Synutra Reports First Quarter Fiscal 2015 Financial Results

11 Aug 2014 --- Synutra International, Inc., which owns subsidiaries in China that produce, distribute and sell nutritional products for infants, children and adults, announced financial results for the first quarter of fiscal 2015 ended June 30, 2014.

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "We were pleased with our fiscal first quarter results. Despite intense market competition, a temporary disruption of operations due to the renewal of our production license and updates in our product packaging during the quarter, we achieved 21% year over year increase in revenue in our core, powdered formula segment.  While our sales volume was down slightly, we focused on efficiency in our selling and promotion activities and effectively controlled the discounts we offered, which helped keep firm our average selling price.  We have also successfully disposed of our Zhangjiakou subsidiary and recognized an after tax gain of $11.9 million.  EPS grew 276% year-over-year to $0.31."

"We continue to invest in strategic marketing programs to connect with our end customers and build brand loyalty. As industry dynamics shift, we remain focused on producing quality products that meet our customers' needs," concluded Mr. Zhang.

Net sales were $86.0 million for the first quarter of fiscal 2015, an increase of 4.6% from $82.2 million in the first quarter of fiscal 2014. Net sales from the Company's branded powdered formula segment were $82.2 million, or 95.6% of net sales in the quarter, compared to $68.1 million, or 82.8% of net sales, in the prior year period. By volume, sales of powdered formula products were 5,680 tons in the first quarter, compared with 5,744 tons in the prior year period. The slight decrease in sales volume was offset by a 22.1% increase in average selling price. Average selling price increased from $11,852 to $14,473 per ton in the first quarter.

Net sales from Nutritional Ingredients and Supplements, which is comprised of external sales of chondroitin sulfate to third parties, was $1.7 million, or 1.9% of total net sales, compared to $6.3 million, or 7.7% of net sales, in the prior year period. This segment is primarily comprised of chondroitin sulfate materials sold to certain international pharmaceutical companies through annual supply contracts. However, as the price of raw materials for these products has significantly increased recently, the Company has suspended major orders and intends to renegotiate pricing with its customers.

Net sales from Other Products, which includes imported whole milk powder and whey protein powder sold to industrial customers, was $2.1 million, or 2.4% of net sales, in the first quarter of fiscal 2015, compared to $7.7 million, or 9.4% of net sales in the prior year period.

Gross profit was $38.8 million in the first quarter of fiscal 2015, compared to $36.1 million in the prior year period. Gross margin was 45%, an increase from 44% in the prior year. Powdered formula margin was 49%, down from 53% in the prior year period, due to the higher cost of raw milk powder and increased testing and maintenance expense on machinery during the production license renewal process.

Selling and distribution expenses were $12.6 million in the first quarter of fiscal 2015, compared with $14.8 million in the prior year period.  Advertising and promotional expenses were $9.7 million in the 2015 first quarter, compared to $8.5 million in the prior year period.  The combined percentage to sales of these two expenses decreased from 28.3% in last year to 25.9%, primarily reflecting improved operational efficiency in the sales management in the Company's IMF sector.

Synutra's gain on disposal and liquidation of subsidiaries was $15.0 million in the first quarter of 2015, compared to $0.4 million in the prior year period. This increase largely represents proceeds from the sale of the Company's Zhangjiakou manufacturing facility.

Income from operations was $24.3 million, an increase of 251.5% from the prior year period. Net income attributable to common stockholders was $17.9 million in the first quarter of fiscal year 2015, or $0.31 per basic share, a 275.7% increase from net income of $4.8 million, or $0.08 per basic share, in the prior year period.