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 Synutra Internati (NASDAQ:SYUT)

Friday, October 10, 2014
Comments & Business Outlook

QINGDAO, China and ROCKVILLE, Md., Oct. 10, 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 unaudited preliminary second quarter 2015 results and raised full year 2015 guidance.

For the second quarter ended September 30, 2014, the Company anticipates revenue in the range of $106-110 million, representing year-over-year revenue growth of at least 20%. Net income attributable to common stockholders is expected to be in the range of $9-10 million, compared to $6.1 million in the second quarter of fiscal 2014, representing year-over-year growth of at least 50%. These positive results were due to increased IMF sales at the distributor and retail channels.

Based on its strong preliminary second quarter and first half fiscal 2015 results, the Company now maintains its forecasted revenue range of $450-500 million, while raising its fiscal 2015 net income guidance from a range of $50-60 million to $55-65 million.

Mr. Liang Zhang, Chairman and CEO of Synutra said, "We are pleased to see continued strong demand for our core formula brands. In the second fiscal quarter, we experienced sequential and year-over-year increases in both revenue and net profit, despite significant market competition.  Our success this quarter was primarily due to increased shipment volumes in a traditionally slow season as a result of our increased strategic marketing efforts.  We expect this momentum to continue in the coming quarters, resulting in strong top line growth and greater operating leverage in fiscal 2015."

Synutra plans to release its second quarter financial results in early November.


Monday, August 11, 2014
Comments & Business Outlook

First Quarter Fiscal 2015 Financial Results

  • 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 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.

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.

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.


Tuesday, June 17, 2014
Comments & Business Outlook

Fourth Quarter 2014 Financial Results

  • Net sales were $98.7 million for the fourth quarter of fiscal 2014, an increase of 36% from $72.9 million in the fourth quarter of fiscal 2013.
  • Net income attributable to common stockholders was $10.1 million in the fourth quarter of fiscal year 2014, or $0.18 per basic share, a 209% increase from net income of $3.3 million, or $0.06 per basic share, in the prior year period.

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "Overall we were pleased with our fourth quarter results and our full year financial performance. Throughout the year we experienced strong top-line growth and continuously improved the efficiency of our marketing, sales and distribution activities."

"Our 2014 fiscal year was marked by changes in the competitive landscape of China's infant formula market with the government's growing focus on food safety regulations. In recent months, both of our milk formula production facilities successfully renewed their production licenses, while almost one third of manufacturers in China were not able to do so. As a result, we were able to expand our network through strategic acquisitions of two new milk formula brands, each with strong sales and distribution networks in their respective regions. To further take advantage of opportunities within this changing space, we are expanding the scope of our new drying facility project in France to include IMF production as well. This will allow us to capture a premium on a 'wholly imported' product. We anticipate our new facility in France to commence operation by the end of CY2015. Additionally, we have negotiated the sale of our Zhangjiakou manufacturing facility. Once the French manufacturing facility is operational, we will no longer need the Zhangjiakou processing capacity. Under the sales arrangement, however, we can continue to utilize the Zhangjiakou capacity on an OEM basis for the next two years until the French project can fully take over. With this strategic arrangement, we are able to take advantage of an attractive purchase price and mitigate our risk of redundant capacity in the future."

"As we look forward to FY2015, we expect to see continued sales growth across our product categories and distribution channels. We will continue to emphasize strategic marketing initiatives to increase consumer interaction with our brands and drive overall market penetration," concluded Mr. Zhang.

Fiscal 2015 Financial Outlook

The Company expects 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.


Tuesday, May 13, 2014
Comments & Business Outlook

QINGDAO, China and ROCKVILLE, Md., May 13, 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 unaudited preliminary fourth quarter and full year 2014 results.

For the fourth quarter ended March 31, 2014, the Company anticipates revenue of approximately $99.5 million, including $89.1 million from the formula segment, and net income in the range of $10-11 million. This equates to full year 2014 revenue and net income of approximately $371 million and $30-$32 million, respectively.

Mr. Liang Zhang, Chairman and CEO of Synutra said, "Our business momentum continued to improve in our fiscal fourth quarter with sequential increases in both formula segment revenue and net profit. Our success in the fourth quarter was due to increased shipment volumes driven by the spring holiday season as well as our increased marketing efforts. Our fourth quarter profit improved over the previous quarter as we drove greater efficiency in our sales & promotion structure. We expect continued 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."

Synutra plans to report its fourth quarter and full year 2014 results and provide greater visibility to its FY15 growth expectations in mid-June. The estimates presented in this press release are preliminary, unaudited and subject to further adjustments.


Thursday, March 6, 2014
Deal Flow

Item 1.01. Entry into a Material Definitive Agreement
 
Beams Power Investment Limited (“Beams”), a British Virgin Islands limited liability company and a majority stockholder of Synutra International, Inc. (the “Company”), entered into a two-year facility agreement, as borrower therein, with Nomura Singapore Limited as mandated lead arranger, Deutsche Bank AG, Hong Kong Branch as facility agent (the “Facility Agent”), DB Trustees (Hong Kong) Limited as international security agent (the “International Security Agent”), Deutsche Bank Trust Company Americas as New York security agent (the “New York Security Agent”) and the Original Lender(s) as defined therein (the “Facility Agreement”), for credit in an aggregate amount of fifty-five million dollars (US$55,000,000). The Facility Agreement is secured by 36,000,000 shares of common stock (as adjusted pursuant to the terms and conditions of the Facility Agreement, the “Pledged Shares”), par value US$0.0001 per share, of the Company held by Beams.
 
In connection with Beams’ pledging of the Pledged Shares and entering into the Facility Agreement, the Company entered into a registration rights agreement with the Facility Agent and Beams (the “Registration Rights Agreement”) on March 3, 2014, pursuant to which the Company agreed, (i) as soon as practicable after an event of default under the Facility Agreement has occurred and is continuing or the New York Security Agent has become the owner of the shares in accordance with the terms of the Pledge Agreement, to file with the Securities and Exchange Commission a registration statement for the resale of the shares and the Pledged Shares (collectively the “Registrable Securities”), to use commercially reasonable efforts to have the registration statement declared effective as soon as practicable, and to maintain the effectiveness of the registration statement until the earlier of (A) the date on which all Registrable Securities have been sold pursuant to the registration statement, (B) the date on which all Registrable Securities have been sold under Rule 144 under the Securities Act, or (C) the passage of four years from March 3, 2014, and (ii) to grant the Facility Agent or its permitted assignees or transferees the right to two demand registrations and unlimited piggyback registrations, subject to certain conditions; provided that in each case, the Company will pay all expenses associated with each registration.
 
The foregoing description of the terms of the Registration Rights Agreement is qualified in its entirety by reference to the copy of the Registration Rights Agreement, filed with this report as Exhibit 4.1, incorporated herein by reference.


Item 1.02. Termination of a Material Definitive Agreement.
 
On March 3, 2014, Warburg Pincus Private Equity IX, L.P. (“Warburg”) received the required payoff amount to repay in full all obligations owed by Beams to Warburg as set out in a payoff letter dated February 26, 2014, upon which the share pledge agreement among Beams, Warburg as the secured party and Warburg as the collateral agent dated as of April 23, 2008 and the registration rights agreements dated as of May 24, 2007 and April 23, 2008, by and among Beams, Warburg and the Company, in each case, as amended, restated, or otherwise modified, and the liens created thereunder terminated in accordance with the terms of such payoff letter.


