Shengtai second quarter net sales increase 49.31% to $64,103,621

Shengtai Pharmaceutical, Inc. (OTC Bulletin Board: SGTI) (''Shengtai'' or ''the Company'' or "We" or "Us" or "Our"), 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 three months ended December 31, 2012.

"We are glad to see the increase of sales revenue and increase of gross profit during the three months ended December 31, 2012 compared to the same period last year," stated Qingtai Liu, CEO of Shengtai. "The Company has produced a positive cash flow from operating expense during the six months ended December 31, 2012."

Second Quarter Fiscal Year 2013 operations results

Net sales for the three months ended December 31, 2012 were $64,103,621, an increase of $21,170,196 or 49.31%, compared with $42,933,425 for the same period in 2011. The increase in net sales primarily resulted from increased cornstarch and other products sales. For the three months ended December 31, 2012, the quantities of our glucose products, cornstarch products and other products sold were 33,228 tons, 55,115 tons, and 60,085 tons , respectively, increase/decrease of approximately (8.94%), 83.38%, and 93.31%, respectively. The increased sales quantities of cornstarch is due to a substantial increase of our Slurry sales, which increased approximately 6,848 tons or 687.03% for the three months ended December 31, 2012 compared to 996.74 tons for the same period in 2011. Net sales from exports for the three months ended December 31, 2012 were $16,214,168, an increase of approximately 115.79%, compared with $7,513,799 for the same period in 2011. The increase is mainly attributable to the increased exporting sales of corn germ meal during the three months ended December 31, 2012 compared to the same period last year, when the export of corn germ meal was nil.

Cost of sales for the three months ended December 31, 2012 was $58,114,822, an increase of $19,222,428 or 49.42%, compared with $38,892,394 for the same period in 2011. The increase in cost of sales was in line with increased sales.

Gross profit for the three months ended December 31, 2012 was $5,988,799, an increase of $1,947,768 or 48.20%, compared with $4,041,031 for the same period in 2011. The increase of gross profit is in line with the increased sales. Gross profit margin for the three months ended December 31, 2012 was 9.34%, a decrease by 0.07% as compared to the gross profit margin of 9.41% for the same period in 2011. The reason for the decrease of gross profit margin is mainly because the average sales prices decreased as compared to the same period last year.

For the three months ended December 31, 2012, selling, general and administrative expenses were $3,898,845, an increase of $872,383 or 28.83%, compared to $3,026,462 for the three months ended December 31, 2011. The increase of selling, general, and administrative expenses is caused by increased selling, general and administrative expenses in PRC, offset by decreased selling, general and administrative expenses in the United States. The Company's selling, general and administrative expenses in the United States ended December 31, 2012 decreased by $49,086 compared to the same period in 2011. The decrease is mainly due to decreased salary expenses of $57,874. The selling, general and administrative expenses from our PRC operating entities increased by $123,106 for the three months ended December 31, 2012 compared to $3,702,602 for the same period in 2011. The selling expenses from our PRC operating entities increased by $1,198,829 or 73.39% in the quarter ended December 31, 2012 compared to the same period in 2011. The increase is mainly attributable to the increase in shipping and handing expenses of $1,225,986 and other expenses of $73,717 offset by decreased package expenses of $14,274, decreased commodity inspection fee of $6,619, decreased exhibition expenses of $5,930, and decreased carfares of $79,156. The general and administrative expenses incurred in PRC increased $248,639 in the quarter ended December 31, 2012 compared to $744,713 for the same period in 2011.

Net income for the three months ended December 31, 2012 was $261,216, an increase of $326,278 or 501.49%, compared with net loss $65,062 for the same period in 2011. The increase in net income was primarily attributable to the increased gross profit of $1,947,768, offset by increased selling, general and administrative expenses of $872,383 and by increased interest expenses of $518,770.

Financial Condition

As of December 31, 2012, Shengtai had cash and restricted cash totaling $7.65 million. The Company's short-term loan totaled $77.13 million and long-term debt totaled $0 million. The Company's total shareholders' equity increased to $63.98 million.

Management Comments

Looking forward, Qingtai Liu, CEO of Shengtai stated, "We see a good demand of our products from the market during the past six months ended December 31, 2012. We will continue in focusing on providing good service to fulfill these demand as well as controlling our gross profit rate at current level."