GLG Life Tech Corporation, a world leader in the production of high-quality stevia, announces financial results for the second quarter of 2008. During the period, the Company achieved record levels of production and shipments of high grade stevia ("HGS") extract. The new production line announced on May 2, 2008 more than doubled production for the quarter as anticipated and the Company was able to produce 40 metric tons of HGS, 220% higher than its previous quarterly production average. GLG has also achieved many milestones towards the development of its business plan during the second quarter including planting a record number of high quality stevia seedlings for this year's harvest, significant progress on the advancement of key capital expansion projects and the development of its consumer division with Weider Global Nutrition. Further, GLG's committed HGS order backlog is US$ 34 million as of July 31, 2008 for delivery over the period Q3 2008 to Q3 2009.
Second Quarter 2008 Financial Results
Revenues for the second quarter ending June 30, 2008 were $1,238,893, a decrease of 4.5% from $1,297,344 in revenue for the second quarter in 2007. Stevia revenue was $1,091,720 for the second quarter in 2008, a marginal decrease from $1,093,863 in the second quarter 2007. Towards the end of the quarter, the Company shipped three containers of high grade stevia product produced during the quarter to a customer with sales term CIF destination point. As a result, the inventory is accounted for as goods in transit at the end of the current quarter. The customer confirmed the receipt of these shipments in July and revenue from this shipment will be recognized as sales in the third quarter along with a reduction in the amounts due to customers on GLG's balance sheet. Revenue for the second quarter was therefore lower than expected due to the shipments in transit to its strategic customer at quarter end. If the value of the goods in transit was to be added to the sales for the second quarter, the value of the goods shipped during the quarter would have met Management's expectations. Inclusion of the sales value of the goods in transit at quarter end with recognized revenue for the second quarter would have increased revenue during the second quarter to approximately $3.5 million.
After meeting rigorous food safety audit standards of its strategic customer, GLG's new secondary processing production line ("Line 3") began operations in early May. Line 3 has been built to GMP (Good Manufacturing Practice) specifications and has an output capacity of between 40-50 metric tons per month of high grade stevia. Line 3 employs GLG's "re-crystallization" technology to take the Company's intermediate product (RA60 industrial powder) and further refine it to higher levels between RA80 and RA97 depending on customer specifications. As a direct result of Line 3 coming into operation during the second quarter, GLG produced and shipped its highest volume of high grade stevia extract ever with tonnage approaching 40 metric tons. To management's knowledge, Line 3 is currently the largest re-crystallization facility for high grade stevia extract in the world today.
Gross profit for the quarter ending June 30, 2008 was $439,862, a decrease of 6.8% from $472,013 in gross profit for Q2 2007. The main driver for the decrease in gross profit for the second quarter 2008 compared with the second quarter of 2007 was lower stevia revenue recognized than expected due to late in the quarter shipments.
Gross profit for the first half of 2008 was $909,257, a decrease of 3% from $937,722 in gross profit for the first half of 2007. Gross profit from the Company's procurement business segment was up 40% for the first half of 2008 compared with the first half of 2007 due to a high portion of higher margin commission sales in the first half of 2008 compared with the first half of 2007.
The SG&A increase (excluding depreciation and amortization) for Q2 2008 over Q2 2007 was $809,872 or a 233% increase. This increase was driven primarily by increases in consolidated salary and wages, consulting fees, professional fees and listing expenses. The cost increases for the second quarter are both 1) one-time related development costs for the Company related to the start-up of its new plants in China and Consumer Division and; 2) ongoing operating cost increases related to the hiring of additional staff in China for the new production line and new Greenfield plants.
EBITDA for the quarter ending June 30, 2008 was ($377,699) a decrease of 364% from $231,671 n EBITDA in Q2 2007. The main drivers for the decrease in EBITDA are attributable to lower gross profit from the stevia business relative to the second quarter in 2007 as well as higher operating expenses for the Company. Lower gross profit was driven by cost factors described in the gross profit analysis as well as the shipment of a material amount of product at the end of the second quarter that was classified as goods in transit with the corresponding gross profit deferred until the third quarter. The higher operating expenses of the Company were driven by the start-up of its two new Greenfield processing facilities in China located in the cities of Mingguang and Dongtai, and the start-up of its new consumer products division in advance of material revenues. GLG has also incurred higher public company and corporate governance costs associated with its recent TSX listing and corporate development projects undertaken in the second quarter.
Net Income (loss)
Net loss for the second quarter 2008 was $1,068,286, a decrease of 1,208% from second quarter 2007 net income of $96,422. The basic earnings (loss) per share (EPS) were ($0.02) for the second quarter 2008 compared with $0.00 for the second quarter of 2007. Earnings were impacted by lower gross profit from the Company's stevia business segment, increased labour costs and expenses associated with the start-up of new facilities and the development of the new consumer products division.
Summary of Second Quarter Results
The following results have been derived from and should be read in conjunction with the consolidated financial statements of GLG for the quarter ending June 30, 2008, and its annual consolidated financial statements for the year ended December 31, 2007. Certain 2007 comparative figures have been reclassified to conform to the current financial statement presentation.
GLG Reconfirms 2008 Revenue and EBITDA guidance
- US$ 34 million order backlog for HGS for delivery Q3 2008 through Q3 2009
- New production line proven and doubled HGS output starting in June 2008
- New consumer products division expected to contribute to margins and revenue in Q3 2008
- Revenues expected to reach record levels in Q4 2008 with new capacity coming on line and a record 2008 stevia leaf harvest
GLG is reducing guidance for Capital Expenditures from $75-85 million to $65-75 million due to build out of 1,000 metric tons of HGS capacity compared to the original plan for 1,500 metric tons.
Management expects to have sufficient capital to complete the 2008 business plan based on the June 30, 2008 cash position of $30.4 million and the addition of recent financings totally over $68 million.
Management's Discussion and Analysis containing a complete review of financial results as well as financial statements and the Annual Information Form are available on the Company's website at www.glglifetech.com or on SEDAR at www.sedar.com.
About GLG Life Tech Corporation
GLG Life Tech Corporation specializes in growing, refining, and producing high grade stevia extract, a natural, zero-calorie sweetener. With fully integrated stevia operations, GLG is the leading supplier of high quality stevia production in China. The Company is also engaged in the distribution of nutritional products in China and holds exclusive agreements with Weider Global Nutrition and Shandong Yong He Tang Health Products Chain Stores Ltd., whose franchise network includes over 1,400 locations. Please visit www.glglifetech.com for further information.
Forward-looking statements: Certain statements in this press release constitute "forward-looking statements". Such forward-looking statements include, without limitation, statements evaluating the market and general economic conditions and discussing future-oriented costs, expenditures and other financial or operating performances. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes" or variations of such words and phrases or words and phrases that state or indicate that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. While the Company has based these forward-looking statements on its current expectations about future events, the statements are not guarantees of the Company's future performance and are subject to risks, uncertainties, assumptions and other factors which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Such factors include amongst others the effects of general economic conditions, changing foreign exchange rates and actions by government authorities, uncertainties associated with legal proceedings and negotiations, industry supply levels, competitive pricing pressures and misjudgments in the course of preparing forward-looking statements. Please refer to the heading "Risk Factors" in our Annual Information Form in respect of our year-ended December 31, 2007 and the risk factors in our Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2007 for a discussion of these and other factors underlying forward-looking statement, both of which are available on SEDAR at www.sedar.com under the Company's names. In light of these factors, the forward-looking events discussed in this press release might not occur. Further, although the Company has attempted to identify factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. As there can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements, readers should not place undue reliance on forward-looking statements.