Tuesday, February 11, 2014
Comments & Business Outlook
SYNUTRA INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
  (Dollars in thousands, except per share data)
(UNAUDITED)

   
Three Months Ended
   
Nine Months Ended
 
  
 
December 31,
   
December 31,
 
  
 
2013
   
2012
   
2013
   
2012
 
Net sales
 
$
101,034
   
$
73,228
   
$
271,795
   
$
192,914
 
Cost of sales
   
60,731
     
41,717
     
156,522
     
126,628
 
Gross profit
   
40,303
     
31,511
     
115,273
     
66,286
 
Selling and distribution expenses
   
12,486
     
14,488
     
40,753
     
41,903
 
Advertising and promotion expenses
   
9,769
     
9,910
     
29,008
     
26,900
 
General and administrative expenses
   
6,477
     
6,967
     
18,760
     
21,986
 
Gain on disposal and liquidation of subsidiaries
   
0
     
0
     
367
     
2,610
 
Government subsidies
   
362
     
216
     
630
     
1,181
 
Income (loss) from operations
   
11,933
     
362
     
27,749
     
(20,712
Interest expense
   
3,850
     
4,021
     
11,761
     
11,511
 
Interest income
   
1,076
     
604
     
3,186
     
1,681
 
Other income, net
   
555
     
573
     
1,407
     
56
 
Income (loss) before income tax expense
   
9,714
     
(2,482
   
20,581
     
(30,486
)
Income tax expense
   
14
     
10,971
     
107
     
37,086
 
Net income (loss)
   
9,700
     
(13,453
   
20,474
     
(67,572
)
Net loss attributable to the noncontrolling interest
   
(287
   
(183
   
(361
   
(417
Net income (loss) attributable to common stockholders
 
$
9,987
   
$
(13,270
 
$
20,835
   
$
(67,155
                                 
Weighted average common stock outstanding – basic
   
57,301
     
57,301
     
57,301
     
57,301
 
Earnings (loss) per share – basic
 
$
0.17
   
$
(0.23
 
$
0.36
   
$
(1.17

Wednesday, January 15, 2014
Comments & Business Outlook

QINGDAO, China and ROCKVILLE, Md., Jan. 14, 2014 /PRNewswire/ -- Synutra International, Inc. (NASDAQ: SYUT), ("Synutra" or the "Company"), which owns subsidiaries in China that produce, market and sell nutritional products for infants, children and adults, announced the commencement of construction of its new drying facility in Carhaix, France (located in the department of Finistere in the Brittany region). On January 10, 2014, the Company held a ground-breaking ceremony in Carhaix, which was attended by distinguished guests including Mr. Pierre Maille, President of General Council of Finistere, Mr. WU Xilin, Minister-Counsellor of Economic and Commercial Affairs in Chinese Embassy in France, and Mr. PAN Nuo, President of Bank of China Paris Branch.

As previously announced, under the partnership agreement between Synutra and France's Sodiaal, the drying facility is intended to manufacture powdered milk and fat-enriched demineralized whey for the needs of Synutra. Over the course of 2013, Synutra received key regulatory approvals and construction permits and the project also received the internal credit approval within Bank ofChina for the construction period financing. The facility is designed to have a total plant area of 200,000 square meters, a total construction area of 40,249 square meters, with production capacity of up to 100,000 tons annually. The facility will comply with both EU and China's manufacturing standards and will adopt world-class production and testing equipment, management techniques, and strict EU standards for material selection, production, and packaging, to ensure high quality and nutritional value for Synutra's products.

Mr. Liang Zhang, Chairman and CEO of Synutra, said, "The start of construction of our new drying facility launches the implementation phase of this project. When completed, the facility will secure a long-term, stable supply of raw material imported from France, further solidifying Synutra as a quality and trusted brand. With advanced production equipment and our French partner's world-leading managerial expertise in the dairy industry, Synutra will have greater capacity to provide safe and nutritious formula to more infants in China."


Monday, November 11, 2013
Comments & Business Outlook

Second Quarter 2014 Financial Results

  • Net sales was $88,556,000 an increase from last years $66,100,000
  • Net income attributable to common stockholders was $6.1 million in the second quarter of fiscal year 2014, or $0.11 per basic share, compared with a net income of $4.8 million, or $0.08 per basic share, in the previous quarter.

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "We are very pleased with our second quarter performance, particularly given that the summer months are seasonally slower periods for our business and recent industry events added to sales volatility. The tailwind of the successful Gold Mining Strategy continued to strengthen our pricing power with the distributors, which offset the sequentially lower volume and rising raw material costs. Our gross margin remained stable on a sequential basis while net margin improved over last quarter as we continued to exert tight control on sales and general administrative expenses."

"In addition to the steady execution of our existing production and distribution, we're making progress on our new drying facility project in Brittany, France. On the financing side, we have received preliminary approval from a leading Chinese bank to fund the majority of the project investment in the form of project financing. On the construction front, we received a key construction permit in the fiscal second quarter and have also engaged industry leading engineering and equipment vendors. We are expecting the final regulatory approval, the environmental impact report for the project in December and construction is scheduled to commence shortly after that. The strategic importance of this project has become more and more evident as China's infant milk formula ("IMF") industry, with the increased involvement from the Chinese government, puts more and more emphasis on premium-quality materials, advanced quality control techniques, and professional execution. We expect this project to create tremendous value for both our customers and shareholders in the long term."

"This quarter the Chinese government continued to introduce measures to address product quality concerns and to improve the image of domestic brands. We welcome the heightened scrutiny from the government, media and consumers alike as we remain focused on the superior quality and safety standards of our partners, manufacturing practices, and retail products, as well as ensuring reasonable pricing on our various product lines for our Chinese consumers. 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. We expect our top line for the third quarter fiscal 2014 to be in the range of $85 to $90 million, and net income to be in the range of $7.5 to $8.5 million," concluded Mr. Zhang.


Friday, August 9, 2013
Comments & Business Outlook

First Quarter 2014 ended June 30, 2013 Financial Results

  • Net sales increased 13% to $82.2 million for the first quarter of fiscal 2014 from $72.9 million in the fourth quarter of fiscal 2013
  • Gross profit was $36.1 million in the first quarter of fiscal 2014, compared to $28.3 million in the previous quarter
  • Net income attributable to common stockholders was $4.8 million in the first quarter of fiscal year 2014, or $0.08per basic share, compared with a net income of $3.3 million, or $0.06 per basic share, in the previous quarter.

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "We are very pleased with our overall performance and the ongoing recovery of our core business this quarter, highlighted by our better than forecasted quarterly sales results and improved profitability during a seasonally slower period. We continued to strengthen the sales operation in our core branded powdered formula segment and also experienced significant results within our nutritional ingredients segment. As our sales organization and outlet network continued to stabilize, we experienced year-over-year as well as sequential increases to both our shipment volume and average selling price."

"We also experienced notable progress in our Nutritional Ingredients and Supplements segment, winning substantial orders that propelled us into the leading market share position of chondroitin sulfate materials in the world for the first time. Our capacity utilization in this business segment increased to approximately 70% in the first quarter and is expected to increase further in the coming quarters."

"The Chinese infant formula industry has experienced some major changes in recent months. We are closely watching and evaluating any impact this may have on Synutra, while also capitalizing on opportunities that could come with the changes. We will proactively communicate any risk factors we perceive with the investment market. With our strong supply chain, our state-of-the-art production facility, our brand equity and our solid sales operation after the Gold Mining program, we remain confident in Synutra's ability to be a leading player in the Chinese infant milk formula industry." concluded Mr. Zhang.


Friday, June 14, 2013
Comments & Business Outlook

Fourth Quarter 2013 Financial Results

  • Net sales decreased 1% to $72.9 million for the fourth quarter of fiscal 2013 from $73.2 million in the third quarter of fiscal 2013.
  • Gross profit was $28.3 million in the fourth quarter of fiscal 2013, compared to $31.5 million in the previous quarter.
  • Net income attributable to common stockholders was $3.3 million in the fourth quarter of fiscal year 2013, or$0.06 per diluted share, compared with a net loss of $13.3 million, which included $11.1 million income tax expense from valuation allowance for deferred tax assets, or $(0.23) per diluted share, in the previous quarter.

