GLG Life Tech Corporation (TSX: GLG)(NASDAQ: GLGL) -
-- First quarter revenue grew 174% to $8.2 million from $3 million in first
quarter of 2009.
-- Net loss after tax was $1.3 million compared to a net loss of $1.5
million in the year ago period.
-- First quarter EBITDA rose 1,199% to $3.5 million from $0.3 million in
the 2009 first quarter.
GLG Life Tech Corporation ("GLG" or the "Company"), the
vertically integrated leader in the agricultural and industrial
development of stevia extracts, announces financial results for the
first quarter ended March 31, 2010.
Business Highlights
First quarter 2010 revenue increase 174% year over year
For the quarter ended March 31, 2010, revenue increased 174
percent, to $8.2 million from $3.0 million in the quarter ended
March 31, 2009. The increase in revenues, which were derived
entirely from stevia sales, was driven by more shipments of
higher-value stevia extract against existing purchase orders when
compared to the first quarter a year ago.
First Quarter 2010 EBITDA increase 1,199% year over year
EBITDA was $3.5 million, compared to EBITDA of $0.3 million for
the first quarter of 2009.
Product Development and Production
New Product Line Announced in January 2010
New Sweet Success(SM) Line of Stevia Blends Launched: In
January, the Company introduced its Sweet Success(SM) line of
stevia extract blends. This addition to the Company's sweetener
portfolio added several proprietary formulas that included
BlendSure™ 6.0, BlendSure™ 7.0, BlendSure™ 7.5 and BlendSure™ 8.0.
This innovative new product line by GLG's research and development
team provides an attractive option for food and beverage
manufacturers seeking to use stevia sweetening systems. Each of the
blends offers flexibility as it relates to a cost of goods input
while maintaining the qualities of taste, consistency and
stability.
New, Fully Operational Rebpure™ RA97 Plant: GLG completed
certification with SGS, an international market leader in
certification services, to bring its new Rebpure™ RA97 refining
facility into operation during the quarter. The facility added
1,000 MT of RA 97 processing capacity for a total of 1,500 MT or a
200 percent increase from the 2009 RA 97 processing capacity. This
new facility enables GLG easy access to ship, air, and rail for
product movement, increased capacity for secondary processing, and
positions the Company to further meet current and anticipated
demand.
Business and Market Development
GLG continues to make progress in increasing the commercial
adoption of its high-grade stevia extracts in key global markets.
Recent business development highlights include:
India: On May 12th, GLG signed a memorandum of understanding
("MOU") with Global AgriSystem Private Limited, a Katra Group
company, regarding the introduction of GLG's stevia products in
India. The agreement includes an initial phase of market
development for GLG stevia extracts, as well as the agricultural
development of growing regions for GLG patented stevia plant
varieties. With a population of 1.2 billion and governmental and
societal concerns over diet and intake, the Company believes that
India's consumer base offers an untapped market for GLG stevia
extracts and a significant opportunity for natural, zero calorie
sweeteners.
Australia/South Pacific: On April 12th, GLG and leading sugar
refiner Sugar Australia signed an MOU and are working to bring a
range of stevia ingredients to food and beverage manufacturers in
Australia, New Zealand, Singapore and the Pacific Islands. Sugar
Australia is the leading sugar refiner in Australia, operating
across multiple business channels including the supply of sugar as
an ingredient into the food and beverage sector, retail sales,
where its CSR consumer brand has the leading market share, the
foodservice sector and exports. In response to consumer demand for
healthier sweetening solutions, Sugar Australia launched a reduced
calorie product called CSR Smart®, which utilizes stevia extracts
in a proprietary sugar blend to provide a 50 percent reduction in
calories.
South America: The Company signed an agreement with Essentia
Stevia for the distribution and marketing of GLG's high quality
stevia extracts in 18 countries throughout Latin America including
Argentina, Paraguay, Brazil, Venezuela, Colombia, and Mexico.
Products will be marketed both industrially and in consumer facing
brands including the launch of a tabletop brand by Essentia using
GLG stevia.
