Shengtai Pharmaceutical Reports Third Quarter Fiscal 2011 Financial Results

WEIFANG, China, May. 16, 2011 /PRNewswire-Asia-FirstCall/ -- Shengtai Pharmaceutical, Inc. (OTC Bulletin Board: SGTI) ("Shengtai" or "the Company"), a leading manufacturer and distributor of high-quality, pharmaceutical grade glucose products in China, and a manufacturer and distributor in China of starch products, today reported financial results for the third quarter of fiscal 2011 ended March 31, 2011.

"Revenue from our glucose products, corn products, and by products all increased during the third quarter fiscal year 2011 compared to the same quarter last year," said Mr. Qingtai Liu, Shengtai Pharmaceutical's CEO. "Sales increased due to higher demand of our products from both international and domestic markets. With the growth of our business, we look to improve our sales and net income greatly in 2011 compared to the same period last year."

"During the third quarter 2011, we continued to develop our customer base, both domestically and internationally. In January 2011, we completed the expansion of a new cornstarch production facility which increased our production capacity from 300,000 tons to 400,000 tons. With our new state-of-the-art facilities, we now have the production capacity to meet the anticipated increase in demand. We also completed construction on a warehouse to store an additional 22,000 tons of corn, our major raw material. Since corn prices have been increasing the additional inventory ability will help to control our cost." Mr. Liu concluded.

Third Quarter Fiscal 2011 Financial Results

Net sales for the three months ended March 31, 2011 were $41,686,161, an increase of $12,278,874, or 41.75%, compared with $29,407,287 for the same period in 2010. The increase in net sales primarily resulted from increased demand of our products in all product lines and increased unit selling prices of our glucose and cornstarch products. For the three months ended March 31, 2011 compared to the same period in 2010, the quantity of our glucose products sold decreased about 4.27% from 31,545 metric tons to 30,197 metric tons, while the average unit selling price of our glucose products increased about 13.91% from $3,169 to $3,610. For the three months ended March 31, 2011 compared to the same period in 2010, the quantity of our cornstarch products sold increased about 51.71% from 23,244 metric tons to 35,263 metric tons, while the average unit selling price of our cornstarch products increased about 19.70% from $2,190 to $2,622. Particular mention must be made for our Slurry sales which increased approximately $3,171,000 or 360% for the three months ended March 31, 2011 compared to the same period last year. The increase is due to higher production of byproducts and higher demand.  Slurry is a byproduct produced in the process of cornstarch production that when dried, becomes cornstarch. For the three months ended March 31, 2011 compared to the same period last year, the quantity of our other products sold increased about 51.65% from 20,991 metric tons to 31,833 metric tons, while the average unit selling price of our other products decreased about 1.11% from $2,364 to $2,338. The increase in domestic sales is due to the improved economic environment compared with the same period last year, increased demand for glucose products due to the execution of the government stimulus plan, as well as our efforts to develop new clients.

Net sales from exports for the three months ended March 31, 2011 increased approximately 49.78% from $7,604,233 to $11,389,746, compared with the same period in 2010. The increase is mainly attributable to the recovery of the global economy resulting in an increase in the international demand for our glucose products compared to the same period last year.

Gross profit for the three months ended March 31, 2011 was $6,427,261, an increase of $770,106, or 13.61%, compared with 5,657,155 for the same period in 2010. The increase of gross profit is mainly in line with the increased sales as well as increased sales prices, offset by increased cost of goods sold mainly caused by increased raw material prices.