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "We were highly encouraged with our ongoing efforts to stabilize our core branded powdered formula business and return to profitability in the fiscal fourth quarter. We believe the short-term negative impact of our price increase implemented in April 2012 has diminished as we continue to nurture and invest in our brands to garner broader trust at the retail level. "

"In the fourth quarter of fiscal 2013, we were pleased to have substantially completed the 'Gold Mining' program which originally started in September 2012. First, as of March 31, 2013, the number of active retail outlets that sell our products stabilized at approximately 27,000, in line with our projection. Since these retail outlets were selected for their existing high levels of sales volume, we believe the marketing and promotional expenditures incurred by these outlets became more efficient. Second, we have deployed an effective inventory tracking system, primarily comprised of personal digital assistant (PDA) devices and cell phone applications, to the majority of our distributors and retail outlets. Over the past five months, we have gained greater visibility to distributors' varying inventory levels by helping them efficiently trace inventory distribution, preventing cross-territorial selling and providing greater logistical support. The completion of our "Gold Mining" strategy provides a strong foundation to improve channel inventory visibility, drive higher efficiency of marketing and promotion expenditures, and ensure greater operational efficiency. "

"The initiatives we've implemented in FY13 to improve our business performance has set the stage for strong improvement to our top and bottom line financial performance in FY14. We believe we can be successful delivering top line sales growth through higher average selling prices and product volume growth. By focusing on higher yielding sales outlets as well as our commitment to support our brands to a more concentrated group of distributors and retail customers, we believe we can achieve improved levels of sales, gross margin and net profit in FY14 compared to the prior year period," concluded Mr. Zhang.


Friday, April 12, 2013
Comments & Business Outlook

QINGDAO, China and ROCKVILLE, Md., April 12, 2013 /PRNewswire/ -- Synutra International, Inc. (NASDAQ: SYUT), ("Synutra" or the "Company"), which owns subsidiaries in China that produce, market and sell nutritional products for infants, children and adults, announced that it has received the required approvals from China's National Development and Reform Commission (NDRC) and its Ministry of Commerce (MC) for the construction of a new drying facility in Carhaix, France.

As originally announced on September 18, 2012, Synutra signed a long-term industrial and commercial partnership agreement with Sodiaal, the leading dairy cooperative in France, and its subsidiary, Euroserum, a world leader in demineralized whey powders. Under this partnership agreement, Synutra will build a new drying facility in Carhaix, France intended to manufacture powdered milk and fat-enriched demineralized whey for the needs of the Synutra group. With the approvals from the NDRC and MC, Synutra remains on schedule to develop the new drying facility.

Mr. Liang Zhang , Chairman and CEO of Synutra, commented, "It is a very notable achievement for Synutra to have received the required approvals for our French project by the Chinese government and we look forward to moving ahead with the development of this new drying facility. We are confident our industrial and commercial partnership with Sodiaal and Euroserum can further increase consumer confidence in Synutra brand products and strengthen our competitive position as a leading dairy and nutritional product provider in China."


Monday, February 11, 2013
Comments & Business Outlook

Third Quarter

  • Net sales increased 11% to $73.2 million for the third quarter of fiscal 2013 from $66.1 million in the second quarter of fiscal 2013.
  • Net loss attributable to common stockholders, including the $11.1 million of valuation allowance for deferred tax assets, was $13.3 million in the third quarter of fiscal year 2013, or $(0.23) per diluted share, decreased from a net loss of $44.2 million, including $25.4 million of valuation allowance for deferred tax assets, or $(0.77) per diluted share, in the previous quarter.

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "Our fiscal third quarter results reflected the beginning of recovery from the sales slowdown attributable to the retail price increase implemented in our fiscal first quarter. The modest sequential revenue growth was driven by higher consumption of branded infant formula products in the winter months as compared to the summer months, as well as increased sales orders from distributors in anticipation of the Chinese New Year holiday in early February. Sales orders measured in tons increased by 28% to 5,875 tons from 4,605 tons in the fiscal second quarter and gross margin increased to 43%, a sequential improvement largely due to the reduction of lower-margin industrial sales in our revenue mix, less free products provided to distributors and a change in the redemption policy in our customer loyalty program."

"We believe the retail price increase we implemented in 2012 on our branded infant formula products are gaining broader consumer acceptance at the retail level and we continue to improve operational efficiency in our business. As discussed last quarter, in light of a maturing infant formula market in China along with intensified competition among multinational and domestic infant formula brands in China, we shifted our strategy from focusing on rapid brand expansion to a focus on the better management of our sales channels and retail outlets. We made clear progress in recent months implementing the "Gold Mining" program, adjusting our sales management approach to focus on margins instead of quantity, and with increased attention on store yield and efficiency. At the end of our fiscal third quarter, the number of retail outlets served decreased significantly from approximately 63,000 to 27,000. In tandem with these changes, our sales force is becoming more streamlined, better equipped, and ready to take on the competitive challenges of today's infant formula market. This adjustment will serve us well in the long-term, improving the overall health of our sales channel system and improving greater operating efficiency and profitability."

"Moving forward, we expect sustained levels of growth in China's infant formula for the foreseeable future and believe the operating adjustments we recently implemented will better position Synutra for long-term success in China's branded infant formula category. Further, we are well positioned in our nutritional ingredient and supplements segment for rapid growth. Our shipment of chondroitin sulfate to third-party customers increased significantly in the first nine months of our fiscal year over our prior period and we expect this category to contribute more meaningfully to our revenue performance in the coming quarters. We are pleased to expect a return to profitability in our fiscal fourth quarter and believe we have improved our growth prospects for our shareholders," concluded Mr. Zhang.


Thursday, December 20, 2012
CFO Trail

QINGDAO, China and ROCKVILLE, Md., December 20, 2012 /PRNewswire/ -- Synutra International, Inc. (NASDAQ: SYUT), ("Synutra" or the "Company"), which owns subsidiaries in China that produce, market and sell nutritional products for infants, children and adults, today announced the appointment of Ms. Ning "Clare" Cai as Chief Financial Officer, effective today. Mr. Weiguo Zhang, who served as Interim Chief Financial Officer and President of the Company, will remain as the President of the Company.

Ms. Cai has thirteen years of experience in corporate finance and investment banking. Ms. Cai joins Synutra from Trina Solar Limited, where she served as a director of investment analysis from April 2010 to April 2012 and as the controller of System Group & China region from May 2012 to December 2012. Before that, Ms. Cai worked for nine years at Scotia Capital, the investment banking arm of Bank of Nova Scotia. Ms. Cai worked on the execution team in Scotia Capital's San Francisco office where she held progressive positions as an Associate from 2001 to 2003, an Associate Director from 2003 to 2006 and as a Director from 2006 to 2009, primarily covering the portfolio management and deal execution for the real estate, gaming & leisure, and technology industries. Ms. Cai started her career with Ernst & Young's Shanghai office where she was a staff accountant in the tax group from 1997 to 1999. Ms. Cai earned a Bachelor in Economics from Shanghai International Studies University and an MBA from University of Iowa Tippie Business School. Ms. Cai holds the Chartered Financial Analyst ("CFA") designation.

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "We are pleased to have Ms. Cai on board as our new CFO. She is distinctly qualified to serve as Synutra's CFO and we are looking forward to leveraging her expertise for both the day-to-day financial operations of the Company and long-term strategic planning. We expect her to contribute quickly to the vision and growth of our Company."


Monday, November 12, 2012
Comments & Business Outlook

Second Quarter 2012 Results

  • Net sales rose to $99.1 million for the second quarter of fiscal 2012 from $43.8 million in the first quarter of fiscal 2012. Net sales from the Company's branded powdered formula segment were $79.1 million, or 79.9% of net sales in the quarter, compared to $40.2 million, or 91.8% of net sales, in the previous quarter
  • Net income attributable to Synutra International, Inc. common stockholders was $8.5 million in the second quarter of fiscal year 2012, or $0.15 per diluted share, compared with a net loss of $9.6 million, or $0.17 per diluted share, in the previous quarter.