Europe: During the quarter, the European Food Safety Authority
(EFSA) issued a positive opinion on the safety of steviol
glycosides. This scientific assessment is the first step towards
EU-wide approval of stevia as an ingredient in food and beverages.
The findings will next go to the European Commission for review.
GLG and industry experts expect full approval in Europe to be
granted by the end of 2010 which would open another significant
market opportunity for the Company.
Corporate Developments
Weider Global Nutrition's ("WGN") Legal Proceedings Against the
Company Dismissed
On March 30, 2010, the Company and WGN announced that the
proceedings commenced by WGN against the Company in the Supreme
Court of British Columbia will be dismissed by consent of the
parties. The dismissal was the result of WGN's offer to drop its
claim against the Company without any payment to WGN if the Company
would drop its counterclaim against WGN and agree to wind up GLG
and Weider's joint venture company Sweet Naturals Corp. The Company
will now be marketing all of its products itself. WGN will carry on
marketing activities in stevia related products independently.
First Quarter 2010 Financial Results Highlights
The following results from operations have been derived from and
should be read in conjunction with the audited consolidated
financial statements of GLG for the period ended March 31, 2010,
and its audited consolidated financial statements for previous
years. Certain prior year's figures have been reclassified to
conform to the current financial information presentation.
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First First
In thousands Canadian $, quarter quarter %
except per share amounts 2010 2009 Change
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Revenue $8,209 $3,001 174%
Cost of Sales $4,921 $1,787 175%
% of Revenue 60% 60% 0 pts
Gross Profit $3,288 $1,214 171%
% of Revenue 40% 40% 0 pts
General & Administration Expenses $2,922 $2,545 15%
% of Revenue 36% 85% (49) pts
Income (loss) from Operations $ 366 ($1,331) (127)%
% of Revenue 4% (44)% 48 pts
Other Expenses (income) $1,323 $935 41%
% of Revenue (16)% (31)% 15 pts
Income Tax Expenses (Recovery) $ 401 ($725) (155)%
Non-Controlling Interests $ 11 $41 (74)%
Net Income (loss) after Income Taxes
and Non-Controlling Interests ($1,347) ($1,500) (10)%
(Loss) per share (Basic and Diluted) ($ 0.05) ($ 0.08) 38%
EBITDA (1) $3,507 $ 270 1,199%
% of Revenue 43% 9% 34 pts
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(1) EBITDA is a non-GAAP financial measure. GLG calculates it by adding to
net income before taxes (1) depreciation and amortization expense
reported on the statement of operations, (2) Other Income (Expenses)
and (3) stock-based compensation expense. This might not be the same
definition used by other companies. For a discussion of EBITDA, and a
reconciliation of EBITDA to net income before taxes and after minority
interest under Canadian GAAP, please see' Non-GAAP Financial
Information" below.
Revenues
Revenues for the three months ended March 31, 2010, which were
derived entirely from stevia sales, were $8.2 million, an increase
of 174 percent from $3.0 million in revenue for the same period
last year. The increase in stevia revenues was driven by more
shipments of higher value stevia extract against existing purchase
orders than in the comparable period for 2009.
Gross Profit
Gross profit for the first quarter of 2010 was $3.3 million, an
increase of 171 percent from $1.2 million in gross profit for the
first quarter of 2009. The increase in gross profit can be
attributed to increased stevia sales and reduced production costs
of stevia extract. The gross profit margin was 40 percent for the
first quarter of both 2010 and 2009.
Although gross profit margin for both periods was the same, it
is not directly comparable. Gross profit margin for the first
quarter of 2009 was positively influenced by the recognition of
deferred revenue relating to a 2009 customer order for the period.
Adjusted for the deferred revenue impact, gross profit margin for
the first quarter of 2009 would have been 28 percent compared to 40
percent for the first quarter of 2010. This 12 percent increase in
gross profit margin in the first quarter of 2010 is primarily
attributable to lower production costs driven by increased use of
GLG's proprietary leaf in its production system. Also, in the first
quarter of 2010, GLG was using its new more efficient production
facilities at Mingguang and Dongtai, compared to the first quarter
of 2009 when it was only using less efficient production facilities
at Runde in Qingdao.
