GLG Life Tech Corp., a vertically integrated leader in the agricultural and commercial development of high-quality stevia and other natural sweeteners, announces financial results for the six months ended June 30, 2014.
Revenue growth strategy continues to produce results
For the six months ended June 30, 2014, GLG achieved revenue growth of 30 percent compared to the same period last year, resulting in $8.7 million in year-to-date revenue. We continue to generate increased revenue numbers through our focus on a strategy of establishing relationships with international customers that have a need for ongoing deliveries of higher-purity stevia extracts, leading to recurring, higher-value revenues. While we continue to also sell a range of lower-purity stevia extracts to other China-based stevia providers and Asian customers, our international focus has markedly increased the contribution to sales and revenue growth. International sales contributed 51 percent of year-to-date 2014 revenues, compared with a 31 percent contribution in the first quarter 2013. International sales have more than doubled year-over-year.
GLG secures $10m luo han guo contract with global food leader
On July 23, 2014, GLG announced an agreement to supply a global leader in the food industry with luo han guo (aka Chinese monk fruit) extract, thereby formally marking GLG's entry into the luo han guo market. The value of the contract is material and it is estimated at between $9 and $12 million (USD) over a twelve-month period, commencing with this fall's luo han guo harvest. The expected value of this one contract (assuming the midpoint value of $10.5 million) is equivalent to approximately 65 percent of 2013 revenues. GLG therefore expects this contract to materially increase revenues beginning late 2014 and extending well into 2015. Further, GLG and the customer have the express option to extend the agreement over future years.
This agreement not only marks GLG's entry into the luo han guo production and supply space, it also immediately positions GLG to be a leading producer of luo han guo products, and will enable the Company to capitalize significantly on its efforts over the past year. GLG previously announced that it had developed a vertically integrated supply chain for the luo han guo business, including agriculture and advanced processing and purification capabilities. Earlier this year, GLG filed in China a patent for its luo han guo processing technology. The Company has also undertaken the GRAS self-affirmation of its luo han guo extract products and, in May 2014, submitted its notification to the FDA of self-affirmed GRAS status of its luo han guo extract products.
Producing luo han guo extract products is a natural extension of GLG's core stevia extract product line; these product lines are each naturally sourced sweetener ingredients and luo han guo is often used complementarily. GLG's experience as a global market leader, agricultural expert, and technological innovator in stevia has facilitated the entry into luo han guo, as much of the expertise gained in developing and optimizing our vertically integrated stevia operations has lent itself well to achieving the same for luo han guo. We have already received a number of other expressions of interest in our luo han guo extract products and capabilities.
GLG's Naturals+ product sales begin
Since expanding our product portfolio beyond stevia (and now, luo han guo) with the GLG Naturals+ line of complementary natural ingredients, we have been working on several agreements for the supply of these Naturals+ products, some of which are expected to have a significant effect on future revenues. Our Naturals+ product line is premised on sourcing high-quality natural and functional food ingredients from China at attractive prices through a unique certification program designed to address the concerns of international food and beverage companies. Our deep familiarity with international food safety standards and supply chain management has helped us establish strong relationships with a network of Chinese suppliers managed under our R8 program, which gives our customers the assurances they require to source these important ingredients through GLG.
We are now in the process of shipping our first Naturals+ order. We look forward to securing agreements for the further supply of Naturals+ ingredients as the year progresses. This product line represents not only an additional source of potentially significant revenues, but the complementary nature of the Naturals+ products with our core sweetener products is expected to open up new opportunities in the stevia and luo han guo spaces, and vice-versa.
GLG furthers GRAS commitment, leads industry in certifications
In the second quarter, we announced two additional filings of Generally Recognized as Safe (GRAS) notifications to the United States Food and Drug Administration (FDA), and receipt of one Letter of No Objection from the FDA for an earlier notification. We filed GRAS notifications for both our high-purity Rebaudioside M stevia extract product and for our luo han guo extract products, and the FDA's Letter of No Objection completed the GRAS process for our RebSweet™ and AnySweetPLUS™ stevia extract products.
The notifications and letter each represents many months of work to develop the product and all required documentation under the FDA-administered GRAS process to demonstrate that each extract meets the FDA's criteria for safety. Each study included in-depth consultation with GRAS Associates LLC, who convened an independent panel of scientists to spearhead the safety assessments.
Consistent with its role as a leader in the sweetener industry, GLG continues to be at the forefront of stevia-related GRAS certifications. GLG believes that a more recent submission to the FDA establishes it as the first company to submit GRAS notification to the FDA for Rebaudioside C. We have the largest number of stevia products certified under the GRAS process including high-purity Rebaudioside A and other Rebaudioside A products, high-purity stevioside, high-purity Rebaudioside M and now high-purity Rebaudioside C, as well as luo han guo extracts of various purities. Additionally, GRAS work is currently underway for high-purity Rebaudioside D. These many submissions and certifications demonstrate our commitment to ensuring that our full complement of naturally sourced sweetener products is compliant with the FDA GRAS program.
Launch of organipure™
On March 7, 2014, we announced our launch of a new line of stevia sweeteners—"organipure". The organipure line includes purity levels that pair the clean finish and rounded sweetness that GLG stevia extracts are known for with organic certifications that are recognized both in North America and Europe. GLG offers the largest portfolio of stevia extract-based sweetener solutions globally, providing a number of options within the organic line, allowing for the use of organipure stevia extract in both high-end and cost-constrained formulations aiming to provide consumers with an organic certified premium finished product. organipure is a natural step in the evolution of GLG's stevia offerings after extensive consultation with its customers and distribution partners, and represents a premium quality organic product with an exceptional taste profile.
Additional second quarter financial highlights
Our gross margin for the three months ended June 30, 2014, improved significantly over the comparable quarter in 2013, increasing 51 percentage points to a positive 9 percent. Gross margin for the six months ended June 30, 2014, was slightly negative at negative 2 percent. Capacity charges resulting from idle facilities, which would otherwise ordinarily flow to inventory, continue to negatively affect our gross margins.
Our loss per share in the second quarter 2014, improved by 62 percent to a loss per share of 8 cents compared to the second quarter 2013 (loss of 21 cents per share).
Our loss per share for the six months ended June 30, 2014, improved by 28 percent to a loss per share of 23 cents compared to the six months in 2013 (loss of 32 cents per share).