GLG Life Tech Corporation Announces Fourth Quarter and Fiscal 2011 Financial Results Highlights and First and Second Quarter 2012 Interim Results

VANCOUVER, British Columbia, Aug. 15, 2012 (GLOBE NEWSWIRE) -- GLG Life Tech Corporation (TSX:GLG) ("GLG" or the "Company"), the vertically-integrated leader in the agricultural and commercial development of high quality stevia and all natural and zero calorie food and beverage products, announces financial results for the year ended December 31, 2011, and interim financial results for the periods ending March 31, 2012, and June 30, 2012.

Second Quarter 2012 Financial Results Highlights

The following results from operations have been derived from and should be read in conjunction with the Company's interim consolidated financial statements for the six month period ended June 30, 2012. Complete financial statements are available at www.glglifetech.com and www.sedar.com.

(1) EBITDA is a non-GAAP financial measure. GLG calculates it by adding to net income before taxes (1) Depreciation and amortization expense as reported on the cash flow statement, (2) Other Income (Expenses), (3) Stock-based compensation expense, and (4) Non-controlling interest. This might not be the same definition used by other companies. For the discussion of EBITDA, and the reconciliation of EBITDA to net income before taxes and after minority interest under US GAAP, please see 'Non-GAAP Financial Information".

Revenue for the three months ended June 30, 2012 which was derived from stevia sales and the sale of consumer beverage products was $6.8 million, a decrease of 56% compared to $15.2 million in revenue for the same period last year. For the three months ended June 30, 2012, the total sales of $6.8 million are composed of stevia sales of $6.5 million and consumer product sales of $0.26 million.

Revenue for the six months ended June 30, 2012 was $7.7 million a decrease of 66% compared to $22.6 million for the same period in 2011. The total revenue was composed of $7.3 million for stevia sales and $0.3 million for consumer products sales.

Gross loss for the three months ended June 30, 2012 was $2.7 million, a decrease of 189% over $3.0 million in gross profit for the comparable period in 2011. The gross profit margin for the three months period ended June 30, 2012 for the Company as a whole was a negative 40% compared to a positive 20% for the three months ended June 30, 2011. On a disaggregated basis stevia products had a gross loss of negative 40% and the consumer products had a gross loss of negative 28%. The gross loss was significantly impacted by the capacity charges to the cost of goods sold. These charges ordinarily would flow to inventory; however, only two of GLG's manufacturing facilities were operating during the quarter and capacity charges of approximately $1.5 million were incurred.

Gross loss for the six months ended June 30, 2012 was $4.3 million compared to a positive $4.2 million gross profit for the comparable period in 2011. The gross profit margin decreased to negative 56% for the six months ended June 30, 2012 from a positive 19% for the comparable period in 2011. On a disaggregated basis, stevia products had a gross margin of negative 58% and the consumer products had a gross margin of negative 23%. The gross loss was significantly impacted by the capacity charges to the cost of goods sold. These charges ordinarily would flow to inventory; however, only two of GLG's manufacturing facilities were operating during the six months and capacity charges of approximately $3.0 million were incurred.

For the three months ended June 30, 2012, the Company had a net loss attributable to the Company of $8.3 million, a decrease of $4.2 million over the comparable period in 2011 ($12.5 million loss). The decrease in net loss was driven by: (1) a decrease in G&A expenses of $10.3 million, (2) a decrease in other income/expenses of $0.4 million, and (3) a decrease of $1.0 in income tax expense. These items were offset by the (4) a decrease in gross profit of $5.7 million, and (5) a decrease in loss attributable to non-controlling interests of $1.8 million.

For the six months ended June 30, 2012, the Company had a net loss attributable to the Company of $14.5 million, a decrease of $3.8 million over the comparable period in 2011 ($18.3 million loss). The decrease in net loss was driven by: (1) a decrease in G&A expenses of $12.4 million, (2) a decrease in other income/expenses of $0.9 million, and (3) a decrease of $0.9 in income tax expense. These items were offset by the (4) a decrease in gross profit of $8.6 million, and (5) a decrease in loss attributable to non-controlling interests of $1.9 million.

Stevia business EBITDA for the three months ended June 30, 2012 was a negative $3.4 million or (53%) as percentage of revenues compared to $1.1 million and 11% as percentage of revenues in the comparable period. This decrease is driven by lower gross margin during the second quarter of 2012 compared to the second quarter of 2011, offset by lower G&A costs in the second quarter of 2012 compared to the comparable period in the prior year. EBITDA as percentage of revenues has improved from (177%) to (53%) comparing the second quarter of 2012 to the first quarter of 2012. This increase is due to the significantly higher level of stevia sales in the second quarter of 2012 compared to the first quarter of 2012.

