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Shengtai Pharmaceutical, Inc. Reports Second Quarter Fiscal 2009 Financial Results

WEIFANG, Shandong, China, Feb. 13 /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, today reported financial results for the second quarter of fiscal 2009 ended December 31, 2008.

"Sales of our glucose products increased during the second quarter compared with the September quarter," said Mr. Qingtai Liu, Shengtai Pharmaceutical's CEO. "Sales of our cornstarch and other products were impacted in the second quarter due to lower demand from the food and beverage sector along with slower economic growth. We believe that the solid demand for glucose products and the increased healthcare spending included in the Chinese government's recently approved 850 billion RMB healthcare reform plan, will propel the continued growth of our domestic glucose business. With the growth of our higher-margin glucose business, we look to consume more cornstarch internally to feed our glucose production, as our cornstarch plant directly connects into our glucose plant through pipes, eliminating shipping, lowering manufacturing costs and ensuring quality. Furthermore, we are pleased to see the declining corn prices in recent months, which will help improve our margins."

"On the sales front, our sales team is aggressively seeking new strategic partnerships, both domestically and internationally, to increase our market share and expand sales channels. In the midst of healthcare reform including new hospital build-out and increased healthcare budgets, many of our key customers are actively launching new products including higher margin non-PVC soft packaging transfusion products. We continue to engage with our current customers in an effort to increase their purchase volumes, as we seek to better understand their current procurement needs and new product development plans. With our new state-of-the-art glucose facilities, we now have the production capacity to meet the anticipated increase in glucose demand. We believe that we are well positioned to benefit from the fast growing healthcare spending in China," Mr. Liu concluded.

Second Quarter Fiscal 2009 Financial Results

Second quarter 2009 revenues were $14.80 million, as compared to $24.95 million reported in the second quarter of fiscal 2008. Sales of glucose products rose to $9.25 million during the second quarter, representing 62.5% of revenues and 12.7% quarter-over-quarter growth. Cornstarch sales for the quarter totaled $2.03 million or 13.7% of revenues. Sales of other products totaled $3.52 million, or 23.8% of revenues.

Gross profit for the three months ended December 31, 2008, was $1.99 million compared with $5.87 million in the same period last year. Gross margin for the quarter was 13.5%, as compared with 23.5% in the second quarter of fiscal 2008 primarily due to lower overall sales, reduced cornstarch and other products production, and higher depreciation costs from our new production facilities.

Selling, general and administrative (SG&A) expenses were $2.32 million, an increase of $508,509 compared with the second quarter last year. The increase in SG&A expenses was mainly the result of higher labor costs. Non-cash stock option expenses for the quarter were $158,818.

Operating income for the quarter was a loss of $328,730.

Net loss for the second quarter 2009 was $473,887 compared with net income of $3.13 million for the year-ago same quarter.

Financial Condition

As of December 31, 2008, the Company's cash and cash equivalents and restricted cash increased to $13.2 million. The Company's total shareholders' equity amounted to $47.52 million.

Business Outlook

"For the 2009 third quarter, we expect sales of our pharmaceutical grade glucose will continue to grow and cornstarch and other products should begin to show a recovery," stated Mr. Qingtai Liu, Shengtai Pharmaceutical's CEO. "As we look further into the second half of our fiscal year 2009, we expect our domestic glucose business will further benefit as the government builds more rural hospitals and community health clinics as part of the 850 billion RMB health care reform package. As more patients receive basic health coverage, we believe there will be increased demand for our glucose as medical transfusions are the most common form of medical treatment in China. We continue to execute our plan to optimize our product portfolio by expanding our glucose business, which carries a higher gross margin than our cornstarch business. As an industry leader in the production of pharmaceutical grade glucose with about 40% of China's glucose market share, as well as being one of only three certified Dextrose Monohydrate manufacturer in China, we are confident in our long-term growth opportunities, and in our ability to succeed as a leading supplier of high-quality, pharmaceutical grade glucose products," Mr. Liu concluded.

Conference Call

The Company will host a conference call and webcast on Friday February 13, 2009 at 9:00 A.M. Eastern Standard Time / 10:00 P.M. Beijing Time. A question and answer session will follow management's presentation. Mr. Qingtai Liu (Chief Executive Officer), Ms. Yiru Melody Shi (Chief Financial Officer), and Ms. Haining Michelle Wang (Investor Relations Manager) will be the primary speakers on the call.