Mr. Liang Zhang, Chairman and CEO of Synutra, remarked, "We are pleased to return to profitability with net income of $8.5 million, an important milestone in the continued recovery of our powdered formula sales from the hormone allegations. We believe our sustained recovery is driven by the effectiveness of our consumer-centric marketing strategy, which has led to sales growth while controlling advertising and promotional costs. There is still room for improvement through margin expansion. However, we believe our three consecutive quarters of improvement demonstrate that our recovery is long term and sustainable. We are focused on quality, a topic that continues to grow in prominence among China's consumers, and we are differentiated by our end consumer-centric marketing, which strengthens our distribution reach. Over the long term, we are confident that these factors will help differentiate us among China's fragmented infant dairy market to strengthen our future growth momentum."


Tuesday, September 18, 2012
Comments & Business Outlook
QINGDAO, China and ROCKVILLE, Md., September 18, 2012 /PRNewswire/ -- Synutra International, Inc. (NASDAQ: SYUT), a leading infant formula company in China and a producer, marketer and seller of nutritional products for infants, children and adults, today announced the signing of a long-term industrial and commercial partnership agreement with Sodiaal, the leading dairy cooperative in France, and its subsidiary, Euroserum, the world leader in demineralized whey powders.

Under this partnership agreement, Synutra will build a new drying facility in Carhaix, France (located in the Brittany region), intended to manufacture powdered milk and fat-enriched demineralized whey for the needs of the Synutra group. Located in the heart of the central Brittany milk-collection basin, this new drying facility will meet the strictest European quality and hygiene standards and will be capable of producing 60,000 tons of powder per year initially, with a designed capacity of up to 100,000 tons annually.

Synutra anticipates spending approximately 90 million euros ($118 million) to build and operate this drying facility with the majority of funding for this project expected to come from PRC bank loans. The operational commissioning of the drying facility is expected to take place by year-end 2014, subject to full PRC government approval and, once completed, is expected to employ approximately 75-100 employees. Upon commissioning of the drying facility, Euroserum and Sodiaal will supply the facility with demineralized liquid whey and milk.

This agreement and the construction of the drying facility in Carhaix remains subject to the approvals of the government of the People's Republic of China, granted by (i) the National Development and Reform Commission, (ii) the Ministry of Commerce and (iii) the State Administration of Foreign Exchange (SAFE).

Mr. Liang Zhang, Chairman and CEO of Synutra said, "We are very pleased with this industrial and commercial partnership with Sodiaal and Euroserum. This opportunity allows Synutra to secure its long-term supply of high quality raw materials and fuel Synutra's future growth while maintaining the highest quality standard for our products. We are confident this collaborative effort can further increase consumer confidence and trust in our premium nutritional products."

Mr. Francois Iches, Chairman of Sodiaal said, "We are delighted with this long term partnership agreement with Synutra and its investment of a new drying facility in the Brittany region. This commitment is a strong signal for Sodiaal and our farmers of the long-term commercial relationship between the two groups."


Friday, August 10, 2012
Comments & Business Outlook

First Quarter Fiscal 2013 Financial Results

  • Net sales decreased to $53.6 million for the first quarter of fiscal 2013 from $85.4 million in the fourth quarter of fiscal 2012. Net sales from the Company's branded powdered formula segment were $50.5 million, or 94% of net sales in the quarter, compared to $82.5 million, or 96.7% of net sales, in the previous quarter
  • Gross profit decreased to $17.3 million in the first quarter of fiscal 2013 from $35.6 million in the previous quarter primarily related to the decrease in quarterly sales. Gross margin in the first quarter of fiscal 2013 decreased to 32% compared to 42% in the previous quarter.

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "Our results were lower than anticipated in our fiscal first quarter. With the 15% price increase implemented on April 1st, 2012 for our infant formula products, our distributors and sub-distributors have taken advantage of purchasing products at pre-increase pricing levels, resulting in reduced levels of purchase orders during our fiscal 2013 first quarter. The weak sales orders have also been exaggerated by a seasonal sales slow-down we typically experience during the hot summer months. We believe it will take another quarter for our customers to work through their inventories before we expect higher levels of ordering activity to return in our fiscal second half. As our sales growth accelerates in the back half of the year, we expect to see greater operating leverage related to the price increase that will have a positive impact on our financial performance."

"We continue to make a concerted effort to enhance our direct communications with customers to expand our market position. This interaction is reinforced through our customer support call centers, store promotions activity and local and national television advertising spots. We are also focused on enhancing the yield of our present distribution system through proper resource and incentive allocation for our top-grossing brand series as well as strengthening our sales efforts.China's dairy industry continues to offer compelling growth characteristics and the expansion of our market position is possible over the long term by ensuring the highest product quality, raising our brand visibility and enhancing the productivity of our distribution system."

"We have solid opportunities to expand our market position in powdered milk formulas and generate strong revenue and profit growth in the second half of our fiscal year. Building on our capabilities in dietary supplement ingredients, we are also cultivating other nutritional supplement product opportunities, including chondroitin sulfate sodium products for joint health, within the current fiscal year. We remain confident that our high quality products and strong management capabilities will result in long-term growth for our shareholders."

Fiscal 2013 Business Outlook

Mr. Liang Zhang concluded, "For the full year of fiscal 2013, we are adjusting our full year outlook to reflect the slower than anticipated sales in the first quarter and second quarters with stronger levels of growth and profitability expected in the fiscal 2013 second half. We currently expect our FY2013 revenue to grow to approximately $380 million to $400 million and achieve profitability of approximately $50 to $57 million. Although we are working through a challenging period in the fiscal first half, we continue to be encouraged with our opportunities in the second half of our fiscal year."


Friday, June 15, 2012
Comments & Business Outlook

Fourth Quarter 2012 Results

  • Net sales decreased to $85.4 million for the fourth quarter of fiscal 2012 from $114.4 million in the third quarter of fiscal 2012 and were up from the $79.3 in last years fourth quarter.
  • Net income attributable to Synutra International, Inc. common stockholders was $7.5 million in the fourth quarter of fiscal year 2012, or $0.13 per diluted share, compared to $10.3 million, or $0.18 per diluted share, in the previous quarter, reflecting steady profitability and an increase over the loss of $0.13 in last years fourth quarter.

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "We are pleased to achieve profitability for the first full fiscal year 2012 since the 2008 melamine crisis with net income attributable to common stockholders of $16.7 million, or $0.29 per diluted share. Quality and consumer confidence remain key issues within our industry. However, we believe our ability to regain sustained profitability after overcoming multiple industry challenges demonstrates the long term potential of Synutra."

"For the fourth quarter of fiscal 2012, our performance continued to demonstrate the sustained market potential of our powdered formula brands. Sequentially, our results were lower due to several factors. First, as we have previously noted, the earlier timing of the Chinese New Year holiday this year led to some sales being shifted to December 2011 from January 2012. Also, in the fiscal third quarter, our increased promotional efforts for the Super-Love and Helanruniu brands led to strong revenue growth, while in the fourth quarter we paced our promotional activities to avoid the holiday season promotion clutters in the market. The gross margin expansion maintained the trend of gains when adjusted for the holiday order shift to the previous quarter. Early in the quarter, we feared a media event regarding an infant death case in Jiangxi province which alleged a connection to our product could have adversely impacted our business. Through vigorous and successful crisis management efforts, we cleaned our name and we believe the impact of that event was largely limited and localized."

"We are encouraged with our progress and look forward to our initiatives for the upcoming fiscal year. As we have previously announced, we implemented an approximately 15% price increase to accommodate rising costs and industry trends. In the near term, we expect the impact on margins to be minimal and may lead to softer sales in the first quarter of fiscal 2013 as distributors continue to work through their level of higher orders placed in the second half of fiscal 2012 in anticipation of our price increase. Over the long term, we believe our price adjustment will lead to further margin expansion and drive sales growth as well. Furthermore, after adjusting for certain seasonality effects, we believe our steady market share and powdered formula revenue performance over the past few quarters demonstrates that Synutra continues to grow healthier operationally and financially. As we continue on this trajectory, we are confident that our focus on quality products, distribution expansion and strong industry understanding will lead to strong returns for shareholders in fiscal 2013 and beyond."