The first quarter gross profit margin of 40 percent represents a
five percent increase from the fourth quarter of 2009, reflecting
continued improvements in production costs. The Company believes
this improvement validates the cost reduction strategy that the
Company has been focused on implementing since 2007. The core of
the strategy is centered on increased use of GLG's proprietary
leaf, with the goal of using GLG's proprietary leaf exclusively by
the second half of 2010.
General and Administration Expenses
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First First
quarter quarter %
In thousands Canadian $ 2010 2009 Change
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SG&A Expenses $1,927 $1,980 (3%)
Stock-Based Compensation $ 717 $ 501 43%
G&A Amortization & Depreciation $ 278 $ 64 334%
Total $2,922 $2,545 15%
% of Revenue 36% 85% (49) pts
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General and administration expenses include sales, general and
administration costs (SG&A), depreciation and amortization
expenses on non-manufacturing fixed assets and stock based
compensation.
Sales, General, and Administration (SG&A) Expenses
SG&A expenses for the first quarter increased $0.4 million,
or 15 percent, to $2.9 million from $2.5 million for the same
period a year ago. The key expense categories that increased were
professional fees and listing related fees.
Stock-based compensation was $0.7 million for the first quarter
of 2010, compared with $0.5 million in the year ago quarter. GLG's
amended stock compensation plan was approved by its shareholders at
its annual general meeting in June 2008. Under the amended plan,
the number of common shares available for issue is 10 percent of
the issued and outstanding common shares. During the first quarter
of 2010, compensation from vesting stock based compensation awards
was recognized and no new option grants were made.
General and administration-related depreciation and amortization
expenses for the first quarter of 2010 were $0.3 million, an
increase from $0.1 million from the comparable period in 2009. The
main drivers for the increase are the amortization of general and
administration-related assets in China at GLG's Runhai, Runhao and
Runyang subsidiaries, which came into operation during the first
quarter of 2010.
Other Expenses
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First First
quarter quarter %
In thousands Canadian $ 2010 2009 Change
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Other Income (Expenses) ($1,323) ($935) 41%
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% of Revenue (16)% (31)% 15 pts
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Other expenses for the three months ended March 31, 2010 were
$1.3 million, compared to other expenses of $0.9 million in the
first quarter of 2009. There were two items that primarily
contributed to other expenses for the three months ended March 31,
2010: (1) interest expenses of $1.1 million at an average interest
rate of 5.28%; and (2) foreign exchanges losses of $0.2 million on
US dollar-denominated liabilities that GLG was holding during the
period. Interest expenses for the three months period ended March
31, 2010 were mainly related to the Company's bank loans in
China.
Income Tax Expenses
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First First
quarter quarter %
In thousands Canadian $ 2010 2009 Change
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Income Tax (Expense) Recovery ($401) $725 (155)%
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% of Revenue (5)% 24% (29) pts
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During the quarter ended March 31, 2010 the Company recorded
income tax expense of $0.4 million - an increase of $1.1 million
compared to the first quarter of 2009 and $0.7 million compared to
the fourth quarter of 2009.
The increase in the income tax expense was driven by the
increase of the future income tax liability of the Company due to a
reversal of temporary differences and increased taxable income from
both Canadian and Chinese operations.
Future tax expense accounted for $0.014 of the $0.05 loss per
share for the quarter ended March 31, 2010.
Net Income (Loss)
--------------------------------------------------------------------------
First First
quarter quarter %
In thousands Canadian $ 2010 2009 Change
--------------------------------------------------------------------------
Net income(loss) ($1,347) ($1,500) (10)%
% of Revenue (16)% (49)% 33 pts
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The Company's net loss in the first quarter of 2010 decreased by
$0.2 million in comparison to the net loss of $1.5 million for the
first quarter of 2009. This $0.2 million decrease in net loss was
driven by a $2.2 million increase in gross profit in the first
quarter of 2010 compared to the first quarter of 2009, which was
partly offset by (1) an increase of $1.1 million in provision for
income taxes in the first quarter of 2010, (2) an increase of $0.4
million in general and administrative expenses in the first quarter
of 2010, and (3) an increase of $0.4 million in other expenses in
the first quarter of 2010.
