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GLG Life Tech Corp (2)
Symbol GLG
Shares Issued 37,890,336
Close 2018-05-14 C$ 1.18
Market Cap C$ 44,710,596
Recent Sedar Documents

GLG Life loses $6.09-million in Q1 2018

2018-05-14 11:20 ET - News Release

Mr. Simon Springett reports

GLG LIFE TECH CORPORATION REPORTS FIRST QUARTER FINANCIAL RESULTS

GLG Life Tech Corp. has released its financial results for the three months ended March 31, 2018. The complete set of financial statements and management discussion and analysis are available on SEDAR and on the company's website.

Financial highlights:

  • First quarter 2018 sales decreased by 32 per cent to $4.3-million, driven by lower pricing, volumes and foreign exchange rates;
  • First quarter 2018 gross profit decreased by $300,000, also driven by lower pricing, volumes and foreign exchange rates;
  • First quarter 2018 gross profit margin decreased by two percentage points, driven by the foreign exchange rate impacts during the first quarter; excluding the impact of foreign exchange, the currency neutral gross profit margin was four percentage points higher than first quarter 2017;
  • First quarter 2018 net loss increased by 27 per cent to $5.6-million.

Revenue for the three months ended March 31, 2018, was $4.3-million, compared with $6.3-million in revenue for the same period last year. Sales decreased by 32 per cent, or $1.9-million, for the period ending March 31, 2018, compared with the prior period.

Stevia sales decreased by 26 per cent, which was driven by three factors: (1) unfavourable movements in the foreign exchange rate of U.S. dollars to Canadian dollars, which accounts for four percentage points of the 26-per-cent decrease; (2) average product price decreases, which account for 12 percentage points of the 26-per-cent decrease; and (3) lower volumes delivered, which accounts for 10 percentage points of the 26-per-cent decrease. A decline in monk fruit sales accounted for the remainder of the sales decrease, with monk fruit sales lower by 88 per cent for the period ended March 31, 2018, compared with the prior period. Over all, international sales represented 93 per cent of total sales, which is one percentage point lower than first quarter of 2017 (94 per cent of sales).

Gross profit for the three months ended March 31, 2018, was $300,000, compared with $600,000 for the comparable period in 2017. The gross profit margin was 8 per cent in the first quarter of 2018, compared with 10 per cent for the same period in 2017, a two-percentage-point decrease. This decrease in gross profit margin for the first quarter of 2018, relative to the comparable period in 2017, was attributable primarily to unfavourable movements in the foreign exchange rates of the U.S. dollar to the Canadian dollar and of the Chinese renminbi to the Canadian dollar, which effectively lowered revenues and increased costs in Canadian-dollar terms; higher capacity charges for the current period compared with the previous period also contributed to the decrease in gross profit. Excluding the impact of foreign exchange, currency-neutral gross profit margin in the first quarter of 2018 increased four percentage points to 14 per cent, relative to the comparable period in 2017.

General and administrative expenses for the three months ended March 31, 2018, were flat at $2.3-million, compared with $2.3-million in the same period in 2017.

For the three months ended March 31, 2018, the company had a net loss attributable to the company of $5.6-million, an increase of $1.2-million, or 27 per cent, over the comparable period in 2017 ($4.5-million). The increased net loss was driven by: (1) an increase in other expenses of $1.3-million; and (2) a decrease in gross profit of $300,000, which were offset by losses attributable to non-controlling interests of $400,000.

Results from operations

The results from operations in the attached table have been derived from and should be read in conjunction with the company's interim annual statements for the period ended March 31, 2018, and its annual consolidated financial statements for the period ended Dec. 31, 2017.

(in thousands of dollars,                               Three months ended March 31,
except per-share amounts)                                         2018         2017

Revenue                                                         $4,267       $6,251
Cost of sales                                                  ($3,946)     ($5,643)
% of revenue                                                      (92%)        (90%)
Gross profit (loss)                                               $322         $608
% of revenue                                                        8%          10%
Expenses                                                       ($2,339)     ($2,329)
% of revenue                                                      (55%)        (37%)
(Loss) from operations                                         ($2,017)     ($1,722)
% of revenue                                                      (47%)        (28%)
Other expenses                                                 ($4,082)     ($2,733)
% of revenue                                                      (96%)        (44%)
Net (loss) before income taxes                                 ($6,099)     ($4,455)
% of revenue                                                     (143%)        (71%)
Net (loss)                                                     ($6,099)     ($4,455)
% of revenue                                                     (143%)        (71%)
Net (loss) attributable to non-controlling interest (NCI)        ($450)         N/A
Net (loss) attributable to GLG                                 ($5,649)     ($4,455)
% of revenue                                                     (132%)        (71%)
(Loss) per share (LPS, basic and diluted)                       ($0.15)      ($0.12)
Other comprehensive income (loss)                              ($2,231)       ($167)
% of revenue                                                      (52%)         (3%)
Comprehensive income (loss)                                    ($8,330)     ($4,622)
Comprehensive income (loss) attributable to NCI                  ($533)         N/A
Comprehensive income (loss) attributable to GLG                ($7,797)     ($4,622)
% of revenue                                                     (183%)        (74%)

