GLG Life Tech Corporation Announces Third Quarter 2010 Results
The overall growth was driven primarily by new distribution contracts signed in 2010 and overall market growth for stevia sales. New markets including China and Mexico contributed to the geographic diversification of GLG’s revenues.
16 Nov 2010 --- GLG Life Tech Corporation, a vertically integrated leader in the agricultural and industrial development of stevia extracts, announces financial results for the third quarter ended September 30, 2010.
Earnings
Nine-month revenue grew 38% year-over-year to $39.6 million.
Third quarter revenue grew 41% year-over-year to $21 million. The overall growth was driven primarily by new distribution contracts signed in 2010 and overall market growth for stevia sales. New markets including China and Mexico contributed to the geographic diversification of GLG’s revenues.
Nine-month EBITDA rose 113% year-over-year to $12.7 million.
Third quarter 2010 EBITDA rose 63% year-over-year to $6.4 million. EBITDA increase primarily attributed to a strong increase in nine-month revenues and contributions from more proprietary stevia leaf used in production compared to the same period in 2009.
Stevia leaf harvest in 2010 going well and the Company is on track to harvest 100% proprietary leaf which further will improve its cost position going forward.
Continued success in obtaining financing for its operations and 2010 stevia leaf purchases.
The Company has had continued success in renewing its loans and obtaining new short term loans and credit facilities to finance its operations and stevia leaf purchases. During the nine months ended September 30, 2010, the Company renewed loans totalling $30.3 million and obtained new loans totalling $54.6 million.
As at September 30, 2010 the Company had $26.5 million cash on hand and working capital of $5.5 million.
Product Development
Launch of breakthrough new stevia blend BlendSureTM: In July, the Company launched BlendSure at the Institute of Food Technologists conference in Chicago, Illinois. GLG believes the new product, which was developed by GLG’s research and development team, is the first of its kind in the industry and combines specific glycosides in a unique and proprietary ratio to deliver high quality taste and stability in carbonated soft drinks at a price point that is competitive with sugar. BlendSure has met all of the requirements for self-affirmed GRAS (generally recognized as safe) and has received a letter of certification from GRAS Associates. The Company filed a dossier for a no-objection letter from the FDA in July 2010.
Market Development
GLG continues to make progress in increasing the commercial adoption of its high-grade stevia extracts in key global markets. Business development highlights in the third quarter include:
Distribution agreements signed in key regions
China: On September 16, GLG signed an exclusive five-year renewable supply agreement with Fengyang Xiaogangcun Υongkang Foods High Tech Co. Ltd. (“FXY”) for GLG’s full range of stevia extract products within China. FXY is a privately held Chinese company based in the Xiaogang region in Anhui province. FXY produces consumer products including stevia and stevia/sugar tabletop sweeteners, reduced and zero calorie beverages and food products mainly for the Chinese market. FXY also has developed stevia/sugar blend products suitable for the China National Sugar Reserve. The agreement between the two companies includes exclusive supplies of stevia extract products and full line of products to FXY. GLG has received an initial purchase order under this supply agreement for $US 12.6 million for delivery within 2010 fiscal year.
North America and Europe: On October 26, GLG partnered with ChemPoint.com Inc. (“ChemPoint”), a prominent e-distributor of specialty and fine ingredients, for the marketing, sale and distribution of GLG’s portfolio of high quality stevia extracts within the United States and Europe. ChemPoint will provide marketing, sales and order fulfillment, as well as technical support and expertise. The companies will jointly launch focused campaigns targeting key segments of the food and beverage industry immediately. The three year agreements establishes ChemPoint as the exclusive supplier of stevia extract products for the high value tier three and tier four customers in the US and European food and beverage industry.
India and Middle East: On October 6, GLG announced the its joint venture with Global Agrisystem Private Limited (“Global Agri”) for the marketing, development and distribution of GLG’s portfolio of stevia extracts in markets throughout India and the Middle East. Global Agri, a Katra Group company, is among India’s largest agribusiness companies focused on the food and agricultural sectors. The signed Market Development Agreement focuses on the utilization of the knowledge, expertise and resources of each party in order to develop the market for stevia in India. This includes obtaining governmental approvals, introduction of certain products to this market, development of new consumer products, government support, agriculture and the future development of manufacturing and processing capacity of stevia for domestic use and possible export.
