GLG Life Tech Corporation
TSX : GLG

GLG Life Tech Corporation

May 14, 2015 07:30 ET

GLG Life Tech Corporation Announces 2015 First Quarter Financial Results

VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 14, 2015) - GLG Life Tech Corporation (TSX:GLG) ("GLG" or the "Company"), a global leader in the agricultural and commercial development of high-quality zero-calorie natural sweeteners, announces financial results for the three months ended March 31, 2015. The complete set of financial statements and management discussion and analysis are available on SEDAR and on the Company's website at www.glglifetech.com.

FINANCIAL HIGHLIGHTS

Revenue for the three months ended March 31, 2015, was $6.2 million, an increase of 32% compared to $4.7 million in revenue for the same period last year. This 32% increase in sales was attributable to a mix of stevia extracts, monk fruit extract and sales of other natural ingredient products.

The Company's focus on growing its international sales international sales was clearly demonstrated during the quarter with international sales accounting for 82% of first quarter 2015 sales compared to only 48% for the comparable period in 2014.

Gross profit for the three months ended March 31, 2015, also improved by $0.9 million comparing the first quarter of 2015 gross profit to the prior period.

Net loss decreased by $0.2 million to $4.8 million or a 4% improvement over the comparable period in 2014 ($5.0 million loss).

Non-GAAP Financial Measures improved in the first quarter of 2015 for gross profit before capacity charges and EBITDA margin.

Gross Profit before capacity charges for the three months ended March 31, 2015, was $1.6 million or 25% of first quarter revenues, compared to $0.9 million or 19% of first quarter revenues for the same period in 2014.

EBITDA improved by 57% for the three-month period ended March 31, 2015, compared to the prior period.

Loss per share from continuing operations was $0.13 per share for the quarter ended March 31, 2015, compared to the prior year ($0.15 per share) or a 13% improvement.

CORPORATE DEVELOPMENTS

Commencement of Monk Fruit Deliveries

This year, GLG shipped its first orders of high-purity monk fruit extracts, moving towards satisfaction of the contract it signed last year with a global leader in the food industry. GLG is building on its inaugural successes in the monk fruit business, as it anticipates expanding its fruit harvest over last year's harvest and is working towards securing additional contracted revenues for the next production season. GLG has also filed a patent through the Patent Cooperation Treaty for its monk fruit purification processes and product formulations.

Producing monk fruit products is a natural extension of GLG's core stevia product line; these product lines are each naturally sourced sweetener ingredients and monk fruit is often used complementarily. GLG differentiates itself from other monk fruit producers in four ways: (1) its competitive advantage in establishing agriculture systems in China, including the introduction of Good Agriculture Practices (GAP) by its monk fruit farmers, superior monk fruit seedlings and its proven methods to expand the amount of farming in other crops such as stevia; (2) its commitment to its Fairness to Farmers program, whereby it aims to promote a healthy economy via fair, stable income for farmers in the monk fruit growing region; (3) its advanced processing and extraction technology, which will enable GLG to more efficiently and economically produce monk fruit extracts and (4) its large industrial processing capacity, which well positions GLG for anticipated growth in the monk fruit market driven by international food and beverage companies.

Corporate Rebranding

On January 27, 2015, the Company unveiled its new corporate brand and logo, in addition to the launch of its new website (www.glglifetech.com). GLG's rebranding emphasizes the Company's Canadian heritage and reflects its new business strategy, which encompasses three complementary product lines. The new website presents a renewed focus on GLG's closed loop system that includes superior agriculture programs, production excellence, and our focus on sustainability and corporate social responsibility throughout the supply chain.

The vision for the new brand and logo came together in a symbolization of several essential aspects of our Company's strategy. The maple leaf, a beloved Canadian symbol, forms the centerpiece of our new logo symbolizing our roots as a public company in Canada. 2015 marks GLG's 10th anniversary as a publically traded company in Canada. The outer portion of the logo - a circular trio of crescents - symbolizes GLG's three core product lines; stevia extracts, long our flagship product; monk fruit, with GLG entering the market as the highest-capacity producer of this highly desired sweetener; and our Naturals+ line of ingredients that offers both functional ingredients complementary to the sweetener space as well as products tailored to meet particular market needs. The brand and logo well captures the essence of GLG as a proudly-Canadian innovator and leader in the world of natural zero calorie sweeteners.

The launch of GLG's new website elaborates on these themes, and more. Visitors will find even greater emphasis on our world-class agricultural programs, including the development of superior non-GMO varietals of stevia and, soon, monk fruit, our technological prowess in the production and innovation arena and our commitment to sustainability and corporate social responsibility. Through the vision of its leaders, the excellence of its team members and the holistic nature of and demanding standards manifest throughout its supply chain, GLG leverages these assets to provide leading natural sweeteners and ingredient solutions to businesses globally.

