GLG Life Tech Corporation

GLG Life Tech Corporation

May 15, 2008 06:00 ET

GLG Life Tech Corporation Announces Q1 2008 Results

VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 15, 2008) - GLG Life Tech Corporation ("GLG" or the "Company") (TSX:GLG), a world leader in the production of high-quality stevia, announces financial results for the first quarter of 2008. The financial results reflect the growth transition the Company is undergoing as it builds out new stevia leaf processing and high-grade extract facilities that are planned to increase its leaf processing capacity by 400% and its high-grade stevia extract operations by 650% by the end of the fourth quarter 2008. GLG has achieved many milestones towards the development of its business plan during the first quarter including significant progress on its stevia greenhouse operations, advancement of key capital expansion projects and the production of intermediate product inventories that will be sold during the second quarter of 2008 against existing 2007/08 production year customer orders currently totaling $8.5 million.

First Quarter 2008 Financial Results

Consolidated Revenue

GLG's consolidated revenues for the first quarter 2008 were as expected at $1,042,476 as compared to $1,874,363 in the first quarter 2007. Stevia revenue was $879,750 and was affected by a rescheduling of a product shipment to one of GLG's customers from the first to second quarter of 2008. The rescheduling of the stevia shipment will not affect the current order backlog for 2007/2008 production year order backlog which is on track for delivery at $8.5 million. For sequential quarter comparison purposes, the year's first quarter reflected a lower number of production days versus the fourth quarter of 2007.

During the first quarter, GLG focused its productive capacity on building intermediate product inventory in order to maximize its factory throughput in anticipation of the new 500 metric ton (MT) line becoming operational in the second quarter. The existing lines were refocused to optimize their operations on the production of intermediate stevia extract. This strategy is anticipated to result in more efficient operations and maximum throughput of GLG's final stevia extract product. The results of this strategy can be seen through the increase in Work in Progress (WIP) inventory values at the end of the first quarter 2008. GLG increased its WIP inventory value from $95,101 as at December 31, 2007, to $2,391,249 as at March 31, 2008.

GLG announced on May 2, 2008, that the new secondary processing line at its subsidiary, Runde, was now operational and final product had begun to be processed. This important development will facilitate the increased shipments to reduce GLG's 2008 production year order backlog valued at $8.5 Million. This backlog value does not include the recently announced GLG/Cargill Agreement which estimated the first three years of minimum revenue to approach US$200 million with the first production to commence October 1, 2008.

Consolidated Gross Margin

Consolidated gross margin for the quarter ending March 31, 2008, was $469,394, an increase of 1% over $465,709 in gross margin for Q1 2007. Consolidated gross margin reflects both margins from GLG stevia operations and procurement revenues related to the Company's commission revenue from the YHT chain stores business located in China.

Consolidated Expenses

Consolidated expenses include sales, general and administration costs (SG&A) plus depreciation and amortization expenses on non-manufacturing fixed assets. The SG&A increase (excluding depreciation and amortization) for the first quarter of 2008 over the first quarter of 2007 was $513,253, or a 245% increase. This was driven primarily by increasing consolidated salary and wages, consulting fees and listing expenses. The total of these three categories was $307,942 of the increase over the first quarter of 2007 comparable costs, or 60% of the SG&A increase quarter over quarter. The cost drivers for these categories were either start-up operations-related (new consumer division and the new leaf processing plants being constructed at Mingguang and Dongtai) or listing-related (increasing costs associated with GLG's recent TSX listing). The next major increase in SG&A was office- related that equated to an increase of $97,324, or 19%, of the SG&A increase quarter over quarter. This was also attributed to start-up operational costs. Schedule 1 to the Interim Financial Statements for the first quarter of 2008 provides the details of these costs.

Consolidated EBITDA

EBITDA for the quarter ending March 31, 2008, was ($0.197), a decrease of 152% over $0.383 in EBITDA in the first quarter of 2007. The decrease in EBITDA was attributable to decreased shipments of stevia extract and the focus on building intermediate stevia extract inventory in anticipation of the new 500 MT high-grade stevia processing line at its Runde subsidiary. EBITDA was also impacted by higher operating expenses resulting from the start-up of its two new subsidiaries in China (located in the cities of Mingguang and Dongtai) and the initiation of GLG's new consumer products division. GLG has also incurred higher operating costs associated with its new TSX listing and corporate development projects undertaken in the first quarter.

Net Income

Net Income (loss) for the first quarter 2008 was ($351,990), a decrease of 224% over first quarter 2007 net income of $284,727. The basic earnings (loss) per share (EPS) were ($0.005) for the first quarter 2007 compared with $0.01 for the first quarter of 2007. Earnings were impacted by deferral of stevia shipments to second quarter and larger expenses associated with new facilities start-up and the initiation of the new consumer products division.

Summary of First Quarter Results

The following results have been derived from and should be read in conjunction with the consolidated financial statements of GLG for the quarter ending March 31, 2008, and its annual consolidated financial statements for 2007. Certain 2007 comparative figures have been reclassified to conform to the current financial statement presentation.

