operating activities
    
9,628,193
   
2,447,863
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
              
Acquisition of equity investment
    
-
   
(898,150
)
Purchase plant and equipment
    
(28,455
)
  
(415,524
)
Proceeds from equipment disposal
    
34,733
       
Additions to construction in progress
    
(5,865,225
)
  
(7,553,156
)
Acquisition of land use right
   
(317,183
)
  
(10,677
)
Purchase of software program
    
(5,343
)
  
-
 
Advances on plant and equipment purchase
    
(5,226,396
)
  
-
 
Loan repayment from related party
    
667,950
       
Loan to related party - non-current
    
-
   
(723,205
)
 Net cash used in investing activities
    
(10,739,919
)
  
(9,600,712
)
               
CASH FLOWS FROM FINANCING ACTIVITIES:
              
Decrease in restricted cash
    
3,842,060
   
28,071
 
Borrowings on notes payable - banks
    
1,335,900
   
7,055,930
 
Payments on notes payable - banks
    
(9,084,120
)
  
(7,084,000
)
Borrowings on short term loans
   
3,566,853
   
13,168,650
 
Payments on short term loans
   
(7,440,963
)
  
(4,946,150
)
Borrowings on employee loans
    
1,271,112
   
-
 
Payments on employee loans
    
(137,616
)
  
-
 
Borrowings on third party loan
    
1,781,556
   
-
 
Payments on long term loans
    
-
   
(885,500
)
Cash proceeds from issuance of common stock
    
506,493
   
-
 
Dividend paid to shareholders
    
-
   
(393,257
)
 Net cash (used in) provided by financing activities
    
(4,358,725
)
  
6,943,744
 
               
EFFECTS OF EXCHANGE RATE CHANGE IN CASH
    
96,016
   
9,228
 
               
DECREASE IN CASH
    
(5,374,435
)
  
(199,877
)
               
CASH, beginning of period
    
6,420,439
   
502,457
 
               
CASH, end of period
  
$
1,046,004
  
$
302,580
  
 
###