QINGDAO, China and ROCKVILLE, Md., Feb. 9,
2017 /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 third quarter of fiscal 2017
ended December 31, 2016.
Mr. Liang Zhang, Chairman and CEO
of Synutra, commented, "Despite the intensified competition in the
Chinese infant milk formula industry, we were able to maintain our
net sales at a consistent level year-over-year with a 1.8% increase
in sales of our core Nutritional Food segment. We are pleased to
see ongoing strong sales momentum for our ultra-high temperature
("UHT") liquid milk product that we launched under the 'Dutchcow'
brand in the fourth quarter of fiscal 2016. We were actively
involved in both online and offline sales activities, and were
pleased that our sales of UHT liquid milk more than tripled in the
December quarter when compared to the previous quarter. We believe
this product is on its way to becoming a staple in the liquid milk
market segment."
Mr. Zhang continued, "In the December quarter, we experienced
further market consolidation after new infant formula production
regulation was announced by the Chinese government in June
2016. As a result, mom and baby stores are adjusting their
business strategies and are realigning brands they carry in the
store, reducing inventories of smaller brands, to make room for
larger brands. While we believe this regulation is beneficial for
the broader industry and larger players including Synutra over
time, in the short term, the industry is undergoing an increase in
promotional discounts. To capitalize on our opportunities ahead, we
have been focused on establishing healthy and long-term
relationships with our distributors and retail outlets by
leveraging our unique knowledge and experience in professional
nutrition training, education and consulting. Additionally, the
adjustments at our French facility were completed at the end of
December 2016 and we converted our
French facility from construction in progress to fixed asset on
December 31, 2016. We remain
confident our made-in-France
products will allow Synutra to better capitalize on the
consolidation opportunities under the new government
regulation."
Third Quarter Fiscal 2017 Financial Results
Net sales were $109.1 million for
the third quarter of fiscal 2017, a slight decrease of 0.2% from
$109.3 million in the third quarter
of fiscal 2016. Net sales from the Company's Nutritional Food
segment, which mainly includes branded powdered formula products
and liquid milk products, were $98.0
million, or 89.8% of net sales, in the third quarter. This
represents an increase of 1.8% from the prior year period's sales
of $96.3 million, or 88.1% of net
sales. This increase was mainly attributable to a contribution of
$12.7 million in sales of UHT liquid
milk products under the DutchCow brand, a 9.3% increase in powered
formula products by volume, and partially offset by an 18.9%
decrease in average selling price, compared to the prior year
period. Sales of powdered formula products increased to 8,358
metric tons in the third quarter, compared to 7,647 metric tons in
the prior year period. The increase was primarily due to the
increased sales volume of private label and adult formula products.
Average selling price ("ASP") was $10,204 per metric ton, compared to $12,588 per metric ton in the prior year period.
The decrease in ASP was due to higher discounts to distributors and
retail outlets and an unfavorable change in RMB to USD exchange
rates.
Net sales from the Nutritional Supplement segment were
$9.4 million, or 8.6% of net sales,
compared to $10.6 million, or 9.7% of
net sales, in the prior year period. This segment mainly consists
of ingredients such as chondroitin sulfate sold to certain
international pharmaceutical companies. The decrease was primarily
due to minor fluctuations in orders from major customers of this
segment.
Net sales from Other Business, which mainly includes imported
whole milk powder and whey protein powder sold to industrial
customers, were $1.6 million, or 1.5%
of net sales, in the third quarter of fiscal 2017, compared to
$2.4 million, or 2.2% of net sales,
in the prior year period. Sales under this segment are
opportunistic and fluctuate from quarter to quarter.
Gross profit was $42.5 million in
the third quarter of fiscal 2017, compared to $55.4 million in the prior year period. Gross
margin for the Nutritional Food segment was 41.2%, a decrease from
57.0% in the prior year period, primarily due to the decreased ASP
of powered formula products, increased unit purchase cost of raw
powder materials, and the increased sales of Dutch Cow UHT liquid
milk with lower margin, which was launched in January 2016. Gross margin was 38.9%, a decrease
from 50.7% in the prior year period. In addition to the decline in
gross margin for the Nutritional Food segment, overall gross margin
was negatively impacted by the depreciation of RMB against USD
during the fiscal third quarter.