EBITDA
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First First
quarter quarter %
In thousands Canadian $ 2010 2009 Change
--------------------------------------------------------------------------
EBITDA $3,507 $270 1,199%
% of Revenue 43% 9% 34 pts
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EBITDA for the quarter ended March 31, 2010 was $3.5 million,
compared to EBITDA of $0.3 million for the comparable period in
2009. This increase in EBITDA is primarily attributable to: (1)
higher stevia revenue and gross profit for the first quarter of
2010 as compared to the first quarter of 2009 (see Gross Profit
explanation above for additional information), and (2) the
inclusion of production staff at Mingguang and Dongtai in
production costs in the first quarter of 2010, compared to the
first quarter of 2009 when they were included in general and
administrative costs because those two facilities had not commenced
operations.
For a reconciliation of EBITDA to net income (loss) before taxes
and after minority interest under Canadian GAAP, please see
"Non-GAAP Financial Information" below.
Capital Expenditures (CAPEX)
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First First
quarter quarter %
In thousands Canadian $ 2010 2009 Change
--------------------------------------------------------------------------
Capex $2,813 $8,446 (67)%
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GLG's capital expenditures of $2.8 million for the first quarter
of 2010 reflected a decrease of 67% from $8.4 million in the first
quarter of 2009. The 2010 capital expenditures were incurred for
the purchase of testing and equipment ($1.8 million) and
construction of additional water treatment facilities at one of the
Company's primary processing plants ($1.0 million).
Liquidity and Capital Resources
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In thousands Canadian $ March 31, 2010 December 31, 2009
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Cash and Cash Equivalents $ 12,807 $ 16,018
Working Capital $ 7,288 $ 6,381
Total Assets $230,006 $229,586
Total Liabilities $ 88,692 $ 84,743
Bank Loans Payable (less than One Year) $ 45,148 $ 37,317
Shareholder Loans $ 6,696 $ 7,243
Bank Loans Payable (greater than One Year) $ 13,392 $ 13,797
Total Shareholder Equity $141,302 $144,819
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Non-GAAP Financial Information
The following table provides reconciliation of EBITDA, a
non-GAAP financial measure, to Canadian GAAP net income.
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In thousands Canadian $ First quarter First quarter
2010 2009
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Income (Loss) Before Income Taxes and
Non-Controlling Interests ($957) ($2,267)
Add:
Non-Controlling Interest $11 $41
Depreciation and Amortization $2,413 $1,057
Net Interest Expense $1,071 $244
Foreign Exchange (Gain) Loss $252 $694
Non-Cash Stock-Based Expense $717 $501
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EBITDA $3,507 $270
% Revenue 43% 9%
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Market and Operations 2010 Outlook
GLG's key operational objectives for 2010 are:
1. Generate sales growth from GLG's direct sales force in the United States
as well as key international markets.
2. Commence operation of new Runhao facilities to increase production
capacity and revenues.
3. Harvest enough proprietary leaf in 2010 crop to achieve 100 percent
coverage of production requirements.
4. Organize stevia growers in partnership with local governments in China
to meet expected 2010 stevia demand.
5. Continue to develop additional leaf growing areas.
6. Continue R&D program for high RA yielding seeds and seedlings, process
innovation and product use formulations.
Revenue 2010 Outlook
The Company is on track to deliver material new revenues in 2010
from the key markets it included in its 2010 Outlook published on
March 31, 2010. The Company has made several key customer
announcements to date in 2010, outlining commercial relationships
that are expected to deliver revenues in three of the key markets
it highlighted in its 2010 Outlook - India, South America and
Australia New Zealand. The Company continues to see global demand
for stevia extracts to be used either in a zero calorie application
or a blend of sucrose and stevia for reduced calorie/better for you
products.
The Company is actively pursuing sales, marketing and production
opportunities for GLG's stevia extract in Japan, Europe, Mexico and
the US markets. GLG has announced deals in Australia, India and
South America so far in 2010 date and expects to announce
additional contracts throughout remainder of 2010 that deliver
revenue starting in 2010.
