CHINA: Synutra Q1 profits lifted by higher formula prices
Synutra has reported an increase in profits for the first quarter of 2015
Chinese infant formula manufacturer Synutra has reported a jump in first-quarter profits, helped by higher selling prices and boosted by proceeds from a plant disposal.
For the first quarter to 30 June, the firm reported net profit of US$18.4m, up from US$4.8m for the same period last year.
Income from operations was also up, hitting US$24.3m from US$7m for the same period last year.
Synutra booked a US$15m gain from the sale of a site in Zhangjiakou.
However, Synutra's gross profit also rose, despite the higher cost of raw milk hitting gross margins.
Though Synutra's sales volumes of powdered formula products fell, the decline in was offset by a 22.1% increase in average selling prices. Overall, the group posted a 4.6% rise in net sales to US$86m.
"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," chairman and CEO Liang Zhang said.
Shares in Synutra were up 0.50% to US$5.99 on 8 Aug.
Synutra Reports First Quarter Fiscal 2015 Financial Results
~ 1Q15 Sales Increase 4.6%~
~Formula Sales Increase 20.8%
~~ Reiterates FY15 Guidance Forecast
QINGDAO, China and ROCKVILLE, Md., Aug. 8, 2014 /PRNewswire/ -- Synutra International, Inc. (Nasdaq: SYUT), ("Synutra" or the "Company"), which owns subsidiaries in China that produce, distribute and sell nutritional products for infants, children and adults, today 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.
As of June 30, 2014, the Company had cash and cash equivalents of $41.0 million and restricted cash of $168.6 million, including the current and non-current portions. Net account receivable decreased to $14.4 million as of June 30, 2014 from $17.8 million in the prior quarter. The Company's inventory position decreased as well to $77.3 million from $84.0 million. Total debt was $341.4 million, including $90.5 million of short-term debt and $91.3 million of long-term debt due within one year, representing a decrease of $26.6 million from last quarter.
Fiscal 2015 Financial Outlook
The Company continues to expect strong top line growth and greater operating leverage in fiscal 2015, with full year revenue growth expected to be at least 20% over fiscal 2014 results, or between $450 to $500 million, and net profit growth expected to be at least 60%, or between $50 to 60 million.
Original source: Synutra
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