EBITDA for the AN0C consumer products was negative $0.4 million for the three months ended June 30, 2012 compared to negative $7.8 million in the comparable period. EBITDA for the AN0C consumer products was negative $0.7 million for the 6 months ended June 30, 2012 compared to negative $8.7 million in the comparable period.

Market and Key Markets Outlook    

Market Drivers for Stevia

Stevia benefits from increased concern about the role of sugar in causing obesity and diabetes and the widespread consumer belief that all-natural products are healthier than artificial products, particularly in the sweetener industry where artificial high-intensity sweeteners have been subject to consumer health risk concerns. 

Datamonitor reported that research by the Natural Marketing Institute (NMI) suggests a growing wariness for artificial sugar replacers in the US. Over half of respondents are concerned about the negative side effects of artificial sweeteners. In a recent online survey conducted by The Globe and Mail, over 1,700 respondents voted on the question "What's your stance on artificial sweeteners?". Over half of the respondents voted "They're unhealthy – I'll never use them".   Growing consumer preference for all-natural products, together with increasing rates of obesity and diabetes, have created significant demand for an all-natural, zero-calorie sweetener alternative.

Stevia's advantages are that it has zero calories, is 100% natural and thus perceived as healthier than artificial sweeteners, remains stable under heat and thus can be utilized in processed foods, is 200 to 300 times sweeter than sugar, and measures zero on the glycemic index, which is important in the diabetic market and benefits from growing consumer understanding of the value of a low glycemic diet. Food and beverage companies are formulating and launching new products in response to consumer demand and we believe stevia provides a solution that fits within consumer expectations for taste and health benefits.

According to Datamonitor, approximately 630 products sweetened with high purity stevia were launched around the world from October 2010 to September 2011, with US accounting for more than 300 products. Mintel's August 2011 report entitled Stevia and Natural Sweeteners - US, reported that 75% of stevia-sweetened products launched in the United States since 2006 were beverages. Leading global food and beverage companies such as The Coca Cola Company, Cargill, PepsiCo and Merisant Company have all launched products containing stevia. 

According to Koncept Analytics, regionally Japan is the largest consumer of stevia, accounting for over half of the global stevia sweetener market. Stevia holds over 40% of the Japanese sweetener market, with widespread use in a variety of products, including pickles, dried seafood, soy sauce, meat, seasonings, beverages and yogurt, ice cream, confectionaries and as tabletop sweetener.  Following approval as a sweetener in the USA in 2008, in an August 2011 report published by Mintel, US retail sales of products containing stevia, including tabletop sweeteners and food and beverage products, could reach US$1.2 billion by the end of 2013, almost double from an estimated US$610 million in 2011. 

Although there is still consumer confusion over the meaning of a "natural" sweetener, stevia-sweetened drinks have found success in several developed markets and the Company expects that they will drive much of the future growth in zero calorie soft drinks. Zenith International estimated that worldwide sales of stevia reached US$285 million in 2010, a 27% increase over 2009. Zenith further forecasts the global market for stevia to grow to 11,000 metric tonnes by 2014, equivalent to US$825 million by value

World sugar prices remained in the range $600 to $800 per tonne throughout 2011. There are a number of conflicting forecasts for sugar moving forward. Some analysts expect a surplus in 2012 and lower sugar prices and others see relatively stable sugar prices in their current range. OECD-FAO expects sugar prices to remain on a higher plateau and to average higher in real terms (when adjusted for inflation) through to 2020 when compared with the last decade. Severe weather (particularly drought) could lead to an increase in sugar prices. A Reuters poll in July 2012 forecast NYSE Liffe white sugar futures at $595 a tonne at the end of 2012. Higher sugar prices will usually facilitate food and beverage companies interest in stevia when it can offer not only a zero calorie natural sweetener benefit but also a lower relative cost.

The stevia industry will remain very competitive with new entrants expected to continue to enter the market. Key barriers to achieving complete vertical integration include the time to develop a naturally bred high rebaudioside A seed or seedlings, scale, efficient extraction technology, and formulation knowledge in working with stevia in food and beverage applications. Agriculture and availability of leaf supply is expected to be reduced in 2012 from the levels seen in 2011 and the industry as a whole may face a shortage of leaf to meet the expected growing demand in the later part of 2012.

GLG's International Stevia Sales Business Outlook

We sell our high-grade stevia extract directly to a number of customers (including large food/beverage companies, food ingredient companies, and flavour houses) internationally. Additionally, we have partnered with distributors that resell GLG's products in a number of markets globally. The Company currently has over 20 distributors and/or agents marketing its products globally. The Company now has distribution agreements in Australia, New Zealand, Mexico, South America, Central America, India, Europe, China, Japan, Korea and the US.