The two parties have also signed an exclusive distribution agreement for the development of the Middle East market for GLG’s stevia extract products where the Katra Group also has extensive experience in the sale and distribution of products. The five year agreement includes distribution of GLG’s stevia extract products including the BlendSure product line, Rebpure, Rebsweet in India and Middle East and marketing supports, sales and technical training to be provided by GLG to Global Agri. There will be an initial purchase commitment for the Middle East market of approximately $1.7 million for delivery within the 2010 fiscal year.
Agricultural Developments
Agricultural R&D Program Further Improves Cost and Sustainability Position: On November 2, the Company announced that its stevia seed propagation program has been succeeded and that the Company’s new Huinong Two (“H2”) proprietary stevia variety has produced enough seeds to fulfill the majority of requirements for the next stevia planting season. The new seeds provide GLG a significant cost advantage due to very high levels of rebaudioside A naturally present in the new stevia strain. GLG plans to upgrade its varieties company wide and to utilize its new H2 strain at all growing bases in China for the 2011 crop season. All improvements to GLG proprietary seed strains are through natural breeding methods.
The H2 strain contains approximately 66% rebaudioside A in the plant leaf. Rebaudioside A is the sweetest component of the stevia plant and the primary glycoside used to meet the market demand for stevia sweeteners. GLG’s H2 strain has yielded 10% higher rebaudioside A content than the previous generation (H1). In addition, the H2 strain also generates 22% more leaf per acre. GLG plans to upgrade its varieties company wide and to utilize its new H2 strain at all 12 of the Company’s growing bases in China for the 2011 crop season.
GLG also announced that an H3 generation is on track to be commercially available for its farmers in the 2012/2013 stevia planting season. The GLG agricultural R&D team has already completed the most difficult steps in developing a commercially viable new natural strain. The H3 generation will now enter the final stages of commercial plot testing and seed propagation which is expected to take one to two years to complete. The H3 proprietary strain results show the following improvements in yield:
* 76% rebaudioside A content in the leaf, a 26% increase from the H1 strain
* An estimated 600kg of additional stevia leaf harvested per acre, a 46% increase over H1, which improves land and resource utilization
* An estimated 40% overall leaf cost improvement expected as a direct result of the increased RA content and increased leaf yield
* Greater processing efficiencies expected
* All improvements to GLG proprietary seed strains are through natural breeding methods.
Third Quarter 2010 Financial Results Highlights
The following results from operations have been derived from and should be read in conjunction with GLG’s interim consolidated financial statements for the nine months ended September 30, 2010, and its audited consolidated financial statements for previous years. Certain prior year's figures have been reclassified to conform to the current financial information presentation.
Revenue
Revenue for the three months ended September 30, 2010, which was derived entirely from stevia sales, was $21.0 million, an increase of 41% over $14.8 million in revenue for the same period last year. This increase is due to a substantial increase in sales in China compared to prior periods, when the majority of sales were made in the US.
Revenue for the nine months ended September 30, 2010 was $39.6, million compared to $28.6 million for the same period in the previous year – an increase of $11.0 million, or 38%.
Gross Profit
Gross profit for the three months period ended September 30, 2010 was $7.0 million, an increase of 71% over $4.1 million in gross profit for the comparable period in 2009. The absolute increase in gross profit can be attributed to the reduced production costs of stevia extract as detailed in the cost of sales section. The gross profit margin for the three-month period ended September 30, 2010 was 33%, compared to 28% for the three-month period ended September 30, 2009. The Company believes that this improvement continues to validate the cost reduction strategy the Company began implementing in 2007. The Company’s use of its own proprietary stevia leaf to meet 100% of production requirements is central to this strategy. Based on the current results of the stevia leaf harvest in 2010, the Company expects to realize this goal.
Gross profit for the nine months ended September 30, 2010, was $13.9 million, an increase of 94% compared to gross profit of $7.2 million for the same period in the previous year. Gross profit margin for these periods was 35% and 25%, respectively, and this increase was driven by the higher use of GLG proprietary leaf in 2010 compared with 2009, as well as lower manufacturing processing costs in 2010 compared with 2009.
