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

WEIFANG, Shandong, China, May 16 /Xinhua-PRNewswire-FirstCall/ -- Shengtai Pharmaceutical, Inc. (OTC Bulletin Board: SGTI) ("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 March 31, 2008.

Third Quarter of Fiscal 2008 Highlights

-- Sales increased 64.8% to $20.7 million

-- Gross profit rose 37.2% to $4.5 million

-- Gross profit margin was 21.7%

-- Operating income increased 30.4% to $2.9 million

-- Net income increased 5.2% to $ 1.9 million

-- Weighted avg. diluted shares outstanding were 19.8 million vs. 10.1


-- Fully diluted EPS was $0.10 versus $0.18

Third Quarter of Fiscal 2008 Results

For the third quarter of fiscal 2008, sales increased 64.8% to $20.7 million from $12.6 million for the third quarter of fiscal 2007.

Cornstarch sales were $7.1 million in this quarter, up 212.5% from $2.3 million in the same period of 2007, sales of glucose products were $7.9 million in this quarter, down 4.3% from $8.3 million in the same period of 2007 and sales of other products were $5.6 million, up 177.5% from $2.0 million in the same period of 2007.

The increased sales of cornstarch resulted in a higher proportion of total cornstarch sales compared to the same reporting period last year. Along with an improving utilization rate of the new cornstarch manufacturing plant, the Company manufactured and sold more cornstarch with lower gross profit margins to generate necessary working capital and funds for construction of its new glucose complex. The significant growth of its other products business was mainly attributable to more sales of higher margin sodium gluconate and cornstarch byproducts associated with the greater operational size of the cornstarch business.

"The sales kept growing during this quarter 2008 2007



Net income $ 7,269,249 $ 4,866,095

Adjustments to reconcile net

income to cash provided by

operating activities:

Depreciation 2,076,992 1,295,570

Amortization 38,263 31,992

Allowance for bad debts 16,558 53,445

Gain on equipment disposal (91,480) --

Gain on disposal of land

use right (24,783) --

Compensation expense for

options issued to

employees 158,818 --

Earnings on equity

investment (192,826) (105,389)

Change in operating assets

and liabilities:

Accounts receivable (1,108,695) (2,401,163)

Notes receivable 380,411 147,315

Other receivables 1,987,660 473,493

Other receivables - related parties 2,570,100 (575,729)

Other receivables - shareholder 1,273,495 (20,900)

Inventories (1,404,996) (1,175,968)

Prepayments (620,451) 87,447

Prepayments - related parties -- (746,328)

Accounts payable (595,474) 2,756,521

Accounts payable - related parties (1,252,106) (467,190)

Accrued liabilities (568,922) 169,404

Accrued liabilities - related party 482,160 --

Other payable 362,035 105,702

Other payable - equipment purchase (1,241,003) --

Other payable - discount on

equipment purchase 626,370 --

Other payable - Intercompany -- --

Customer deposit 297,543 1,128,506

Taxes payable 2,261,984 316,605

Net cash provided by

operating activities 12,700,902 5,939,428


Acquisition of equity investment -- (904,043)

Purchases of plant and equipment (154,262) (497,603)

Proceeds from equipment disposal 35,266 --

Additions to construction in

progress (7,725,153) (11,697,698)

Acquisition of land use right (324,031) (10,747)

Purchase of software program (5,426) --

Advances on plant and equipment purchase (9,876,385) (1,069,809)

Loan repayment from related party 678,200 --

Proceed from land use right disposal 30,826 --

Net cash used in

investing activities (17,340,965) (14,179,900)



Decrease (increase) in restricted cash 3,407,360 (1,518,640)

Borrowings on notes payable - banks 5,425,600 12,959,405

Payments on notes payable - banks (10,579,920) (11,431,445)

Borrowings on short term loans 12,750,160 17,100,419

Payments on short term loans (11,380,196) (7,550,669)

Borrowings on employee loans 1,412,554 627,960

Payments on employee loans (459,082) (378,336)

Borrowings on employee loan - officer 45,187 --

Borrowings on third party loan 2,898,529 --

Payments on third party loan (2,826,195) --

Payments on long term loans -- (1,334,641)

Cash proceeds from issuance

of common stock 506,493 --

Dividend paid to shareholders -- (395,838)

Net cash provided by

financing activities 1,200,490 8,078,215


CHANGE IN CASH 248,470 14,494

DECREASE IN CASH (3,191,103) (147,763)

CASH, beginning of period 6,420,439 502,457

CASH, end of period $ 3,229,336 $ 354,694

For more information, please contact:

Company Contact:

Ms. Melody Shi


Shengtai Pharmaceutical, Inc.