The Company believes that China presents a key market
opportunity for its high-grade stevia products. China currently
faces a shortfall of sugar production and in 2009 imported over 1.5
million metric tons of sugar worth approximately $1.1 billion.
Based on the latest statistics that the Company has for 2010, the
Company believes that this shortfall may reach 3 million metric
tons of sugar for 2010. The Company believes that the population
and sugar consumption will continue to grow, which may cause this
shortfall to increase. The Company believes that this sugar supply
shortfall has created a market opportunity for stevia-based
sweeteners, and is actively pursuing this market opportunity in
China directly with the Chinese government. GLG has made
significant progress on this opportunity since its announcement in
GLG's 2010 Outlook on March 31, 2010 and expects to realize stevia
extract revenue from this opportunity in 2010.
EBITDA 2010 Outlook
Our expectation for EBITDA margin (percentage of revenues) for
2010 is 24 to 26% EBITDA margin on full year revenues. The Company
is not making any change to the full year EBITDA margin expectation
at this time, however the first quarter EBITDA margins have run
higher than expected, in part because changes in the renminbi to US
dollar exchange rate, which we forecast would negatively impact our
2010 EBITDA margins by four percentage points, have not occurred as
expected. The positive effects of our proprietary leaf as reflected
in our first quarter EBITDA results may also result in higher than
planned full year EBITDA margins.
Capital Expenditures - 2010 Outlook
The Company expects to undertake some key capital projects in
2010, including the completion of its water treatment upgrade
program and a new R&D innovation centre. The R&D innovation
centre has the potential for government funding in China and the
Company is currently pursuing such support. This new centre will
focus on R&D across all aspects of the stevia supply chain,
including agriculture, extract processing, finished product
production and product formulation innovation.
GLG's Outlook Summary for 2010
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Actual Outlook
In millions Canadian $ 2009 2010
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Revenue 41.9 70-80
EBITDA 10.5 17-21
Capital Expenditures 40.8 10-15
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The Company also announces today that it has changed the date of
its Annual General Meeting from Thursday June 24th, 2010 to Friday
June 25th, 2010.
About GLG Life Tech Corporation
GLG Life Tech Corporation is a global leader in the supply of
high purity stevia extracts, an all natural, zero-calorie sweetener
used in food and beverages. The Company's vertically integrated
operations cover each step in the stevia supply chain including
non-GMO stevia seed breeding, natural propagation, stevia leaf
growth and harvest, proprietary extraction and refining, marketing
and distribution of finished product. GLG's advanced technology,
extraction technique and premier, high quality product offerings
including Rebpure™, Rebsweet™, Anysweet™ and the Company's newest
line Sweet Success(SM), make it a leading producer of high purity,
great tasting stevia extracts.
For further information, please visit www.glglifetech.com.
Forward-looking statements: This press release contains certain
information that may constitute "forward-looking information" and
"forward-looking statements" within the meaning of applicable
Canadian and United States securities laws. All statements relating
to plans, strategies, projections of results of specific activities
or investments, and other statements that are not descriptions of
historical facts may be forward-looking statements. Forward-looking
statements and information are inherently subject to risks and
uncertainties, and actual results could differ materially from
those currently anticipated due to a number of factors, which
include, but are not limited to, operational risks, 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 other risks and uncertainties
disclosed in the public documents filed by the Company with
Canadian and United States securities regulatory authorities.
Forward-looking statements and information may be identified by
terms such as "may", "will", "should", "continue", "expect",
"anticipate", "estimate", "believe", "intend", "plan" or "project",
or similar terms or the negatives of these terms. Although we
believe that the expectations reflected in the forward-looking
statements and information are reasonable, we cannot guarantee
future results, levels of activity, performance, or achievements.
The Company's forward-looking statements and information reflect
the beliefs, opinions and projections on the date the statements
are made. The Company assumes no obligation to update
forward-looking information should circumstances or management's
estimates or opinions change, except as required by law.
Contacts: GLG Life Tech Corporation Brian Meadows Chief
Financial Officer +1 (604) 641-1368 +1 (604) 844-2830 (FAX)
ir@glglifetech.com www.glglifetech.com
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