Latest Product Accomplishments Under FDA's GRAS Program

Consistent with its role as a leader in the sweetener industry, GLG places great importance on adherence to the Generally Recognized as Safe ("GRAS") program administered by the United States Food and Drug Administration ("FDA"). Through this program, for each of its core sweetener products, GLG undertakes expert studies and in-depth consultation through GRAS Associates, LLC, which convenes independent panels of scientists to spearhead safety assessments for each product to determine that the product is GRAS. The output of each study is then submitted to the FDA GRAS program, whereupon the submission is reviewed by the FDA. If the FDA finds no issues with the submission, it issues a Letter of No Objection, reflecting the FDA's view that it has no issue with the Company's determination that its product is GRAS.

Last year was a productive one for GLG's GRAS submissions, with four different products garnering Letters of No Objection from the FDA. GLG has continued this trend; since the beginning of 2015, we have received additional Letters of No Objection from the FDA:

  • On February 17, 2015, the Company announced that it had received a Letter of No Objection regarding its high-purity Rebaudioside C extract products. GLG is the first company to have Rebaudioside C products deemed GRAS in compliance with the FDA's GRAS program. Furthermore, in late 2014, GLG announced its development of its "Reb C Gold" seedling - containing levels of Reb C many times higher than that found in prior stevia seedling strains. It expects to offer Reb C extract products commercially in late 2016.
  • On April 27, 2015, the Company announced that it had received a Letter of No Objection regarding its high-purity Rebaudioside D extract products. To date, the supply availability and high price of Rebaudioside D extracts have been limiting factors for their broader use in the natural sweetener market. However, GLG is working on an agriculture R&D program to address both of these factors.

GLG has the largest number of stevia extract products certified under the GRAS process, as well as GRAS status for its Monk fruit extract products. Pursuing and obtaining GRAS designations furthers GLG's commitment to maintaining the highest quality standards for its products, and to ensure that each of its naturally-sourced sweetener products conforms to the GRAS compliance standards.

Launch of BevSweet™ and BakeZeroCal™

In February 2015, the Company announced two new products specifically formulated for two industry applications. BakeZeroCal™, for the baking industry, provides significant calorie reduction while also providing the bulking and browning attributes commonly desired by bakers and consumers alike. BevSweet™, for the beverage industry, allows food and beverage companies to reduce calories and naturally sweeten their products with decreased formulation time and with no solubility issues. Each product is a special blend providing an improved taste profile, including a well-rounded sucrose-like sweetness, and ease of use. BakeZeroCal and BevSweet will enable companies to formulate new products and reformulate existing products with less complexity and lower cost.

Appointment of Paul Block to GLG's Board of Directors

On March 3, 2015, the Company announced the appointment of Mr. Paul R. Block to its Board of Directors. Mr. Block brings a wealth of experience in sales, marketing, and business development as a senior executive in the global food and beverage and sweetener industries. Mr. Block most recently served as Chief Executive Officer of Merisant Worldwide Company, Inc. and the Whole Earth Sweetener Co., LLC. While at Merisant, Mr. Block oversaw the company's well-recognized line of sweeteners, including the Equal® sweetener brand. Prior to joining Merisant, Mr. Block held C-level positions at Sara Lee Coffee and Tea Consumer Brands, Allied Domecq Spirits USA and Groupe Danone. Mr. Block has been a key figure in developing the global stevia tabletop market through his role as CEO at Merisant and the Whole Earth Sweetener Co., LLC., launching the successful Pure Via® line of tabletop zero calorie stevia sweeteners.

Mr. Block is an excellent strategist who complements our current Board makeup and skill set. He has a proven track record of innovation and building shareholder value in the sweetener and food and beverage industries.

SELECTED FINANCIALS

As noted above, the complete set of financial statements and management discussion and analysis for the quarter ended March 31, 2015, are available on SEDAR and on the Company's website at www.glglifetech.com.

Results from Operations

The following results from operations have been derived from and should be read in conjunction with the Company's annual consolidated financial statements for 2014 and the condensed interim consolidated financial statements for the three-month period ended March 31, 2015.

3 Months Ended March 31 % Change
In thousands Canadian $, except per share amounts 2015 2014
Revenue $6,168 $4,663 32%
Cost of Sales ($5,846) ($5,217) 12%
% of Revenue (95%) (112%) 17%
Gross Profit (Loss) $322 ($554) (158%)
% of Revenue 5% (12%) 17%
Expenses $2,501 $1,951 28%
% of Revenue 41% 42% (1%)
Loss from Operations ($2,179) ($2,505) (13%)
% of Revenue (35%) (54%) 18%
Other Expenses ($2,586) ($2,467) 5%
% of Revenue (42%) (53%) 11%
Net Loss before Income Taxes ($4,765) ($4,972) (4%)
% of Revenue (77%) (107%) 29%
Net Loss ($4,765) ($4,972) (4%)
% of Revenue (77%) (107%) 29%
Loss per share (LPS, Basic & Diluted) ($0.13) ($0.15) (15%)
Other Comprehensive Income (Loss) $535 ($150) (458%)
% of Revenue 9% (3%) 12%
Total Comprehensive Loss ($4,230) ($5,121) (17%)
% of Revenue (69%) (110%) 41%

Revenue

Revenue for the three months ended March 31, 2015, was $6.2 million, an increase of 32% compared to $4.7 million in revenue for the same period last year.

