Shengtai third quarter net sales decrease 4.52% to $39,803,608

Shengtai Pharmaceutical, Inc. (OTC Bulletin Board: SGTI) (''Shengtai'' or ''the Company'' or "we" or "us"), a manufacturer and distributor in China of glucose and starch as pharmaceutical raw materials and other starch and glucose products, today reported financial results for the third quarter of fiscal 2012 ended March 31, 2012.

Third Quarter Fiscal Year 2012 Result of Operations

Net sales for the three months ended March 31, 2012 were $39,803,608, a decrease of $1,882,553  or 4.52%, compared with the same period in 2011. The decrease in net sales primarily resulted from decreased sales quantities for the three months ended March 31, 2012, compared to the same period last year. For the three months ended March 31, 2012 compared to the same period last year, the quantity of our glucose products sold increased about 3.75%, while the average unit selling price of our glucose products decreased about 3.51%. For the three months ended March 31, 2012 compared to the same period last year, the quantity of our cornstarch products sold decreased about 15.92%, while the average unit selling price of our cornstarch products decreased about 0.94%. For the three months ended March 31, 2012 compared to the same period last year, the quantity of our other products sold decreased about 19.09%, while the average unit selling price of our other products increased about 5.73%. The increased unit selling prices are caused by the increased raw material cost during the quarter ended March 31, 2012 compared to the same period last year. The sales  quantity decreased mainly because of competition in the market of cornstarch and other products.

Cost of sales for the three months ended March 31, 2012 was $34,371,199, a decrease of $887,701  or 2.52%, compared with the same period in 2011. The decrease in cost of sales was mainly due to the decrease of sales offset by the increase in the price of corn, our main raw material.

Gross profit for the three months ended March 31, 2012 was $5,432,409, a decrease of $994,852  or 15.48%, compared with the same period in 2011. The decrease of gross profit is mainly because  the unit selling prices of our products did not increase as fast as the corn prices. Gross profit margin for the three months ended March 31, 2012 was 13.65%, a decrease from 15.42% for the same period in 2011. The reason for the decrease of gross profit margin is mainly because the price of corn, our main raw material, increased approximately 10.06% for the three months ended March 31, 2012 compared to the same period last year whereas the average selling prices did not increase as much. The Company believes that the market is taking its time to respond to the increased corn prices and will reach a more profitable price level in the near future. At the same time, the Company believes that the Company's actions to improve gross profit margin, such as expanding raw  material storage facilities to reduce the impact of fluctuation on the price of our raw materials, will  benefit us in maintaining our profitability.

For the three months ended March 31, 2012, selling, general and administrative expenses were $3,321,269, an increase of $829,300 or 33.28%, compared to $2,491,968 for the three months ended March 31, 2011. The selling, general, and administrative expenses increased mainly due to increased shipping expenses caused by increased gas prices. The Company incurred $0 non-cash stock option expenses for the three months ended March 31, 2012 and 2011, respectively.

Net income for the three months ended March 31, 2012 was $98,253, a decrease of $2,206,924,  compared with $2,305,177 for the same period in 2011. The decrease in net income was primarily attributable to the decreased gross profit and increased interest expenses.

Financial Condition

As of March 31, 2012, Shengtai Pharmaceutical, Inc. had cash and restricted cash totaling $19.36 million. The Company's short-term bank loans totaled $60.92 million and long-term debt totaled $0 million. The Company's total shareholders' equity increased to $62.17 million.

Management Comments

Looking forward, Qingtai Liu, CEO of Shengtai Pharmaceutical, Inc. stated, "Going forward, Shengtai will continue to work on expanding sales network, maintaining good customer relationship, improving gross profit, and controlling the expenses. As usual, we will keep focusing on quality control."