GLG Life Tech Corporation
TSX : GLG

GLG Life Tech Corporation

May 15, 2009 06:30 ET

GLG Life Tech Corporation Announces First Quarter 2009 Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 15, 2009) - GLG Life Tech Corporation (TSX:GLG) ("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, 2009.

First Quarter Report 2009 - Business Highlights

US$ 40.5 Million Stevia Extract Order Received from Cargill for TRUVIA™: In May 2009, GLG received an initial order from Cargill valued at US$ 40.5 million for the delivery of high grade stevia extract beginning October 2009. Further, GLG has agreed to make additional product available to Cargill during the next 18 months for a possible increase in the order size.

GLG-Weider Sweet Naturals (SN) Venture Progress: SN has continued to make progress in establishing its sales and distribution of rebiana and other high grade stevia products during the first quarter. SN is now active in 17 countries worldwide and is working with over 400 companies at various stages of opportunity development. SN has signed a number of customers during the first quarter including Zevia LLC, a leading natural beverage company which was announced on May 12, 2009. SN is also currently in discussion with a number of large multinational companies to supply high grade stevia products including rebiana. These discussions are expected to be concluded over the balance of 2009.

New Leaf Processing Plants Fully Operational: GLG completed food safety audits to bring its two new stevia leaf processing plants into operation during the first quarter. These plants bring online an additional 36,000 metric tons (MT) of processing capacity for a total of 41,000 MT, a 720% increase over 2008 leaf processing capacity.

High Grade Stevia Extract Production Quadrupled as Compared to 2008 Average Production Rates: With two new leaf processing facilities in operation, GLG is now leveraging its high grade stevia extract facilities and has increased monthly production of high grade stevia extract from an average of 10 MT in 2008 to 40 MT currently.

2009 Stevia Agricultural Program Underway: GLG has succeeded in doubling the number of its proprietary seedlings for planting during 2009 compared to 2008. The Company continues to receive high levels of support from local Chinese Governments in its exclusive growing areas.

The First Quarter 2009 Financial Results Highlights

The following results from operations has been derived from and should be read in conjunction with the consolidated financial statements of GLG for the quarter ending March 31, 2009, and its annual consolidated financial statements for previous years. Certain prior year's figures have been reclassified to conform to the current financial statement presentation.



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In thousands Canadian $, except First quarter First quarter % Change
per share amounts 2009 2008
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Revenue $3,001 $841 257%

Cost of Sales $1,582 $573 176%

% of Revenue 53% 68% (15%)

Gross Profit $1,419 $268 430%

% of Revenue 47% 32% 15%

General & Administration Expenses $2,750 $849 224%

% of Revenue 92% 101% (9%)

Income (loss) from Operations ($1,331) ($581) (129%)

% of Revenue (44%) (69%) 25%

Other Expenses ($935) ($352) 166%

% of Revenue (31%) (42%) 11%

Net Loss after Income Taxes and
Non-Controlling Interests ($1,500) ($934) (61%)

Earnings (loss) per share (Basic) ($0.02) ($0.01) (39%)

Earnings (loss) per share (Diluted) ($0.02) ($0.01) (39%)

Total Comprehensive Income (loss) $1,367 $1,458 (6%)

% of Revenue 46% 173% (128%)

EBITDA (1) $270 ($350) 177%

% of Revenue 9% (42%) 51%

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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.


Revenues

Revenues for the quarter ending March 31, 2009 were $3 million, an increase of 257% over $0.8 million in revenue for the first quarter in 2008. The increase in stevia revenues quarter over quarter was driven by higher demand for the Company's high grade stevia extract products, and increased shipments of higher value stevia extract than in the comparable period.

Accounts receivable decreased from $2.7 million as at December 31, 2008 to $1.3 million as of March 31, 2009.

Inventory increased to $36.4 million as at March 31, 2009 from $33.1 million as at December 31, 2008. Key drivers for the increased inventory levels were: (a) the increase in work in progress inventories to meet customer order commitments for 2009 (b) the increase in finished product inventories driven by new leaf processing facilities coming online in the first quarter and (c) by-product inventories available for sale or further processing into final products. The value of finished goods inventories on hand at the end of the period rose from $1.2 million as of year-end 2008 to $2.2 million at the end of the first quarter.