Selling and distribution expenses were $15.9 million in the third quarter of fiscal
2017, compared to $14.0 million in
the prior year period. The increase was primarily due to additional
expenses associated with the Company's staff and certain
distributors visiting the French facility. Advertising and
promotional expenses were $12.2
million in the third quarter, consistent with $12.8 million in the prior year period. Selling
and distribution, and advertising and promotion expenses combined
accounted for 25.7% of sales, compared to 24.6% in the prior year
period.
Income from operations was $6.9
million, or 6.3% of sales, in the fiscal third quarter,
compared to $20.6 million, or 18.9%
of sales, in the prior year period.
Net foreign currency exchange gain was $2.5 million in the third quarter of fiscal 2017,
compared to a loss of $2.4 million in
the prior year period. This gain was primarily due to the
appreciation of the RMB against the Euro, as one of the Company's
PRC subsidiaries, whose functional currency is RMB, had borrowed
significant loans denominated in Euro.
Net income was $5.1 million,
compared to $12.3 million in the
prior year period. Net income attributable to common stockholders
was $4.9 million in the third quarter
of fiscal year 2017, or $0.09 per
basic share, compared to $12.0
million, or $0.21 per basic
share, in the prior year period.
Nine Months ended December 31,
2016 Financial Results
Net sales for the first nine months of fiscal 2017 ended
December 31, 2016 were $269.6 million, compared to $278.9 million in the prior year period. Net
sales from the Nutritional Food segment were $248.7 million, or 92.3% of net sales, compared
to $248.2 million, or 89.0% of net
sales, in the prior year period.
Gross profit was $113.8 million
for the first nine months of fiscal 2017, compared to $137.9 million in the prior year period. Gross
margin decreased to 42.2% from 49.4% in the prior year period.
Income from operations was $18.9
million for the first nine months of fiscal 2017, compared
to $46.0 million in the prior year
period. Included in the first nine months fiscal 2017 operating
income was a $2.8 million loss on
purchase contract as the Company's French facility was not able to
begin taking in raw milk from suppliers from the previously agreed
date, and therefore had to pay the supplier or third party
processors to process the raw milk. The Company no longer had loss
on the purchase contract from June
2016 after its milk processing tower began trial
operations.
Net income was $7.8 million,
compared to $20.9 million in the
prior year period. Net income attributable to common stockholders
was $7.7 million for the first nine
months of fiscal 2017, or $0.14 per
basic share, compared to $20.1
million, or $0.35 per basic
share, in the prior year period.
Balance Sheet
As of December 31, 2016, the
Company had cash and cash equivalents of $51.4 million and restricted cash of $204.6 million, including the current and
non-current portions. Net accounts receivable increased to
$28.3 million from $19.6 million as of September 30, 2016. The Company's inventory
position increased to $129.4 million
from $120.3 million as of
September 30, 2016, as the Company is
still in the process of streamlining its inventory management at
the French facility. Total debt was $511.5 million, including $163.4 million of short-term debt and
$76.2 million of long-term debt due
within one year, representing a decrease of $20.9 million from last quarter. Net debt, which
is total debt net of cash and restricted cash, decreased to
$255.5 million from $285.5 million as of September 30, 2016.
Fiscal 2017 Financial Outlook
Prior fiscal 2017 guidance was based on the expectation that the
Company's French project would commence formal operations with
stable production in December 2016.
Given the impact associated with additional French project
production delays, the Company expects to generate lower sales from
bulk milk and whey protein powder from the French facility this
year, and expects that the French facility will report a net loss
for the fourth quarter as we start to include its profitability to
our overall income statement starting from January 1, 2017. The Company is therefore
adjusting its fiscal 2017 sales outlook from previously announced
$400 to $450 million to total net
sales of between $350 to $400 million
and the fiscal 2017 net income outlook from the previously
announced $10 to $15 million to net
income of between $0 to $5 million.
The Company has not factored in additional foreign exchange impact
into its fiscal 2017 forecast, aside from its fiscal nine months
results. Synutra remains highly optimistic about its growth
potential as its made-in-France
products become widely available for retail sales in the
China market.
Conference Call Details
The Company will hold a conference call on Friday, February 10, 2017 at 8:00 a.m. Eastern Time to discuss the financial
results. Listeners may access the call by dialing the following
numbers:
United States Toll
Free:
|
+1
(845)-675-0438
|
China Toll
Free:
|
400-120-0654
|
Conference ID:
|
66846470
|
A webcast and replay of the conference call will be available
through the Company's IR website at www.synutra.com.