To participate, please call the following numbers ten minutes before the call start time:

Phone Number + 1 (877) 407-8035 (North America)

Phone Number + 1 (201) 689-8035 (International)

A live webcast of the conference call will be available by accessing the below website at or on the Investor Relations page of Shengtai Pharmaceutical's website at . Please visit the website at least 15 minutes early to register for the webcast and download any necessary audio software.

A replay of the call will be available through Saturday, February 21, 2009, at 11:59 P.M. Eastern Standard Time. For the replay, please call:

     Phone Number +1 (877) 660-6853 (North America)
     Phone Number +1 (201) 612-7415 (International)
     Account Number: 286
     Conference ID Number: 313673

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 leading manufacturer and supplier of pharmaceutical grade glucose used for medical purposes. It also manufactures and supplies glucose and cornstarch products to the food, beverage and industrial production industries in China. For more information about Shengtai Pharmaceutical, Inc., please visit .

Forward-looking Statements

Certain statements made in this news release, may contain 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. These factors 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 products' 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.

                        Shengtai Pharmaceutical, Inc.
       Consolidated Statements of Income and Other Comprehensive Income
        For the three and six months ended December 31, 2008 and 2007

                                Three months ended       Six months ended
                                   December 31,            December 31,
                               2008         2007         2008         2007

    SALES REVENUE         $14,795,746  $24,954,288  $32,919,474  $44,327,357

    COST OF SALES          12,801,591   19,086,274   27,732,778   33,865,306

    GROSS PROFIT            1,994,155    5,868,014    5,186,696   10,462,051

     EXPENSES               2,322,885    1,814,376    4,752,675    3,510,931

     OPERATIONS              (328,730)   4,053,638      434,021    6,951,120

      Earnings on equity
       investment              31,561          977       33,412      149,756
      Other income             43,312       69,962       55,181      109,709
      Other expense          (242,202)     (26,495)    (251,112)    (203,844)
      Interest expense and
       other charges          (41,667)    (519,417)     (63,506)    (935,881)
      Interest income          79,380       32,243       96,673       98,404
        Other income
         (expense), net      (129,616)    (442,730)    (129,352)    (781,856)

     TAXES                   (458,346)   3,610,908      304,669    6,169,264

     TAXES                     15,541      481,323      148,760      787,168

    NET INCOME (LOSS)        (473,887)   3,129,585      155,909    5,382,096

        Foreign currency
         adjustments          123,453      140,556      287,726    1,412,651

     (LOSS)                 $(350,434)  $3,270,141     $443,635   $6,794,747

        Basic                  $(0.02)       $0.17        $0.01        $0.28
        Diluted                $(0.02)       $0.15        $0.01        $0.27

        Basic              19,123,338   18,961,992   19,109,149   18,918,496
        Diluted            19,123,338   20,296,006   19,109,149   20,000,956

                        Shengtai Pharmaceutical, Inc.
                         Consolidated Balance Sheets
                  As of December 31, 2008 and June 30, 2008

                                                    December 31,    June 30,
                                                        2008          2008
     Cash                                            $6,881,595   $3,405,606
     Restricted cash                                  6,319,465    6,763,500
     Accounts receivable, net of allowance for
      doubtful accounts of $493,507 and $440,701
      as of December 31, 2008
      and June 30, 2008, respectively                 6,192,651    7,614,236
     Notes receivable                                   703,206      458,630
     Other receivables                                  175,554      691,215
     Inventories                                      6,773,059    5,039,278
     Prepayments                                        217,503      310,381
     Loan to related party                              440,100           --
       Total current assets                          27,703,133   24,282,846

    PLANT AND EQUIPMENT, net                         70,803,112   69,943,021

     Investment in Changle Shengshi Redian Co.,
      Ltd.                                            3,665,602    3,607,912
     Loan to related party - noncurrent                      --      437,700
     Intangible assets - land use right, net of
      accumulated amortization                        3,032,706    3,042,183
       Total other assets                             6,698,308    7,087,795
         Total assets                              $105,204,553 $101,313,662


     Accounts payable                                $7,377,921   $7,669,728
     Accounts payable - related parties               1,104,312      714,776
     Notes payable - banks                           10,767,780   10,942,500
     Short term loans                                23,266,620   22,658,270
     Accrued liabilities                                257,281      261,187
     Other payable                                    2,474,936    2,146,108
     Employee loans                                   1,080,531    1,382,287
     Employee loan - officer                             53,871       53,605
     Third party loan                                   242,783      640,228
     Customer deposit                                 1,203,835      804,323
     Taxes payable                                    2,863,436    4,631,252
     Current portion of capital lease obligations        58,445           --
       Total current liabilities                     50,751,751   51,904,264