This 32% increase in sales was attributable to a mix of stevia extracts, monk fruit extract and sales of other natural ingredient products. Stevia and monk fruit extracts accounted for 87% of sales in the quarter. The Company made its first shipment of monk fruit extract under a contract it announced in July 2014. International sales accounted for 82% of the first quarter 2015 sales compared to only 48% for the comparable period in 2014. Sales for the Company's GLG Naturals+ product line accounted for 14% of the revenues in the first quarter.

Cost of Sales

For the three months ended March 31, 2015, the cost of sales was $5.8 million compared to $5.2 million in cost of sales for the same period last year (a $0.6 million or 12% increase). Cost of sales as a percentage of revenues was 95% compared to 112% in the prior comparable period, a decrease of 17 percentage points. The cost of sales as a percentage of revenue was lower for the three months period ended March 31, 2015, compared to the prior comparable period due to decreased capacity charges in stevia production. Capacity charges charged to the cost of goods sold ordinarily would flow to inventory and is the largest factor on reported gross margin. Only two of GLG's manufacturing facilities were operating during the first quarter and capacity charges of $1.2 million were charged to cost of sales (representing 21% of overall cost of sales) compared to $1.4 million charged to cost of sales in 2014 (representing 28% of cost of sales).

The key factors that impact stevia and monk fruit cost of sales and gross profit percentages in each period include:

  1. Capacity utilization of stevia manufacturing plants.
  2. The price paid for stevia leaf and the stevia leaf quality, which is impacted by crop quality for a particular year/period and the price per kilogram for which the extract is sold. These are the most important factors that will impact the gross profit of GLG's stevia business.
  3. The price paid for monk fruit and the monk fruit quality, which is impacted by crop quality for a particular year/period and the price per kilogram for which the extract is sold. These are the most important factors that will impact the gross profit of GLG's monk fruit business.
  4. Salaries and wages of manufacturing labour.
  5. Other factors which also impact stevia cost of sales to a lesser degree include:
    • water and power consumption;
    • manufacturing overhead used in the production of stevia extract, including supplies, power and water;
    • net VAT paid on export sales;
    • exchange rate changes;
    • depreciation and capacity utilization of the stevia extract processing plants; and

GLG's stevia and monk fruit business is affected by seasonality. The harvest of the stevia leaves typically occurs starting at the end of July and continues through the fall of each year. The harvest of monk fruit typically occurs starting in October and continues through December of each year. GLG's operations in China are also impacted by Chinese New Year celebrations, which occur approximately late-January to mid-February each year, and during which many businesses close down operations for approximately two weeks.

Gross Profit (Loss)

Gross profit for the three months ended March 31, 2015, was $0.3 million, an increase of $0.9 million over $0.6 million gross loss for the comparable period in 2014. The gross profit margin for the three- month period ended March 31, 2015, was 5% compared to a negative 12% for the three months ended March 31, 2014, or an increase of 17 percentage points over the same period of last year. The gross margin for the three-month period ended March 31, 2015, increased due to higher stevia prices in the first quarter of 2015 compared to the prior period, an improved product mix of higher margin international products in the first quarter of 2015 compared to the prior period and decreased capacity charges in the first quarter 2015 compared to the prior period.

Net Loss Attributable to the Company

In thousands Canadian $ 3 Months Ended March 31 % Change
2015 2014
Net Loss ($4,765) ($4,972) (4%)
% of Revenue (77%) (107%) (28%)

For the three months ended March 31, 2015, the Company had a net loss attributable to the Company of $4.8 million, a decrease of $0.2 million or a 4% improvement over the comparable period in 2014 ($5.0 million loss). The decrease in net loss was driven by (1) an increased gross profit of $0.9 million, which was offset by (2) an increase in G&A expense of $0.6 million and (3) an increase in other expenses of $0.1 million.