Gross Profit

Gross profit for the period ending March 31, 2009 was $1.4 million, an increase of 430% over $0.3 million in gross profit for the comparable period in 2008. The increase in gross profit was driven by increased sales in the first quarter of 2009 as compared to the first quarter of 2008. The gross profit margin on sales for the first quarter 2009 was 47% compared to 32% gross profit margin achieved on sales in the first quarter of 2008. Gross profit margin for the quarter was positively influenced by the recognition of deferred revenue relating to a 2009 customer order for the period. Gross profit margin for the quarter would have been 32% without the impact of the deferred revenue on first quarter sales and gross profit.

General and Administration Expenses



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In thousands Canadian $ First quarter First quarter % Change
2009 2008
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SG&A Expenses $1,980 $674 194%

Stock based Compensation $501 $- 100%

G&A Amortization & Depreciation $269 $175 54%

Total $2,750 $849 224%

% of Revenue 92% 101% (9%)
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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 three months ended March 31, 2009 were $2 million, an increase of $1.3 million or 194% over the same period for 2008 ($0.7 million). The key expense categories that increased were salaries, consulting fees, office, advertising and promotion and business taxes and licenses which in total accounted for 84% of the increase during the period compared to the same period in 2008. SG&A expenses for the first quarter 2009 compared to the fourth quarter 2008 were 2% higher. GLG's employee count at the end of the first quarter of 2009 was 977, a 21% increase of 169 people over year-end 2008 (808). The majority of the Company's employees are based in China and work in production. GLG had an extensive recruiting and training program to hire these employees in advance of the new facilities in Mingguang (Anhui Province, China) and Dongtai (Jiangsu Province, China) coming into operation. These two new facilities came online during the months of February and March 2009 after food safety audits were successfully completed. As a result, a portion of salary costs in the first quarter associated with production employees are reflected in the SG&A expenses rather than production costs or inventory. A large proportion of these salary costs will be reflected in cost of sales or inventory after the first quarter of 2009. Approximately 30% or $0.3 million of salaries, office and rental expenses during the first quarter of 2009 were either one-time in nature, pre-production expense related or salary related costs of production staff at the new subsidiaries. (The total of these three SG&A categories was $1.0 million). There were some additional start-up related expenses in China for office, rental and business tax and licenses, which were associated with the initial set-up of the new facilities in China.

Stock Based Compensation Expense

Stock based compensation was $0.5 million for the first quarter of 2009 compared with Nil in the first quarter of 2008. GLG had an amended stock compensation plan 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% of the issued and outstanding common shares. Prior to 2008, the Company had not granted stock options since 2005. Grants made during 2008 were 1,474,480 in compensation securities including both options and restricted shares. Eighty-four percent of these grants have three-year vesting and performance criteria requirements to be fully earned by the recipients. The first quarter 2009 stock compensation expenses were associated with the grants from 2008.

G&A Depreciation and Amortization

G&A related depreciation and amortization expenses for the three months ended March 31, 2009 was $0.3 million, an increase of 54% over $0.2 million for the comparable period in 2008. The main driver for the increase in amortization is related to the increase in intangible patent amortization related to the acquisition of Agricultural High Tech Developments Limited in 2007.

Other Expenses



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In thousands Canadian $ First quarter First quarter % Change
2009 2008

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Other Expenses ($935) ($352) 166%
% of Revenue (31%) (42%) 11%
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Other expense for the three months ended March 31, 2009 was $0.9 million, an increase of 166% over $0.4 million for the comparable period in 2008. There were two items that contributed 100% to the other expense for the first quarter of 2009: (1) unrealized foreign exchanges losses on US$ denominated liabilities that GLG was holding at quarter-end ($0.7 million) and (2) interest on short-term loans ($0.2 million). With respect to the US dollar denominated liability, GLG has managed the foreign exchange risk by matching a customer order denominated in US$.