Business Outlook

Mr. Liang Zhang concluded, "Looking forward to the 2013 full fiscal year, we expect revenues to be in the $400 to $420 million range and net income to be in the $55 to $65 million range. We aim to maintain steady profitability while continuing to invest in sales and distribution expenses to drive market penetration of new product lines. Overall, while we recognize there may continue to be short term fluctuations related to industry volatility, we are confident in our ability to deliver sustained market share and long-term growth for shareholders."


Friday, February 10, 2012
Comments & Business Outlook

  
     
Nine Months Ended
 
  
 
December 31,
   
December 31,
 
  
 
2011
   
2010
   
2011
   
2010
 
   
(in thousands, except earnings per share)
 
Net sales
 
$
114,362
   
$
44,233
   
$
257,172
   
$
169,222
 
Cost of sales
   
67,078
     
39,211
     
151,810
     
108,943
 
Gross profit
   
47,284
     
5,022
     
105,362
     
60,279
 
                                 
Selling and distribution expenses
   
12,619
     
12,714
     
37,408
     
37,551
 
Advertising and promotion expenses
   
7,588
     
10,451
     
22,638
     
35,107
 
General and administrative expenses
   
7,365
     
6,130
     
20,616
     
20,576
 
Impairment of goodwill
   
     
     
     
1,440
 
Other operating income, net
   
1,721
     
173
     
1,901
     
484
 
Income (loss) from operations
   
21,433
     
(24,100
)
   
26,601
     
(33,911
)
                                 
Interest expense
   
3,841
     
2,626
     
11,125
     
7,401
 
Interest income
   
481
     
187
     
1,404
     
432
 
Other income (expense), net
   
(509
   
73
     
63
     
298
 
Income (loss) before income tax expense (benefit)
   
17,564
     
(26,466
)
   
16,943
     
(40,582
)
                                 
Income tax expense (benefit)
   
7,162
     
(5,920
)
   
7,370
     
(8,922
)
Net income (loss)
   
10,402
     
(20,546
)
   
9,573
     
(31,660
)
                                 
Net income (loss) attributable to the noncontrolling interest
   
116
     
(67
)
   
358
     
(131
)
Net income (loss) attributable to Synutra International, Inc. common stockholders
 
$
10,286
   
$
(20,479
 
$
9,215
   
$
(31,529
                                 
Earnings (loss) per share – basic
 
$
0.18
   
$
(0.36
 
$
0.16
   
$
(0.56
Earnings (loss) per share – diluted
 
$
0.18
   
$
(0.36
 
$
0.16
   
$
(0.56
Weighted average common shares outstanding – basic
   
57,301
     
57,301
     
57,301
     
56,201
 
Weighted average common shares outstanding – diluted
   
57,301
     
57,301
     
57,301
     
56,201
 
 
Mr. Liang Zhang, Chairman and CEO of Synutra, remarked, "Synutra has achieved an exceptional quarter with powdered formula sales reaching a three year record high of $99.8 million and net income increasing to $10.3 million, reflecting sustained profitability. These positive quarterly results were in part due to the impact of the week-long Chinese New Year holiday in January, which led some distributors to place orders in December 2011, which may have otherwise been placed in January 2012. More importantly, in the third quarter we increased distributor promotions for our Super-Love product brand to help deepen market recognition and penetration for this relatively new sub-brand of our Super Series. As a result, Super-Love gross sales for November and December were more than double that of the previous monthly average.

"Operationally, we remain focused on product safety. We continue to concentrate on the effectiveness of our already stringent quality control processes and continue to invest in improvements. This January, when media reports on the death of a child in Jiangxi brought product safety into the spotlight, we swiftly conducted an internal investigation while actively cooperating with local authorities in their fact-finding efforts. Two days after the story aired, we published the outcome of our own investigation to show our products were safe. Initial government findings came shortly thereafter, confirming that our products were safe and consistent with national standards. In less than seven days, final results of multiple rounds of testing by separate government authorities further confirmed what we already knew. While it is still early to determine the effect of this incident on our business, we are encouraged by the fact that no Synutra products were pulled from store shelves due to this event other than the one shop in Jiangxi where the infant's family purchased their formula.

"Looking forward, we caution that the fourth fiscal quarter's results may be more muted compared to the performance of the third fiscal quarter, considering the following impacts. First, there is the effect of the Chinese New Year holiday which shifted some January 2012 orders forward to December 2011. In addition to affecting sales performance, this will also impact margins as we provide distributors with fixed discounts each period, which is why margins vary with sales volume. Second, it is still early to quantify the impact of the Jiangxi incident. January 2012 orders were placed ahead of the incident so any impact will affect the February and March order numbers. Lastly, we are preparing to implement a distributor price increase of about 15% on April 1, 2012, to bring our prices more in line with rising costs and industry trends. We expect this supplier price adjustment will translate into a retail price increase of up to 15% on average resulting in future margin expansion and revenue growth. Overall, the coming quarter will be an exciting one in Synutra's development. We look forward to updating the market as we gain more visibility."


Friday, January 20, 2012
Comments & Business Outlook

QINGDAO, China and ROCKVILLE, Md., January 20, 2012 /PRNewswire-Asia/ -- Synutra International, Inc. (NASDAQ: SYUT), ("Synutra" or the "Company"), which owns subsidiaries in China that produce, market and sell nutritional products for infants, children and adults, today announced the final findings by government authorities regarding the case involving the twin infants from Jiangxi Province. The Jiangxi Province Center for Disease Control and Prevention and the Jiangxi Dairy Quality Supervision and Inspection Center ("the Authorities") have performed two separate rounds of testing, which both confirmed the preliminary findings announced on January 13, 2012 from the People's Government of Duchang County that cleared Synutra products. The Authorities stated that samples in both additional tests were collected directly from the family of the deceased infant and from the retail store where the family bought the products and concluded that the samples are compliant with all eleven national standards, including level of coliform bacteria and total bacterial count. The Authorities also tested the residential well water from the family and found that both coliform bacteria levels and total bacterial count exceeded national standards. The Authorities had also previously released the attending physician's diagnostic records that determined the infant death was due to body overheating (hyperthermia) and multi-functional organ failure and that both the death of the male infant and the sickness of his twin sister were not due to food poisoning or related to food.

Mr. Weiguo Zhang, President and interim CFO of Synutra, commented, "We are pleased that our product and brand have been cleared of any responsibility in this tragic situation. We are currently assessing the impact of this event on our business. We will inform our investors when we have a clearer picture of the overall operational effect in the coming weeks. At this point, our sales and earnings estimates for the quarter ended December 31, 2011 remain unchanged. We plan to announce the results of third quarter of fiscal year 2012 in the second week of February, and we estimate the sales revenue to be within a range of $90 to $93 million and net income in a range of $9 to $10 million."


Friday, January 13, 2012
Comments & Business Outlook

QINGDAO, China and ROCKVILLE, Md., January 13, 2012 /PRNewswire-Asia/ -- Synutra International, Inc. (NASDAQ: SYUT), ("Synutra" or the "Company"), which owns subsidiaries in China that produce, market and sell nutritional products for infants, children and adults, today announced that the People's Government of Duchang County in Jiangxi Province concluded after product testing that the Company's infant formula products are compliant with all government safety standards. The tests were performed due to the incident involving the Jiangxi twins that the Company announced yesterday. The government also found that the death of the male infant and the illness of his twin sister were both not due to food poisoning or related to food.