About Synutra International, Inc.
Synutra International, Inc. (Nasdaq: SYUT) is a leading infant
formula company in China. It
principally produces, markets and sells its products through its
operating subsidiaries under the "Shengyuan" or "Synutra" name,
together with other complementary brands. It focuses on selling
premium infant formula products, which are supplemented by more
affordable infant formulas targeting the mass market as well as
other nutritional products and ingredients. It sells its products
through an extensive nationwide sales and distribution network
covering all provinces and provincial-level municipalities in
mainland China. As of December 31, 2016, this network comprised over
990 independent distributors and over 270 independent
sub-distributors who sell Synutra products in approximately 27,680
retail outlets.
Forward-looking Statements
This press release contains "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act
of 1995 that are based on our current expectations, assumptions,
estimates and projections about Synutra and its industry. All
statements other than statements of historical fact in this release
are forward-looking statements. In some cases, these
forward-looking statements can be identified by words or phrases
such as "anticipate," "believe," "continue," "estimate," "expect,"
"intend," "is/are likely to," "may," "plan," "should," "will,"
"aim," "potential," "continue," or other similar expressions. The
forward-looking statements included in this press release relate
to, among others, Synutra's goals and strategies; its future
business development, financial condition and results of
operations, particularly the progress on the new drying facility
project in France; the expected
growth of the nutritional products and infant formula markets in
China; market acceptance of
Synutra's products; the safety and quality of Synutra's products;
Synutra's expectations regarding demand for its products; Synutra's
ability to stay abreast of market trends and technological
advances; competition in the infant formula industry in
China; PRC governmental policies
and regulations relating to the nutritional products and infant
formula industries and our ability to meet governmental
requirements, and general economic and business conditions
in China. These forward-looking
statements involve various risks and uncertainties. Although
Synutra believes that the expectations expressed in these
forward-looking statements are reasonable, these expectations may
turn out to be incorrect. Synutra's actual results could be
materially different from the expectations. Important risks and
factors that could cause actual results to be materially different
from expectations are generally set forth in Synutra's filings with
the Securities and Exchange Commission. The forward-looking
statements are made as of the date of this press release. Synutra
undertakes no obligation to update any forward-looking statements
to reflect events or circumstances after the date on which the
statements are made or to reflect the occurrence of unanticipated
events.
Synutra
International, Inc.
|
Consolidated
Balance Sheets
|
Dollars and
shares in thousands, except per share data
|
|
|
|
|
|
|
|
December 31,
2016
|
|
March 31,
2016
|
ASSETS
|
|
|
|
|
Current
Assets:
|
|
|
|
|
Cash and cash
equivalents
|
$
|
51,401
|
$
|
102,667
|
Restricted
cash
|
|
32,362
|
|
77,787
|
Accounts receivable,
net of allowance of $806 and $1,435, as of December 31, 2016 and
March 31, 2016, respectively
|
|
28,315
|
|
29,911
|
Inventories
|
|
129,447
|
|
98,360
|
Due from related
parties
|
|
1,080
|
|
2,486
|
Receivable from
disposal of a subsidiary
|
|
997
|
|
1,161
|
Deferred tax
assets
|
|
14,630
|
|
15,781
|
Prepayments and other
current assets
|
|
48,041
|
|
30,675
|
Investment held at
trust
|
|
-
|
|
3,169
|
|
|
|
|
|
Total current
assets
|
|
306,273
|
|
361,997
|
|
|
|