Tel: +1-949-468-7078


Investor Relations Contact:

Mr. Crocker Coulson


CCG Elite Investor Relations

Tel: +1-646-213-1915 (NY Office)



due to more cornstarch production, higher product prices and increased sales of higher-value products. We were pleased with our sales this quarter despite seasonal softness due to the Chinese Spring Festival, the snow storm in February, and machine maintenance incurred in this quarter," said Chairman and CEO, Mr. Qingtai Liu, "We believe our business will continue to grow significantly in the next several quarters since we successfully launched trial production at the new glucose complex."

Gross profit for the three months ended March 31, 2008 was $4.5 million, up 37.2% from $3.3 million for the same period of the prior year. The increased gross profit was mostly due to economies of scale resulting from the expansion of production output and enhanced operating efficiencies. Gross margin for the third quarter of fiscal 2008 was 21.7%, a decrease from 26% for the same period of 2007 due to an increase in the price of raw materials and a higher proportion of cornstarch with lower profit margins.

Selling, general and administrative expenses for the three months ended March 31, 2008 were $1.6 million, up 51.4% compared with the corresponding period in 2007. The increase in selling, general and administrative expenses was attributable to increased administrative expenses such as stock-based compensation and professional and listing fees of being a listed company.

Shengtai Pharmaceutical's operating income in third quarter of fiscal 2008 increased 30.4% to $2.9 million from $2.2 million in the same period of prior year, while the operating margin was 13.9% versus 17.6% in the third quarter of fiscal 2007.

Net income for the three months ended March 31, 2008 was $1.9 million. The increase in net income was due to greater sales volume and revenue, and the fast expansion of new products. Weighted average diluted earnings per share were $0.10 for the three months ended March 31, 2008, compared to $0.18 for the three months ended March 31, 2007. The diluted weighted average shares was 19.8 million in the third fiscal quarter of 2008 versus 10.1 million for the same period of last year, primarily due to a private placement of stock in May 2007.

Financial Condition

As of March 31, 2008, Shengtai Pharmaceutical had cash and restricted cash of $5.7 million and working deficit of $20.6 million. During the three months ended March 31, 2008, the Company generated $12.7 million in cash flow from operations. As of March 31, 2008, the Company had $45.8 million in total debt, and $42.5 million of shareholders' equity.

Business Outlook

In October 2007, Shengtai Pharmaceutical completed a new cornstarch production facility with maximum annual capacity to produce 240,000 metric tons, which is close to its existing glucose production plant and new glucose production complex. Currently, the cornstarch production facility produces cornstarch to satisfy the Company's own glucose production needs, and the some excess cornstarch is sold to outside customers.

The Company has been upgrading its existing glucose facilities and is expected to reach projected annual production capacity of about 90,000 metric tons in first half of 2008. It is currently utilizing more cornstarch internally for the production of pharmaceutical glucose and other higher value-added products. The new cornstarch production facility ensures the adequacy and quality of the cornstarch as the main material of pharmaceutical glucose and lower shipping costs to improve its profit margins. During the nine months ended March 31, 2008, we estimate that by using cornstarch manufactured internally, we have saved $1.0 million.

Shengtai Pharmaceutical nearly finished the construction of the new glucose production complex with expected annual production capacity of 120,000 tons. The new facility is now equipped with most of the major high-tech operational machines and the Company will apply its international quality control standards over the production. The new facility successfully commenced trial production at the beginning of May 2008.

"We are very pleased to see our successful trial production at the new glucose complex. The official launch of its production should further satisfy strong demand of glucose products, especially for pharmaceutical grade glucose products," said Chairman and CEO, Mr. Qingtai Liu, "We will be shifting more excess cornstarch to be utilized internally to the new glucose complex, which will strengthen our glucose business and improve our profitability. We will also continue to manufacture innovative products and diversify our product lines to meet market demand to pursue higher profit margin and minimize our operating risks."

Teleconference Information

Shengtai Pharmaceutical, Inc. will conduct a conference call at 9:00 a.m. Eastern Time on Friday, May 16, 2008 to discuss the third quarter results of fiscal year 2008.