Mr. Liang Zhang, Chairman and CEO of Synutra, reacted to the government finding, "We are gratified to learn that government testing has confirmed our own test results earlier today to show that our products are safe. Given the turbulent history of China's dairy industry, we recognize our consumers are more focused than ever on product safety. We hope that the government's swift response and confirmation of the safety of our infant formula products will alleviate the concerns of our consumers and the general public. As the government testing results reinforce, Synutra is a company dedicated to producing safe and high quality products to better safeguard the health and nutrition of infants in China."


Thursday, January 12, 2012
Comments & Business Outlook

QINGDAO, China and ROCKVILLE, Md., Jan. 12, 2012 /PRNewswire-Asia/ -- Synutra International, Inc. (NASDAQ: SYUT), ("Synutra" or the "Company"), which owns subsidiaries in China that produce, market and sell nutritional products for infants, children and adults, today issued a statement in response to local Chinese media reports of a pair of 4-month old twins in Jiangxi province who became ill with severe intestinal symptoms. One passed away from dehydration on January 7, 2012. The other has recovered following hospitalization. Both children were reported to have been consuming Synutra powdered milk formula products for weeks before the sudden onset of their illnesses.

Mr. Liang Zhang, Chairman and CEO of Synutra, stated, "Our hearts go out to the family suffering from this tragic event. At the same time, we firmly believe this is an isolated incident unrelated to Synutra's products.  All of our products, including the lot under question, are thoroughly tested and analyzed before shipment. These products are formulated and produced under stringent safety standards to safely meet the nutritional needs of infants.  We have chosen to not recall any of our products because we are confident that they are safe. We are also not aware of any decisions to remove our products from store shelves, except in the store from which the ill infants' formula originated.

"The Company and our distributors are actively cooperating with various local and provincial authorities to investigate the source of the reported illness," continued Mr. Zhang. "The Jiangxi Bureau of Quality and Technical Supervision is in the process of testing product samples collected from the affected family.  We recognize the pain of the grieving family. However, we hope to reassure consumers that we are fully confident that our products are safe.  We believe in the quality of our products and stand by our quality assurances," Mr. Zhang concluded.


Monday, December 12, 2011
Comments & Business Outlook

QINGDAO, China and ROCKVILLE, Md., Dec. 12, 2011 /PRNewswire-Asia/ -- Synutra International, Inc. (NASDAQ: SYUT), ("Synutra" or the "Company"), which owns subsidiaries in China that produce, market and sell nutritional products for infants, children and adults, today announced the planned relocation of the Company's R&D, customer service, call-center, and training facilities into a new corporate campus in Beijing by the end of December, 2011.

Mr. Liang Zhang, Chairman and CEO of Synutra, remarked, "Our planned move is coming amidst robust sales growth after our most recent profitable quarter ended September 30, 2011 with a net income of $8.5 million. According to the Commercial Information Center (CIC) of the Ministry of Commerce, our market share in China's infant milk formula sector improved to 5.9% for the month of October.

Mr. Weiguo Zhang, President and Interim CFO of Synutra, commented, "Although promotional activities on certain product lines may partially contribute to the apparent surge in the expected sales growth, we are pleased by our steady trend of improvement. We are particularly encouraged by the margin expansion and operating cash flow staying in positive territory since the previous reporting period. Other factors that may drive the potential sales growth include the fact that the fall season typically sees more active consumer buying and that distributors stock up ahead of time in December in anticipation of the early on-set of Chinese New Year holidays in the month of January 2012. Nevertheless, we believe

the top-line growth for the three months ending December 31, 2011 will be between 45% to 48%, which, we believe would likely result in an expected net income range of $9 to $10 million for the three months ending December 31, 2011."

"I wanted to emphasize," continued Mr. Liang Zhang, Synutra Chairman and CEO, "that the Company has moved beyond the turbulent market crises and is returning to a normalized operating environment. We will continue to focus on our day-to-day operations to produce the safest and highest quality products for our customers, and we will continue to attend to the fundamentals and work to enhance shareholder value."

GeoTeam Note: Net income guidance works out to about EPS of $0.17 vs. a $0.10 street estimate.


Sunday, November 13, 2011
Comments & Business Outlook

Second quarter of fiscal 2012

  • Net sales rose to $99.1 million for the second quarter of fiscal 2012 from $43.8 million in the first quarter of fiscal 2012.
  • Gross profit was $42.0 million in the second quarter of fiscal 2012, compared to $16.1 million in the previous quarter.
  • Gross margin in the second quarter of fiscal 2012 was 42.4%, compared to 36.7% in the previous quarter.

 As sales volume continues to grow and selling costs decrease as a percentage of net sales, the Company expects margins to continue to strengthen but at a more gradual pace to converge towards a long term normalized range.

  • Net income attributable to Synutra International, Inc. common stockholders was $8.5 million in the second quarter of fiscal year 2012, or $0.15 per diluted share, compared with a net loss of $9.6 million, or $0.17 per diluted share, in the previous quarter.

Mr. Liang Zhang, Chairman and CEO of Synutra, remarked, "We are pleased to return to profitability with net income of $8.5 million, an important milestone in the continued recovery of our powdered formula sales from the hormone allegations. We believe our sustained recovery is driven by the effectiveness of our consumer-centric marketing strategy, which has led to sales growth while controlling advertising and promotional costs. There is still room for improvement through margin expansion. However, we believe our three consecutive quarters of improvement demonstrate that our recovery is long term and sustainable. We are focused on quality, a topic that continues to grow in prominence among China's consumers, and we are differentiated by our end consumer-centric marketing, which strengthens our distribution reach. Over the long term, we are confident that these factors will help differentiate us among China's fragmented infant dairy market to strengthen our future growth momentum."


Thursday, September 8, 2011
Resolution of Legal Issues

QINGDAO, China and ROCKVILLE, Md., Sept. 8, 2011 /PRNewswire-Asia/ -- Synutra International, Inc. (NASDAQ: SYUT) ("Synutra" or the "Company"), which owns subsidiaries in China that produce, market and sell nutritional products for infants, children and adults, today announced that the U.S. Court of Appeals for the Fourth Circuit ("Appellate Court") affirmed a previous ruling of the U.S. District Court for the District of Maryland ("District Court"). As announced in April 2010, the District Court had granted the Company's motion to dismiss a product liability lawsuit brought against the Company related to products allegedly sold by subsidiaries during the 2008 melamine crisis in China. The plaintiffs filed a notice of appeal thereafter. In its opinion issued on September 6, 2011 regarding the appeal, the judges of the Appellate Court affirmed the District Court's dismissal of the complaint on the grounds of forum non conveniens.

Mr. Weiguo Zhang, President and interim CFO of Synutra, commented, "We are gratified that the Appellate Court has affirmed the District Court decision that the case is dismissed. We believe this will help us to focus on our business and enhance shareholder value by removing uncertainty and alleviating investor concerns."


Monday, August 29, 2011
CFO Trail

QINGDAO, China and ROCKVILLE, Md., August 30, 2011 /PRNewswire-Asia/ -- Synutra International, Inc. (NASDAQ: SYUT), a leading infant formula company in China and a producer, marketer and seller of nutritional products for infants, children and adults, today announced Donghao Yang has resigned from his position as Chief Financial Officer ("CFO") to pursue another professional opportunity, effective immediately. Weiguo Zhang, the Company's President and Chief Operating Officer since 2005, will serve as interim CFO as the Company conducts its search for potential CFO candidates.


Wednesday, August 24, 2011
Liquidity Requirements
Our cash and cash equivalent decreased from $48.7 million as of March 31, 2011 to $27.5 million as of June 30, 2011. As we improve our financial performance and decrease operating cash outflow, we believe that our future cash and cash equivalent will be sufficient for our operating needs. Depending on our cash flow situation, we may adjust the amount of industrial milk powder imported and sold.