Outlook

GLG continues to expect significant growth in the company's international stevia sales in 2018, driven by the company's partnership with GLG's global distributor and the company's own direct sales in the dietary supplement market. Considering the company's distributor's size and distribution reach, GLG expects that the partnership will continue to deliver significantly higher sales to GLG. The company's international stevia revenues increased significantly in fiscal 2017, up 47 per cent over the same period in 2016.

As the company's global distributor leverages its existing customer relationships, distribution channels, and ingredient expertise in the food and beverage space, GLG expects international stevia revenues to continue to grow. The company is seeing significant sales opportunities arise from this partnership.

Moreover, the partnership presents opportunities to develop and deliver new stevia products that have not historically been part of GLG's portfolio. Recently, in collaboration with ADM, the company announced the newest addition to its portfolio of great-tasting stevia extracts, the new high-Reb M product line. Made from GLG's proprietary high-Reb M Dream Sweetener stevia leaf, this next-generation stevia product line facilitates sugar replacement with better-tasting, low-calorie, natural sweetening systems and solutions that provide a sugar-like sensory experience. These products provide a clean and full-bodied sweetness experience that is remarkably close to sugar, allowing for deeper calorie reduction through reduced sugar formulations. And with its sucrose-like sweetness, these high-Reb M products enable formulators to reduce sugar more than ever before and provide the end consumer with better-tasting healthier choices. The company expects revenue from sales from Reb M products to commence in 2018 and to grow to be an important part of its stevia revenues over the next three to five years as more of these products become available.

In addition, GLG is succeeding with its own direct sales efforts in the dietary supplement market, distinct from the food and beverage space covered by the company's distribution partnership. GLG has been successful in 2017 and into 2018 in developing the company's dietary supplement customers with its innovative ClearTaste product line, which delivers better-tasting stevia and monk fruit. The company's ClearTaste stevia and monk fruit products provide better-tasting stevia extracts that remove a number of the taste issues typically associated with stevia extracts, including bitter and astringent notes. As of April 2, 2018, the company has secured 50 customers in the past 12 months and GLG expects to more than double this customer base in 2018. A number of these customer wins have replaced their existing stevia and monk fruit suppliers with GLG's ClearTaste products, citing improved sensory performance -- in particular, reduced bitterness and aftertaste compared with their previous suppliers' products.

GLG expects that these two sales channels will bring continued growth in the next 12 months for the company's international stevia sales.

Finally, the company has developed a two-phase plan designed to eliminate approximately $100-million in outstanding debt and interest, with the first phase being approved by the shareholders in May, 2017, and fully implemented in the fourth quarter of 2017 (see the related party debt conversion section in the management discussion and analysis for details). The company is progressing well toward completing the second phase of debt restructure and, as noted above, expects to reach a final agreement to convert all third party debt into equity in GLG's subsidiary.

The company provided a progress update on Feb. 27, 2018, in which it announced that the company received an official letter from China Cinda Assets Management Corp. (Anhui branch) confirming its intention to move forward in 2018 as a new shareholder in GLG's new joint stock company -- Anhui Runhai Biotechnology Joint Stock Co. Ltd. -- and to resolve Runhai's bank debt obligations. Cinda Anhui has taken the lead in consolidating GLG's Chinese debt amongst the other Chinese banks and has been actively engaged in negotiations with the company to convert all the outstanding bank debt into equity into Runhai. Indeed, Cinda Anhui's letter highlights its involvement in the debt-restructuring process, including its work with the other Chinese banks that have held debt in Runhai. Significantly, this letter also formally communicates Cinda Anhui's intent to move forward in 2018 to resolve the company's Chinese debt positions.

As previously noted, the company plans to provide all necessary public disclosure once the final plan is agreed by all parties, including GLG's board of directors. Once the company finalizes the restructuring plan with Cinda Anhui, the company will have a strong financial partner in Cinda Anhui, which will further strengthen the company's position in the market and fundamentally restructure the company's balance sheet by converting its bank loans into equity in its China subsidiary.

About GLG Life Tech Corp.

GLG Life Tech 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.

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