Net Loss



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In thousands Canadian $ First quarter First quarter % Change
2009 2008

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Net Loss ($1,500) ($934) (61%)
% of Revenue (50%) (111%) 61%
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The net loss for the three months ending March 31, 2009 was ($1.5) million, in comparison with a net loss of ($0.9) million for the comparable period in 2008. The basic loss per share was $0.02 for the three months ending March 31, 2009 compared with a loss per share of $0.01 for the comparable period in 2008. Earnings were impacted by larger expenses driven by five categories: (1) start-up expenses in China associated with the two new greenfield production facilities, (2) expenses related to the development of the new venture "GLG-Weider Sweet Naturals" in advance of material revenues commencing, (3) full ramp-up of the Company's new leaf processing facilities in March 2009, (4) stock based compensation, and (5) unrealized foreign exchange losses driven by decline in the Canadian dollar relative to the US dollar in the first quarter.

EBITDA

EBITDA for the quarter ended March 31, 2009 was $0.3 million, an increase of 177% over negative ($0.4) million in EBITDA for the comparable period in 2008. The main drivers for the increase in EBITDA for the three months ended March 31, 2009 compared to 2008 is attributable to (1) higher stevia revenue and gross profit for the first quarter 2009 as compared to the first quarter of 2008 and (2) a portion of the costs previously reported as part of SG&A are now flowing to inventory and costs of goods sold as the new leaf processing facilities began production during the first quarter.

Capital Expenditures (CAPEX)



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In thousands Canadian $ First quarter First quarter % Change
2009 2008
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CAPEX $8,446 $3,243 160%

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GLG's capital expenditures were $8.4 million for the first quarter of 2009 in comparison to $3.2 million in Q1 2008. First quarter 2009 capital expenditures were driven by the completion of the leaf processing facility builds at the Runhai (Mingguang) and Runyang (Dongtai) subsidiaries.

The following table presents the current capacity levels for the Company's facilities as of March 31, 2009 compared to year-end 2008.



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Production Capacity 2009 Year end 2008
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Leaf Processing 41,000 5,000
Intermediate Powder (RA 60) 4,000 500
High Grade Stevia (RA 80) 1,000 1,000
Rebiana (RA 97) 500 500
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Balance Sheet Financial Highlights



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In thousands Canadian March 31, December 31,
2009 2008
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Cash and cash equivalents $8,618 $7,363
Working Capital ($13,460) ($2,562)
Total Assets $188,282 $174,361
Total Liabilities $69,456 $57,364
Advances from Customers $25,540 $24,492
Loans Payable (Current Portion) $17,149 $10,232
Total Shareholder Equity $118,698 $116,829

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Cash and cash equivalents increased by $1.3 million during the first quarter of 2009. Working capital decreased by $10.9 million from the year-end 2008 position. The working capital decrease can be attributed to a net increase in short term loans for the first quarter of $6.9 million used to fund capital expenditures and a net increase in accounts payable related to capital expenditures of $4.4 million. Total liabilities include the advances from customers in the amount of $25.5 million that was used to fund the purchase of stevia leaf in 2008 required for customer 2008/09 orders.

Cash used by investing activities was $4.4 million in the first quarter on 2009, compared to $3.2 million in the same period in 2008. The majority of cash outflow was to finance remaining construction at the facilities in Dongtai and Mingguang.

Cash generated by financing activities was $7.2 million in the first quarter, compared to $11.3 million in the same period in 2008. The key item that drove the increase in cash generated by financing activities during the quarter came from a net increase in short term bank loans in China of $5.8 million.

Market and Operations 2009 Outlook

The Company expects the demand for its stevia products to be significantly stronger in 2009 compared to 2008. This expectation is driven by the opening of new markets for stevia extracts due to approval by several regulatory bodies in 2008. The major geographic market that has opened up for high purity Rebaudioside A stevia extract products is the United States. Approval of stevia extracts was also declared by the World Health Organization's Joint Expert Committee on Food Additives (JECFA) as well as by Australia and New Zealand. There were several important product launches in the U.S. at the end of 2008 and during the first quarter of 2009. GLG's alliance partner Cargill successfully launched a tabletop sweetener (TRUVIA™) in July 2008 using rebiana. The Coca-Cola Company has launched Sprite Green, Odwalla juices and Vitaminwater10 using rebiana late in the fourth quarter of 2008 and during the first quarter of 2009. PepsiCo has also launched a series of beverages sweetened with high purity Rebaudioside A. In addition, a division of Dr. Pepper Snapple Group has re-launched the All Sport brand of beverages now utilizing stevia. The Company expects numerous new product launches in 2009 based on feedback received from customers and prospects. The current economic recession has the potential to impact the Company's financial results negatively if food and beverage companies delay plans to launch new stevia based products.