Tuesday, August 9, 2011
Comments & Business Outlook

First Quarter Fiscal 2012 Financial Results

 

Mr. Liang Zhang, Chairman and CEO of Synutra, remarked, "We are pleased with the continued recovery of our branded formula sales. Though there is significant room for improvement before we reach our targeted performance goals, we believe our branded formula sales demonstrate that our recovery is ongoing and sustainable. Quality, especially for domestic infant dairy producers, continues to grow in prominence in the eyes of China's consumers. As such, we believe we are well-positioned with our focus on premium quality brands to gain greater consumer recognition."

Mr. Donghao Yang, Chief Financial Officer of Synutra, commented, "We do recognize our first quarter 2012 topline performance shows significant volatility versus prior quarters. This is due to two main factors. The majority of the difference is attributable to our decision not to enter into industrial milk powder sales this quarter. In the past, we have used these sales as a form of short-term financing. We are pleased to note that as our sales performance strengthened, we we were able to meet our short-term cash requirements. In addition, it is also important to note that $16.6 million of formula sales were shifted from the June quarter to early July. A series of events led to this revenue shift but it primarily reflects whey powder delivery timing from our French supplier. Our management team acted quickly to identify an alternate source and we were able to make up much of the delayed sales by early July through working overtime. More importantly, this issue has been resolved. We have secured a reliable interim supplier and our French supplier will begin regular shipments in August."

"As an infant formula company, Synutra's performance is best tracked through its powdered formula sales. Accounting for the shipment delay, our formula sales in the June quarter would have increased by $8.4 million from the March quarter. Furthermore, as you can see from the increase in raw materials and inventory on our balance sheet, we are quickly ramping up to meet the incoming order demand. We are proud of this achievement and believe that this marks only the first of many quarters of sustained sales growth and margin enhancement," Mr. Yang concluded.

Net sales were $43.8 million for the first quarter of fiscal 2012 compared to $79.3 million in the fourth quarter of fiscal 2011, reflecting lower industrial milk powder sales and delay of revenue recognition into early July due to timing of whey protein powder shipments during the quarter. Net sales from the Company's branded powdered formula segment were $40.2 million, or 91.8% of net sales in the quarter, compared to $48.3 million, or 60.9% of net sales, in the previous quarter. Net sales of the Company's Super series infant formula accounted for 58.4% of the volume of sales and 70.4% of the net sales of the powdered formula segment for the first quarter of fiscal year 2012 compared to 53.9% of the volume of sales and 65.8% of the net sales of the powdered formula segment in the previous quarter. By volume, sales of powdered formula products were 4,513 tons in the fiscal first quarter compared to 6,057 tons in the previous quarter.

 

Loss from operations was $9.9 million compared to a loss from operations of $6.4 million in the previous quarter. Total operating expense remained predominantly steady from the previous quarter but reflects higher bonus expenses for the sales team. Selling and distribution expenses increased 14.8% to $12.5 million from $10.9 million. Advertising and promotional expenses were $7.0 million, compared to $6.3 million in the previous quarter. General and administrative expenses were $6.6 million compared to $7.7 million in the previous quarter.

Net loss attributable to Synutra International, Inc. common stockholders was $9.6 million in first quarter fiscal year 2012, or ($0.17) per diluted share, compared with a net loss of $8.5 million, or ($0.15) per diluted share in the previous quarter.

Mr. Yang continued, "One of the key highlights this quarter was the upward trend of our market share. This further supports our belief that our recovery is a sustained and ongoing trend. Our May and June quarters were affected by product shipment delays but our overall direction and market share position demonstrates that consumer demand for our products is recovering."


Wednesday, June 15, 2011
Comments & Business Outlook
  • Net sales increased 79.3% to $79.3 million in the fourth quarter of fiscal 2011 from $44.2 million in the third quarter of fiscal 2011, led by growth in the Company's infant formula sales. Net sales from the Company's branded powdered formula segment were $48.3 million, or 60.9% of net sales in the quarter, compared to $20.7 million, or 46.8% of net sales, in the previous quarter. Net sales of the Company's Super series infant formula accounted for 53.9% of the volume of sales and 65.8% of the net sales of the powdered formula segment for the fourth quarter of fiscal year 2011 compared to 45.4% of the volume of sales and 57.1% of the net sales of the powdered formula segment in the third quarter of fiscal year 2011. By volume, sales of powdered formula products were 6,057 tons in the fiscal fourth quarter compared to 4,063 tons in the previous quarter.
  • Gross profit was $17.5 million in the fourth quarter of fiscal 2011, compared to $5.0 million in the third quarter of fiscal year 2011. Gross margin in the fourth quarter of fiscal 2011 was 22.0%, compared to 11.4% in the third quarter of fiscal 2011. This reflects the impact of the discounts the Company provided to distributors to regain market share, which were deducted from gross sales, negatively impacting net sales and gross margin.
  • Loss from operations improved substantially to $6.4 million, from the $24.1 million operating loss in the prior year period. Total operating expenses were 30.1% of revenue reflecting advertising and promotional activities in line with the Company's normalized range.

Mr. Liang Zhang, Chairman and CEO of Synutra, remarked, "Our results this quarter demonstrate that our recovery is ongoing and, we believe, sustainable. Sales of our branded powdered formula have doubled since the last quarter, led by growth of our Super series. Furthermore, we have launched a new brand, our My Angel series, to capitalize on the shifting market dynamics of China's infant dairy market. This supplementary product line will be distributed through specialty baby stores with unique formulations and is not expected to cannibalize our existing premium product lines. Looking forward, we believe our focus on premium quality brands as well as our broadening distribution reach will lead to greater consumer recognition."

Mr. Donghao Yang, Chief Financial Officer of Synutra, commented, "The fourth quarter is also significant from a channel perspective. We have begun to see signs of our distributors' inventory levels stabilizing after the destocking in the previous two quarters. Overall, we are pleased with the continued financial and operational improvements accomplished by our dedicated employees."

Mr. Yang continued, "We are pleased to note strong sequential growth in our financial performance. Operating results have shown significant improvement in the fourth quarter compared to the previous two quarters when the hormone crisis impacted results. Our powdered formula segment sales increased by 133.2% and gross margin more than doubled in the fourth quarter compared to the third quarter. Operating loss this quarter narrowed by 73.3% compared with the previous quarter. As we have observed, the destocking of channel inventory is coming to an end, which is a major contributing factor to our operating improvement. As our market share continues to recover directionally over time, distributors will adjust their inventory level upward accordingly, so we expect to see further improvement in our operating results in the coming quarters."


Saturday, February 5, 2011
Investor Alert
On July 7, 2010, the Company entered into a supplementary agreement with Beijing Oriental Campus Property Management Co., Ltd., pursuant to which the Company is required to prepay the head office building rental expense of $17.6 million, representing rental expense from September 1, 2010 to August 31, 2018, before December 31, 2010. We paid $9.1 million of this expense before December 31, 2010. Due to the tight cash flow we experienced after the prematurity event, we negotiated with the counterparty and temporarily ceased payment for the remaining balance. Any further payment will be made on a negotiated basis.

Friday, February 4, 2011
Comments & Business Outlook

QINGDAO, China and ROCKVILLE, Md., Feb. 3, 2011 /PRNewswire-Asia-FirstCall/ -- Synutra International, Inc.today announced financial results for the third quarter of fiscal 2011 ended December 31, 2010.

Donghao Yang, Chief Financial Officer of Synutra, commented, "The negative media reports from early August 2010 continued to drastically impact our financial results, and our third quarter sales of $44.2 million and net loss of $20.5 million can be directly attributed to that disruptive event.  However, our sales and gross margin performance from the month of December in our powdered formula segment gives us reason to believe the worst is behind us and we have begun a sustainable recovery.  I am also pleased to report that channel inventory turnover days, which is a gauge of distributor and retail demand, improved materially from a peak of 120 days in August 2010 to 43 days in December 2010, which is in line with more normalized levels of between 40 to 45 days. We have provided these monthly metrics because this additional layer of transparency allows us to better illustrate the recovery we believe started to materialize late in the third quarter, after we took swift measures to respond to the negative media reports from August."