Liquidity and Capital Resources

In thousands Canadian $ 31-Mar-15 31-Dec-14
Cash and Cash Equivalents $ 523 $ 955
Working Capital $ (74,946 ) $ (67,351 )
Total Assets $ 80,390 $ 71,903
Total Liabilities $ 126,045 $ 113,676
Loan Payable (<1 year) $ 68,325 $ 62,501
Loan Payable (>1 year) $ 28,531 $ 25,063
Total Equity $ (45,655 ) $ (41,773 )

The Company continues to progress with the following measures to manage cash flow of the Company: paying down short-term loans, reducing accounts payable and negotiating with creditors for extended payment terms, working closely with the banks to restructure its loans, arranging financing with its Directors and other related parties, and reducing operating expenditures including general and administrative expenses and production-related expenses. Total loans payable (both short-term and long-term) is $96.9 million as of March 31, 2015, an increase of $9.3 million compared to the balance as of December 31, 2014 ($87.6 million). The increase in loans payable was primarily driven by (1) the 10% appreciation of the Renminbi against the Canadian dollar during the first quarter, which caused an increase of $5.8 million in short-term loans, an increase of $0.2 million in long term loans and an increase of $2.4 million in interest payable included in due to related parties; and (2) a net increase of $0.9 million in due to related parties and long term loans. The $7.6 million increase in negative working capital for the quarter ended March 31, 2015, is due to net increase of $9.5 million in negative working capital driven by the 10% appreciation of the Renminbi against the Canadian dollar, a $1.4 million increase in interest payable and $0.3 million decrease in account payable; these are offset by an increase of $3.0 million in current assets.

NON-GAAP Financial Measures

Gross Profit (Loss) before capacity charges

This non-GAAP financial measure shows the gross profit (loss) before the impact of idle capacity charges are reflected on the gross profit margin. GLG had only 50% of its production facilities in operation in the first three months of 2015 and idle capacity charges have a material impact on the gross profit (loss) line in the financial statements.

Gross Profit before capacity charges for the three months ended March 31, 2015, was $1.6 million or 25% of first quarter revenues, compared to $0.9 million or 19% of first quarter revenues for the same period in 2014. Gross Profit before capacity charges increased from the comparable period due to an improved product mix of higher margin international products in the first quarter of 2015 compared to the prior period and higher prices for stevia extracts realized in the first quarter of 2015 compared to the prior period.

Earnings before Interest Taxes and Depreciation ("EBITDA") and EBITDA Margin

Consolidated EBITDA

EBITDA for the quarter ended March 31, 2015, was negative $0.5 million or negative 9% of revenues, compared to negative $1.3 million or negative 28% of revenues for the same period in 2014. EBITDA improved by 57% for the three-month period ended March 31, 2015, driven by an improved product mix of higher margin international products in the first quarter of 2015 compared to the prior period and higher prices for stevia extracts realized in the first quarter of 2015 compared to the prior period.

In thousands Canadian $ 3 Months Ended March 31 % Change
2015 2014
Loss Before Income Taxes and Non- ($4,765) ($4,972) (4%)
Controlling Interests
Add:
Bad debt expenses (recovery) ($155) $8 (1988%)
Recovery for prepaids ($193) $0 0%
Recovery for sales taxes recoverable ($372) $0 0%
Net Interest Expense $2,436 $1,896 28%
Depreciation and Amortization $1,294 $791 64%
Foreign Exchange Loss $853 $540 58%
Non-Cash Share Compensation $349 $442 (21%)
EBITDA ($553) ($1,294) (57%)
EBITDA as a % of revenue (9%) (28%) 19%

Additional Information

Additional information relating to the Company, including our Annual Information Form, is available on SEDAR (www.sedar.com). Additional information relating to the Company is also available on our website (www.glglifetech.com).

About GLG Life Tech Corporation

GLG Life Tech Corporation is a global leader in the supply of high-purity zero calorie natural sweeteners including stevia and monk fruit extracts used in food and beverages. GLG's vertically integrated operations, which incorporate our Fairness to Farmers program and emphasize sustainability throughout, cover each step in the stevia and monk fruit supply chains including non-GMO seed and seedling breeding, natural propagation, growth and harvest, proprietary extraction and refining, marketing and distribution of the finished products. Additionally, to further meet the varied needs of the food and beverage industry, GLG has launched its Naturals+ product line, enabling it to supply a host of complementary ingredients reliably sourced through its supplier network in China. For further information, please visit www.glglifetech.com.

Forward-looking statements: This press release may contain certain information that may constitute "forward-looking statements" and "forward looking information" (collectively, "forward-looking statements") within the meaning of applicable securities laws. 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 that 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, consumer demand for our products and new orders from our customers and distributors, 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. Specific reference is made to the risks set forth under the heading "Risk Factors" in the Company's Annual Information Form for the financial year ended December 31, 2013. 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.

Contact Information

  • GLG Life Tech Corporation
    Simon Springett
    Investor Relations
    Phone: +1 (604) 669-2602 ext. 101
    +1 (604) 662-8858 (FAX)
    Email: ir@glglifetech.com