In thousands $Canadian
Q1 08 Q1 07 % Change
Consolidated Revenue $ 1,042 $ 1,874 (44)
Consolidated Gross Profit $ 469 $ 466 1
% of Revenue 45.0% 24.8% 26.8
Consolidated Expenses $ 898 $ 212 323
% of Revenue 86.1% 11.3% 74.8
Income from Operations (Loss) ($428) $ 254 (269)
% of Revenue (41.1%) 13.5% (54.6)
Other Income (Expenses) $ 76 $ 31 145
% of Revenue 7.3% 1.6% 5.7
Net Income (loss) before Tax ($352) $ 285 (224)
% of Revenue (33.8%) 15% (48.8)
Net Income (loss) after Tax ($352) $ 285 (224)
Earnings per share (Basic) ($0.005) $ 0.01 (150)
Earnings per share (Fully Diluted) ($0.003) $ 0.01 (130)
Consolidated Depreciation & Amortization $ 231 $ 127 82
% of Revenue 22.2% 6.8% 15.4
EBITDA (1) ($197) $ 383 (151)
% of Revenue (19%) 20% (39)

GLG reports on progress towards its major operational objectives for 2008

Construct new facilities to increase production capacity and revenues

Status - Completed: 500 MT new line for Runde has been completed and is operational as of May 2, 2008. Operations of the new line are progressing and it is expected that by the beginning of June, GLG's high-grade stevia extract production will double. For GLG's new leaf processing facilities in Mingguang and Dongtai, GLG is pleased to report that all vendors have been selected, all required government approvals have been received and construction is on track for completion in Q4.

Organize stevia growers in partnership with local governments in China

Status: GLG is pleased to report that this objective is on track to meet required quantities of high-quality stevia leaf from its three exclusive stevia growing areas for its next production cycle that will commence in late in the third quarter of 2008. GLG announced its third stevia growing area in Juancheng in the Shangdong Province in China on April 18, 2008. GLG also announced its new 300 mu (approximately 50 acres) seedbase was established in partnership with the People's Government of Dongtai which is now the largest stevia seedbase in China. Its greenhouse operations have been successful in providing the volume of seedlings required for 50% supply for this year's stevia leaf forecast, up for the originally planned volume of 30%.

Implementation a new Consumer Products Division and commencement of operations

Status - Completed: GLG announced the start-up of its Consumer Products division on March 14, 2008. GLG has already developed consumer formulated stevia sweetener product for one of its existing customer's tabletop and dietary supplement products. GLG further announced a Letter of Intent on May 7, 2008, to establish a joint venture with Weider Global Nutrition to distribute consumer products world-wide.

Recruit and train staff in China for new production facilities (to be completed by Q4)

Status: Recruitment is on track for the fourth quarter.

"We have made significant progress towards our 2008 strategic objectives that properly position us to be the world's largest leading provider of high-grade stevia extract. We are executing on a very aggressive program in 2008 that positions us for significant growth in our business beginning in the fourth quarter of 2008. Our team is working tirelessly to deliver on all key 2008 objectives to 1) increase our high-grade stevia capacity by 650% by the fourth quarter, 2) secure required quantities of high-quality stevia leaf from our three exclusive growing areas, and 3) deliver record shipments of stevia product to our global customer base. Our new commercial agreement with Cargill provides more certainty for our shareholders in terms of the minimum revenues generated in the first three years of the Agreement that will support this expansion," states Chairman and CEO, Dr. Luke Zhang.

Financial Outlook for the remainder of GLG's 2008 Fiscal Year

GLG maintains the following outlook financial guidance for 2008.

2008 Estimate 2007 Actual
Revenue (1) $16 to $18 million $9.1 million
EBITDA $2.6 to 3.0 million $1.5 million
Capital Expenditures (CAPEX) $75 to $85 million $6.5 million
(1) 100% of the revenue in the outlook is under customer contracts.

The Company expects the market for its stevia products to be stronger in 2008 relative to the demand seen in 2007. The majority of its high-grade stevia extract will go to its major customer as per the new agreement announced on April 30, 2008 with Cargill Incorpoated. The Company is also experiencing increasing customer interest in its lower-grade stevia products and is in the process of pursuing sales opportunities within its consumer division as announced on March 14, 2008.

Growth in revenue and EBITDA will be based on delivery against existing customer orders for 2008 as well as expected new orders for the 2008/2009 delivery period. Revenue is expected to be significantly weighted towards the third and fourth quarter of 2008.

Looking forward, revenue for the second quarter is expected to be driven by the new high-grade stevia line announced on May 2, 2008, and the use of the increased WIP inventory developed during the first quarter.

Management's Discussion and Analysis containing a complete review of financial results as well as financial statements and the Annual Information Form are available on the Company's website at or on SEDAR at

About GLG Life Tech Corporation

GLG Life Tech Corporation specializes in growing, refining, and producing high grade stevia extract, a natural, zero-calorie sweetener. With fully integrated stevia operations, GLG is the leading supplier of high quality stevia production in China. The Corporation is also engaged in the distribution of nutritional products in China and holds exclusive agreements with Weider Global Nutrition and Shandong Yong He Tang Health Products Chain Stores Ltd., whose franchise network includes over 1,400 locations. Please visit for further information.

Forward-looking statements: Certain statements in this press release constitute "forward-looking statements". Such forward-looking statements include, without limitation, statements evaluating the market and general economic conditions and discussing future-oriented costs, expenditures and other financial or operating performances. 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 which 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, 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. Please refer to the heading "Risk Factors" in our Annual Information Form in respect of our year-ended December 31, 2007 and the risk factors in our Management's Discussion and Analysis ("MD&A") for the year ended December 31, 2007 for a discussion of these and other factors underlying forward-looking statement, both of which are available on SEDAR at under the Company's names. 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.

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