  • Net sales increased 7.4% to $44.2 million in the third quarter of fiscal 2011 from $41.2 million in the second quarter of fiscal 2011.
  • Gross profit was $5.0 million in the third quarter of fiscal 2011, compared to $8.9 million in the second quarter of fiscal year 2011. Operating loss in the December quarter was $24.1 million, slightly better than the $26.1 million operating loss in the September quarter.

Operating expenses remained elevated as a percentage of sales due to the Company's aggressive investment in advertising and promotional activities to rebuild brand equity and recover market share.  Sequentially, operating expenses decreased as the Company drew back advertising and promotional expenses to more normalized levels through the quarter from a high of $7.5 million in September to $3.4 million in December.  


Thursday, November 4, 2010
Comments & Business Outlook

Second Quarter Fiscal 2011 Financial Overview

  • Net sales were $41.2 million in the second quarter of fiscal 2011, compared to $65.3 million in the second quarter of fiscal 2010.  
  • Loss from operations was$26.1 millionin the second quarter of fiscal 2011, compared to a loss of $16.3 million in the prior year period.  
  • For sequential comparison, in the first quarter of fiscal year 2011, operating income was $16.3 million.  
  • Net loss attributable to Synutra International, Inc. common shareholders was $21.2 million, or $0.37 per diluted share in the second quarter of fiscal 2011, compared with a net loss of $14.0 million, or $0.26 per diluted share, in the prior year period.

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "The second quarter of fiscal 2011 was very challenging for Synutra.  The premature development allegations, which drove a considerable decline in our market share, left a deep and lasting impact on our business.  We are proud, though, of our response to this very difficult situation.  We took the initiative to reach out to the proper authorities to verify the quality of our products and stem further consumer panic, we mobilized our sales team and call center to handle customer concerns and we have provided our distributors with more discounts and promotional activities to maintain the strength of our distribution channels.  We also directly confronted the source of these erroneous media reports, Phoenix Satellite Television, who then issued a formal public apology."

Zhang continued, "Today, we are cautiously optimistic about our ongoing recovery.  Following the melamine crisis, our management team demonstrated that they are capable of returning Synutra to profitability.  We are confident that through the dedication and commitment of this same team, Synutra will rebuild its market presence and recapture its previous long-term growth momentum."


Thursday, September 30, 2010
Comments & Business Outlook

Synutra International, Inc. (Nasdaq: SYUT),  today provided the web link to Phoenix Satellite Television Holdings Limited's ("Phoenix TV") public apology.  As announced yesterday, Synutra has received a formal public apology from Phoenix TV for promulgating false claims against Synutra. The on-air apology, delivered on the same program as were the false claims, resolves the previously reported legal actions brought by Synutra against Phoenix TV and its subsidiary, Beijing Tianying Jiuzhou Network Technology Co. Ltd, the operating company of the website ifeng.com.  

Mr. Liang Zhang, Chairman and CEO of Synutra, commented, "We never doubted the quality of our product or our commitment to our consumers, and we believe the public apology from Phoenix TV is an appropriate response, especially since it comes from the very source of the false allegations. We feel that Phoenix TV's on-air apology lays a sturdy foundation for the restoration of our brand going forward. To that end, we remain cautiously optimistic about our ongoing recovery, and we continue to monitor diligently our sales channels."

To view the video segment containing the apology, please visit the Events and Presentations page of the Company's IR website, http://www.synutra.com/. The apology begins approximately 32'10" into the show, and lasts until approximately 33'50" into the show.


Monday, August 9, 2010
Comments & Business Outlook

 First Quarter Fiscal 2011 Financial Highlights:

  • Net sales up 77.0% to $83.8 million from $47.4 million in the prior year period.
  • Gross profit increased 136.9% to $46.4 million from $19.6 million in the prior year period.
  • Gross margin up substantially to 55.3% from 41.4% in the prior year period.
  • Operating income increased to $16.3 million from an operating loss of $10.6 million in the prior year period.
  • Net income attributable to Synutra International, Inc. common shareholders increased to $10.1 million, or $0.19 per diluted share, from a net loss of $9.9 million or ($0.18) per diluted share, in the prior year period.

Mr. Liang Zhang, Chairman and CEO of Synutra stated, "Our fiscal first quarter financial results continue to demonstrate our return to growth and profitability. Last quarter marked the significant milestone of our return to profitability. This quarter, we have continued to leverage our robust information network and innovative, consumer driven marketing strategy to further improve our revenue mix and drive profitability."

SYUT also addressed product quality rumors:

Mr. Liang Zhang, Chairman and CEO of Synutra stated, "Certain parties in the media recently attempted to create a crisis by linking our products to premature development and precocity in children. These claims are highly irresponsible and based on speculation instead of scientific evidence. Certain members of the media promulgated these claims despite the fact that many different external factors have been linked to premature development in children, and, additionally, China's CDC and several leading scientists already stated publicly that there was no evidence linking our products to such symptoms.

"As a well-known and trusted provider of infant formula in China, we are completely confident that our products are safe and our quality levels are industry-leading. We do not add hormones to our products and we have invested heavily in research, quality control, formulations and ingredients. We have participated in exhaustive quality testing at all required government levels, including with the relevant state agencies and industry groups. Additionally, our upstream ingredient suppliers are also reliable and trusted around the world.

"Recently, we have worked closely with state authorities, including the Chinese Dairy Association and the Office of Food Safety, to test product samples to prove that these claims are false. We expect that the results of these tests should be made public soon, and we hope that they are published expeditiously. We firmly believe they will illustrate our unwavering product quality and commitment to consumer safety.

"We are in the process of taking legal action to protect our brand, and we intend to prosecute the parties responsible for these accusations to the furthest extent possible."


Tuesday, August 11, 2009
Investor Alert

On the balance sheet, Synutra reported cash and cash equivalents of $29.58 million on June 30, 2009, compared to $37.74 million on March 31, 2009. Working capital was negative at $83.74 million, compared to negative working capital of $80.43 million three months earlier. Long-term debt at the end of June 2009 was $16.10 million, compared to $8.78 million at the end of March. The working capital deficit was caused primarily by the product recall expenses, including product replacement cost; shipping charges and inventory write-down and write-off, as well as the subsequent loss of sales. As of June 30, 2009, the Company was not in compliance with certain covenants of its loan agreement with one of its lenders, ABN AMRO Bank, N.V., Hong Kong branch, which was acquired by Royal Bank of Scotland. The Company is currently in discussions with the lenders on a waiver and is unable to predict when, or if the waiver will be granted. Also, in order to maintain sufficient funds for its operations, it has postponed the payment of certain accounts payables and has negotiated with certain suppliers to extend payment terms beyond the customary terms.

Source: Business Wire (August 11, 2009)


Tuesday, February 10, 2009
Research

SYUT filed its Third quarter report with the SEC.  The company reported a significant EPS loss of $0.91 on an 82% drop in revenues to $17.66 million . 

There were two main reasons for the decreased financial results:

1.  Sales volume of powdered formula products decreased by 21.0% to 23,719tonsfor the nine months ended December 31, 2008 from 30,035 tons for the same period in the previous year. The decrease was primarily due to a slow down in sales activities in the second half of September to December 2008, following the melamine contamination incident and our shipments in the second and third fiscal quarters were mainly used for the replacement of recalled products in the quarter ended December 31, 2008, partially offset by a significant business growth experienced in the months from April to August, 2008.

2.  The average selling price of our powdered formula products for the nine months ended December 31, 2008 increased by 21.6% to $9,090 per ton from $7,475 per ton for the same period in the previous year. This increase in average selling price was a combined result of a greater proportion of higher-priced products in our product mix and a broad increase of our sales price in August 2008.

Source: SEC Form 10Q (February 9, 2009)

The GeoTeam® will monitor the company's progress as it attempts to put this chapter behind them and continue its previous growth trend.  Analyst estimates show the company returning to profitability with EPS of $0.74 ($0.61 tax adjusted).