Gross profit margin for the three months ended March 31, 2011 was 15.42%, a decrease from 19.24% for the same period in 2010. The reason for the decrease of gross profit margin is mainly because the price of corn, our main raw material, increased approximately 13.77% for the three months ended March 31, 2011 compared to the same period last year. Average sales price for our products increased 7.15% for the three months ended March 31, 2011 compared to the same period last year. Average sales prices for the three months ended March 31, 2011 increased 13.91% and 19.70% for glucose and cornstarch products, respectively, compared to the same period last year. Average sales price of other products decreased 1.11% for the three months ended March 31, 2011 compared to the same period last year. The decrease of gross profit margin is due to the price of corn increasing more than the average sales price and also due to the change of product mix. In the three months ended March 31, 2011, more low profit products, such as Slurry, were sold compared to the same period last year when more profitable products, such as glucose, accounted for a larger percentage of total revenue. We believe that increased sales of cornstarch and byproducts will bring more positive cash flow because sales will increase as the collection rate remains the same. We are also working on improving pricing and profit control to improve gross profit margin. At the same time, we have built and are building raw material storage facilities to reduce the impact of fluctuation on the price of our raw materials. We are focused on pricing improvement as well as locking in lower cost of material.

For the three months ended March 31, 2011, selling, general and administrative expenses were $ 2,491,968, a decrease of $586,062, or 19.04%, compared to $3,078,030 for the three months ended March 31, 2010.  Selling expenses were $1,431,042 and $1,196,102 for the three months ended March 31, 2011 and 2010, respectively. The increase is mainly due to increased commission and increased shipping and handling expenses due to increased sales and increased shipping expenses such as gas expenses. General and administrative expenses were $1,060,926 and $1,881,928 for the three months ended March 31, 2011 and 2010, respectively. The decrease is mainly due to decreased expenses as a public company for the three months ended March 31, 2011, such as decreased option expenses due to options being fully vested and decreased professional expenses due to control of our expenses.

We incurred $0 and $158,818 non-cash stock option expenses for the three months ended March 31, 2011 and 2010, respectively. The option expenses are included in selling, general and administrative expenses.

Net income for the three months ended March 31, 2011 was $2,305,177, an increase of $1,327,052 compared with $978,125 for the same period in 2010. The increase in net income was primarily attributable to the increased sales in our operations, offset by increased cost of goods sold and increased income tax.

Business Outlook

"With our performance to date during the 2011 fiscal year, we are very confident and proud to say that both the net revenue and net income will increase greatly for the fiscal year 2011 compared to fiscal year 2010," stated Mr. Qingtai Liu, Shengtai Pharmaceutical's CEO. "As we look further into the fourth quarter of our fiscal year 2011, we expect our cornstarch manufacturing facility be utilized at around 85% of capacity by the end of December 31, 2011. The newly expanded cornstarch manufacturing facilities will help us to satisfy the increasing demand of our cornstarch products and byproducts. We have already built relatively large back orders for our glucose and cornstarch products. In order to continually stabilize our gross profit margin, we will continue to construct additional storage facilities to better control the impact of fluctuating corn prices. Looking forward, we are also confident with our cash position, which is enhanced by the increased sales and good accounts receivable collection. In the coming year, we will focus on providing high quality products as well as continue searching for higher profit high-tech products." Mr. Liu concluded.

Financial Condition

As of March 31, 2011, the Company's cash and cash equivalents increased to $2.2 million. The Company's total shareholders' equity amounted to $57.67 million.

About Shengtai Pharmaceutical, Inc.

Shengtai Pharmaceutical, Inc. through its wholly owned subsidiary, Shengtai Holding, Inc. (SHI), and the Chinese operating company of Weifang Shengtai Pharmaceutical Co., Ltd., is a manufacturer and distributor in China of glucose and starch products as pharmaceutical raw materials, other starch products and other glucose products such as corn meals, food and beverage glucose and dextrin. For more information about Shengtai Pharmaceutical, Inc., please visit www.shengtaipharmaceutical.com.

Forward Looking Statements

Certain statements in this press release and oral statements made by the Company constitute forward-looking statements concerning the Company's business and products. These statements include, without limitation, statements regarding our ability to prepare the Company for growth, the Company's planned capacity expansion 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.

SOURCE Shengtai Pharmaceutical, Inc.