Synutra said the tailwind of its gold mining strategy continued to strengthen its pricing power

Synutra said the tailwind of its gold mining strategy continued to strengthen its pricing power

Chinese infant formula group Synutra International has moved to a profit in the first half of its financial year.

In the six months to the end of September, the company booked a profit of US$10.8m compared to a net loss of $53.9m a year earlier.

Synutra said the tailwind of its "gold mining" strategy continued to strengthen its pricing power with distributors in the period, which offset sequentially lower volume and rising raw material costs.

The strategy, which began in September last year, was designed to "improve channel inventory visibility, drive higher efficiency of marketing and promotion expenditures, and ensure greater operational efficiency".

Gross margin remained "stable" on a sequential basis at 43.9%, the company said, while net margin improved over last quarter as it continued to "exert tight control" on sales and general administrative expenses.

Operating income reached $15.8m from an operating loss of $21.1m in the prior year period.

Net sales jumped 42.7% to $170.8m. Revenues from Synutra's branded powdered formula products increased to $139.7m, or 82% of net sales, compared to $100.5m last year.

"As we gain greater confidence in our ability to control discounts while sustaining our shipment volume among fierce market competitions, we remain confident in our opportunities in the second half of the year," the company said.

Synutra said it forecasts fiscal 2014 revenues to be in the range of $85m to $90m, and net income in the range of $7.5m to $8.5m.

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