The Company's key operational objectives for 2009 include:



1. Commence operation of new facilities to increase production capacity
and revenues (Completed)
2. Prepare necessary GLG proprietary seedlings to meet expected demand
from customers for Q4 2009 and 2010 (Completed).
3. Organize stevia growers in partnership with local governments in China
to meet expected 2009 stevia demand (Completed).
4. Generate additional sales growth from GLG Weider Sweet Naturals
venture
5. Complete a new rebiana production facility (Phase One - 1,000 Metric
Tons) by year-end 2009
6. Continue R&D program for high RA yielding seeds and seedlings


Outlook for 2009

(Canadian dollars)



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2009 Outlook 2008 Actual
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Revenue $50 to $60 million $9.9 million
EBITDA $8 to $12 million ($1.0) million
Capital Expenditures $17 to $40 million $57.8 million
(CAPEX)
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Revenue and EBITDA - 2009 Outlook

The Company's stevia operations are expected to account for 100% of revenue growth in 2009. This growth will be based on delivery against existing customer orders for 2009 as well as expected new orders for the 2009/2010 delivery period. 2009 revenue is expected to be significantly weighted towards the second half of 2009. This expectation is driven by the following:

a) The Company has approximately US$34 million under contract for delivery in 2009 as of the date of this release. This would equate to CDN$40.6 million using an average exchange rate assumption of $1.19 per $US for the balance of 2009 (Source: TD Bank Economics Report April 14, 2009).

b) There was limited production and shipments in the first quarter due to plant commissioning activities and the customary plant shut down in February for Chinese New Year celebrations.

c) The new facilities underwent food safety audits which were completed mid-March following which the new production facilities in Dongtai and Mingguang are ramping up production levels and commencing customer shipments.

d) New customer contracts are expected to be closed during 2009 with delivery commencing in the third and fourth quarters of 2009. This would meet the remaining $6.4 million (US$5.4 million) in revenue expected to be delivered during 2009 to meet the lower end of revenue guidance.

e) GLG expects to generate the majority of 2009 projected EBITDA beginning in the second quarter of 2009 based on sufficient revenue being generated to cover cash related operating expenses.

Capital Expenditures - 2009 Outlook

Capital expenditures are anticipated to be approximately $17 million to $20 million and include amounts required to complete the facilities in Mingguang and Dongtai as well as phase one of the new rebiana facility (Phase One equals 1,000 metric tons rebiana capacity). The Company expects to fund these capital expenditures through its existing and new banking arrangements in China.

A further $20 million in capital expenditures may be incurred to expand the processing facilities in Mingguang and Dongtai in order to add additional leaf processing capacity during 2009. These capacity upgrades would be initiated by growth in the stevia market and customer contract requirements.

Management's Discussion and Analysis containing a complete review of financial results as well as financial statements will be available on the Company's website at www.glglifetech.com or on SEDAR at www.sedar.com.

About GLG Life Tech Corporation

GLG Life Tech Corporation is a global leader in the supply of high purity stevia, an all natural, zero-calorie sweetener used in food and beverages. The Company's 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 and extraction technique make it a world leading producer of high purity rebaudioside A extracts. Please visit www.glglifetech.com for further information.

Forward-looking statements: Forward-looking statements: Certain statements in this press release constitute "forward-looking statements". Such forward-looking statements include, without limitation, statements evaluating the market for stevia, the Company's production capacity, demand for stevia and the Company's stevia based products and general economic conditions. Forward-looking statements involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations include 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 under the heading "Risk Factors" in our Annual Information Form in respect of our year-ended December 31, 2008 and the risk factors in our Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2008 and for the interim period ending March 31, 2009, all of which are available on SEDAR at www.sedar.com. The Company's forward-looking statements 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. Financial outlook information contained in this press release about prospective results of operations, capital expenditures or financial position is based on assumptions about future events, including economic conditions and proposed courses of action, based on management's assessment of the relevant information as of the date hereof. Such financial outlook information should not be used for purposes other than those for which it is disclosed herein.

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