|
|
Property, plant and
equipment, net
|
|
302,938
|
|
294,185
|
Land use rights,
net
|
|
7,811
|
|
8,541
|
Intangible assets,
net
|
|
2,802
|
|
2,661
|
Restricted
cash
|
|
172,236
|
|
128,397
|
Due from related
parties
|
|
-
|
|
2,223
|
Deferred tax
assets
|
|
4,102
|
|
3,481
|
Long-term loan
receivable
|
|
7,208
|
|
9,286
|
Other non-current
assets
|
|
12,564
|
|
6,326
|
|
|
|
|
|
TOTAL
ASSETS
|
$
|
815,934
|
$
|
817,097
|
|
|
|
|
|
LIABILITIES AND
EQUITY
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
Short-term
debt
|
$
|
163,379
|
$
|
95,175
|
Long-term debt due
within one year
|
|
76,209
|
|
95,504
|
Accounts
payable
|
|
71,642
|
|
76,862
|
Income taxes
payables
|
|
1,794
|
|
2,721
|
Due to related
parties
|
|
205
|
|
132
|
Advances from
customers
|
|
30,111
|
|
25,186
|
Other current
liabilities
|
|
48,805
|
|
49,617
|
|
|
|
|
|
Total current
liabilities
|
|
392,145
|
|
345,197
|
|
|
|
|
|
Long-term
debt
|
|
271,872
|
|
315,512
|
Deferred government
subsidies
|
|
6,699
|
|
7,196
|
Capital lease
obligations
|
|
6,447
|
|
7,315
|
Other long-term
liabilities
|
|
4,199
|
|
5,077
|
|
|
|
|
|
Total
liabilities
|
|
681,362
|
|
680,297
|
|
|
|
|
|
Equity:
|
|
|
|
|
Common stockholders'
equity:
|
|
|
|
|
Common stock, $.0001
par value: 250,000 shares authorized; 57,301 shares issued and
56,691 shares outstanding as of both
December 31, 2016, and March 31, 2016
|
|
6
|
|
6
|
Additional paid-in
capital
|
|
134,693
|
|
134,693
|
Accumulated
deficit
|
|
-7,065
|
|
-14,810
|
Accumulated other
comprehensive income
|
|
2,427
|
|
13,352
|
|
|
|
|
|
Total common
stockholders' equity
|
|
130,061
|
|
133,241
|
|
|
|
|
|
Noncontrolling
interest
|
|
4,511
|
|
3,559
|
|
|
|
|
|
Total
equity
|
|
134,572
|
|
136,800
|
|
|
|
|
|
TOTAL LIABILITIES AND
EQUITY
|
$
|
815,934
|
$
|
817,097
|
Synutra
|
Income
Statement
|
In USD
thousands, except per share data
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Nine Months
Ended
December 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Net sales
|
$
|
109,053
|
$
|
109,256
|
$
|
269,622
|
$
|
278,933
|
- including
sales to related parties
|
|
4,406
|
|
3,593
|
|
11,495
|
|
8,946
|
Cost of
sales
|
|
66,578
|
|
53,891
|
|
155,830
|
|
141,031
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
42,475
|
|
55,365
|
|
113,792
|
|
137,902
|
|
|
|
|
|
|
|
|
|
Selling and
distribution expenses
|
|
15,898
|
|
14,001
|
|
40,591
|
|
40,569
|
Advertising and
promotion expenses
|
|
12,156
|
|
12,835
|
|
29,223
|
|
30,921
|
General and
administrative expenses
|
|
7,678
|
|
8,000
|
|
22,622
|
|
20,701
|
Loss on supply
contract
|
|
0
|
|
0
|
|
2,833
|
|
0
|
Government
subsidies
|
|
146
|
|
105
|
|
403
|
|
307
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
6,889
|
|
20,634
|
|
18,926
|
|
46,018
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
3,580
|
|
4,117
|
|
10,471
|
|
12,495
|
Interest
income
|
|
1,814
|
|
2,179
|
|
5,615
|
|
6,713
|
Foreign currency
exchange gain (loss), net
|
|
2,477
|
|
(2,423)
|
|
(1,851)
|
|
(10,975)
|
Other expense,
net
|
|
104
|
|
179
|
|
291
|
|
599
|
|
|
|
|
|
|
|
|
|
Income before income
tax expense
|
|
7,496
|
|
16,094
|
|
11,928
|
|
28,662
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
2,359
|
|
3,823
|
|
4,142
|
|
7,754
|
|
|
|
|
|
|
|
|
|
Net income
|
|
5,137
|
|
12,271
|
|
7,786
|
|
20,908
|
|
|
|
|
|
|
|
|
|
Net income
attributable to the noncontrolling interest
|
|
192
|
|
233
|
|
41
|
|
768
|
|
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
|
4,945
|
$
|
12,038
|
$
|
7,745
|
$
|
20,140
|
|
|
|
|
|
|
|
|
|
Weighted
average common stock outstanding - basic and
diluted
|
|
56,691
|
|
57,026
|
|
56,691
|
|
57,163
|
Earnings per share -
basic and diluted
|
$
|
0.09
|
$
|
0.21
|
$
|
0.14
|
$
|
0.35
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/synutra-reports-third-quarter-fiscal-2017-financial-results-300405215.html
SOURCE Synutra International, Inc.