     Capital lease obligation, net of current
      portion                                         5,076,055           --
     Other payable - noncurrent                       1,859,323    2,653,995
       Total long term liabilities                    6,935,378    2,653,995
       Total liabilities                             57,687,129   54,558,259

    COMMITMENTS AND CONTINGENCIES                            --           --

     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, 19,169,805 and 19,094,805
      shares issued and outstanding as
      of December 31, 2008 and June 30, 2008,
      respectively                                       19,170       19,095
     Paid-in capital                                 20,306,019   19,987,708
     Statutory reserves                               3,003,993    2,894,902
     Retained earnings                               19,183,395   19,136,577

     Accumulated other comprehensive income           5,004,847    4,717,121
       Total shareholders' equity                    47,517,424   46,755,403

         Total liabilities and shareholders'
          equity                                   $105,204,553 $101,313,662

                        Shengtai Pharmaceutical, Inc.
                    Consolidated Statements of Cash Flows
             For the six months ended December 31, 2008 and 2007

                                                         2008          2007
     Net income                                       $155,909    $5,382,096
     Adjustments to reconcile net income to cash
       (used in) provided by operating
         Depreciation                                2,124,286     1,187,166
         Amortization                                   26,110        23,820
         Bad debt expense                               77,061            --
         Stock option expense                          317,636            --
         (Gain) Loss on equipment disposal             201,766       (90,098)
         Loss on disposal of land use right                 --         5,955
         Earnings on equity investment                 (33,412)     (149,756)
       Change in operating assets and
         Accounts receivable                         1,383,582      (311,689)
         Notes receivable                             (243,183)     (772,571)
         Other receivables                             482,406     1,186,223
         Other receivables - related party                  --     2,531,257
         Other receivables - shareholder                    --     1,254,248
         Inventories                                (1,703,009)      159,692
         Prepayments                                (1,549,571)     (472,365)
         Accounts payable                            1,492,834    (1,668,080)
         Accounts payable - related parties           (717,373)     (293,176)
         Accrued liabilities - related party           (61,824)           --
         Accrued liabilities                         1,102,279      (150,906)
         Other payable                              (2,538,294)     (313,162)
         Customer deposit                              394,375       417,062
         Payable - officer                                  --        31,145
         Taxes payable                              (1,789,911)    1,671,334
          Net cash (used in) provided by
           operating activities                       (878,333)    9,628,195

     Purchase of plant and equipment                    (1,033)      (28,455)
     Proceeds from equipment disposal                5,125,050        34,733
     Additions to construction in progress            (841,746)   (5,865,225)
     Acquisition of land use right                          --      (317,183)
     Purchase of software program                           --        (5,343)
     Advances on plant and equipment purchase               --    (5,226,396)
     Loan repayment from related party                      --       667,950
          Net cash provided by (used in)
           investing activities                      4,282,271   (10,739,919)

     Decrease in restricted cash                       479,144     3,842,060
     Borrowings on notes payable - banks            10,747,962     1,335,900
     Payments on notes payable - banks             (10,982,250)   (9,084,120)
     Borrowings on short term loans                  4,392,900     3,566,853
     Payments on short term loans                   (3,909,682)   (7,440,963)
     Borrowings on employee loans                      787,061     1,271,112
     Payments on employee loans                     (1,095,828)     (137,616)
     Borrowings on third party loan                    113,633     1,781,556
     Payments on long term loans                      (513,852)           --
     Cash proceeds from issuance of common stock           750       506,493
          Net cash provided by (used in)
           financing activities                         19,838    (4,358,725)

    EFFECTS OF EXCHANGE RATE CHANGE IN CASH             52,213        96,016

    INCREASE (DECREASE) IN CASH                      3,475,989    (5,374,433)

    CASH, beginning of period                        3,405,606     6,420,439

    CASH, end of period                             $6,881,595    $1,046,006

    For more information, please contact:

    Shengtai Pharmaceutical, Inc.
     Ms. Yiru Melody Shi
     Chief Financial Officer

     Eddie Cheung
     Investor Relations
     Tel:   +1-646-284-9414

SOURCE Shengtai Pharmaceutical, Inc.
Copyright©2009 PR Newswire.
All rights reserved

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