To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: 800-688-0796. International callers should dial 617-614-4070. When prompted by the operator, mention Conference Passcode 502 870 72.

If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Friday, May 16 at 11:00 a.m. Eastern Time. To access the replay, dial 888-286-8010, international callers should dial 617-801-6888, and enter the passcode 924 807 90.

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 .

Safe Harbor Statement

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release and oral statements made by the Company, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. 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 --





Three months ended Nine months ended

March 31, March 31,

2008 2007 2008 2007

SALES REVENUE $20,701,577 $12,563,088 $65,028,934 $35,472,898

COST OF SALES 16,220,665 9,297,002 50,085,971 26,694,321

GROSS PROFIT 4,480,912 3,266,086 14,942,963 8,778,577


ADMINISTRATIVE EXPENSES 1,603,932 1,059,579 5,114,863 2,989,524

INCOME FROM OPERATIONS 2,876,980 2,206,507 9,828,100 5,789,053


Earnings on equity

investment 43,070 83,182 192,826 105,389

Non-operating income 67,451 1,704 177,160 98,867

Non-operating expense (96,191) (18) (300,035) (2,801)

Interest expense and

other charges (738,634) (323,688) (1,674,515) (692,326)

Interest income 55,697 42,396 154,101 86,041

Other (expense), net (668,607) (196,424) (1,450,463) (404,830)


FOR INCOME TAXES 2,208,373 2,010,083 8,377,637 5,384,223

PROVISION FOR INCOME TAXES 321,220 216,990 1,108,388 518,128

NET INCOME 1,887,153 1,793,093 7,269,249 4,866,095


Foreign currency

translation adjustments 1,554,258 130,758 2,966,909 377,729

COMPREHENSIVE INCOME $3,441,411 $1,923,851 $10,236,158 $5,243,824


Basic $0.10 $0.18 $0.38 $0.48

Diluted $0.10 $0.18 $0.36 $0.48


Basic 19,069,805 10,125,000 18,967,857 10,125,000

Diluted 19,845,195 10,125,000 19,959,689 10,125,000



AS OF MARCH 31, 2008 AND JUNE 30, 2007


March 31, June 30,

2008 2007



Cash $ 3,229,336 $ 6,420,439

Restricted cash 2,490,000 6,128,500

Accounts receivable, net of

allowance for doubtful accounts

of $350,618 and $431,178 as of

March 31, 2008 and June 30, 2007,

respectively 7,530,395 5,779,967

Notes receivable 567,571 984,675

Other receivables 1,416,761 2,984,484

Other receivables - related

parties -- 2,491,656

Other receivables - shareholder -- 1,229,625

Loan to related party -- 657,500

Inventories 6,222,975 4,449,267

Prepayments 805,641 140,376

Total current assets 22,262,679 31,266,489

PLANT AND EQUIPMENT, net 41,998,981 30,178,074


Investment in Changle Shengshi

Redian Co., Ltd. 3,395,183 2,675,678

Loan to related party -

non-current 428,400 394,500

Prepayments - non-current 17,979,164 7,429,371

Intangible assets - land use

right, net of accumulated

amortization 2,272,278 1,816,021

Total other assets 24,075,025 12,315,570

Total assets $ 88,336,685 $ 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


Accounts payable $ 5,224,288 $ 3,807,997

Accounts payable - related

parties 507,612 949,992

Notes payable - banks 4,284,000 8,942,000

Short term loans 21,934,080 18,870,250

Accrued liabilities 135,731 229,643

Other payable 2,407,234 1,526,903

Employee loans 1,651,578 596,516

Employee loan - officer 52,572 --

Third party loan 421,776 318,274

Customer deposit 1,181,468 796,228

Long term loan - current

maturity 414,120 381,350

Taxes payable 4,625,019 2,048,932

Total current liabilities 42,839,478 38,468,085



Other payable - noncurrent 3,661,472

Total long term liabilities 2,965,162 3,661,472

Total liabilities 45,804,640 42,129,557



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

March 31, 2008 and June 30,

2007, respectively 19,070 18,875

Additional paid-in capital 19,828,665 19,163,549

Statutory reserves 1,735,484 1,735,484

Retained earnings 17,154,919 9,885,670

Accumulated other comprehensive

income 3,793,907 826,998

Total shareholders' equity 42,532,045 31,630,576

Total liabilities and

shareholders' equity $ 88,336,685 $ 73,760,133






SOURCE Shengtai Pharmaceutical, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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