GLG's international stevia business sales team is based in Vancouver and is focused on supporting our regional distributors as well as direct relationships with food and beverage companies. GLG has doubled the number of their distributors and has also added sales agents in some key markets to drive sales in 2012. GLG's China and Asian stevia sales team is based in Shanghai and Qingdao. This team targets both end customers as well as regional distributor sales support. 

Our notable sales wins to date in 2012 include:

• Global tabletop sweetener company
• Global food service company
• Global pharmaceutical company
• Global dairy company
• International flavor house
• North American Ready To Drink beverage company
• South American sweetener company
• European water company
• European consumer packaged goods company
• European ice cream company

As well as direct sales to other stevia extract providers.

Examples of new products launched by GLG's customers include: flavoured water and fruit filling in Europe, multiple stevia-sweetened beverages in the US, powdered blends and power bars in Europe, a tabletop applications in The US, Europe and South America, a beverage in Latin America, two flavoured milks in Asia Pacific and additional multiple beverage applications in Asia-Pacific region.

Gross profit margins are expected to improve as the Huinong 3 ("H3") proprietary leaf variety is in use by the Company starting in late 2012. The H3 plant variety has already been harvested in 2011 and tested in GLG primary processing plants that confirmed plant size, RA content and expected yield results in our primary processing facility. H3 is expected to deliver reduced stevia leaf processing costs starting in the fourth quarter 2012. The H3 plant variety have approximately 76% RA in the plant leaf, which is 26% higher than the first generation (H1) seeds, and will generate 46% more leaf per acre than the earlier H1 plants as well. Huinong 4 ("H4") is currently available for planting, which is expected to provide GLG with a significant cost reduction in its production of high-purity stevia extracts in the future. H4 results show a 16% increase in leaf yield over the H3 plants, while maintaining a similar 76% RA content.

First Quarter 2012 Financial Results Highlights

The following results from operations have been derived from and should be read in conjunction with the Company's interim consolidated financial statements for the three month period ended March 31, 2012. Complete financial statements are available at www.glglifetech.com and www.sedar.com.

 (1) EBITDA is a non-GAAP financial measure. GLG calculates it by adding to net income before taxes (1) Depreciation and amortization expense as reported on the cash flow statement, (2) Other Income (Expenses), (3) Stock-based compensation expense, and (4) Non-controlling interest. This might not be the same definition used by other companies. For the discussion of EBITDA, and the reconciliation of EBITDA to net income before taxes and after minority interest under US GAAP, please see 'Non-GAAP Financial Information".

Revenue for the three months ended March 31, 2012 which was derived from stevia sales and the sale of consumer beverage products was $0.9 million, a decrease of 88% compared to $7.4 million in revenue for the same period last year. The total sales of $0.9 million are composed of stevia sales of $0.8 million and consumer product sales of $0.1 million. The Company was focused on developing new customers in Asia, North America, South America and Europe during the first quarter to rebuild its stevia extract sales. Revenues in the first quarter were made primarily to new customers in Asia.

The Company's consumer products business, AN0C had sales of $0.1 million in the first quarter of 2012. Consumer product sales decreased by 96% compared to the prior period. The Company had limited financial resources for marketing and promotion available in the first quarter to support advertising and promotions and the result of a lower advertising and marketing promotions spend is reflected in the lower sales in the period. 

Gross loss for the three months period ended March 31, 2012 was $1.6 million, a decrease of 234% over $1.2 million in gross profit for the comparable period in 2011. The gross profit margin for the three months period ended March 31, 2012 for the Company as a whole was minus 185% compared to 17% for the three months ended March 31, 2011. The gross loss was significantly impacted by the capacity charges to the cost of goods sold. These charges ordinarily would flow to inventory during periods of higher utilization; however, only two of GLG's manufacturing facilities were operating during the quarter and capacity charges of approximately $1.6 million were incurred.

The Company had a net loss attributable to the Company of $6.2 million, an increase of $0.5 million over the comparable period in 2011. The increase in net loss was driven by: (1) a decrease in gross profit of $2.8 million, (2) the decrease in income tax recovery of $0.2 million and (3) the decrease in loss attributable to non-controlling interests of $0.2 million. These items were offset by (1) a decrease in G&A expenses of $2.2 million, and (2) a decrease in interest expense and other income/expenses of $0.6 million.

NON-GAAP Financial Measures

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

EBITDA for the quarter ended March 31, 2012 was negative $1.8 million, compared to negative $1.3 million in EBITDA for the same period in 2011. The main drivers for the decrease in EBITDA are decreased gross profit in Q1 2012 for stevia and An0c consumer product sales compared to the prior period ($2.8 million) which were offset by the reduction in general and administrative expenses ($2.1 million).

Fourth Quarter and Fiscal 2011 Financial Results Highlights

The following results from operations have been derived from and should be read in conjunction with the Company's interim consolidated financial statements for the three and twelve month periods ended December 31, 2011 and 2010. The Company has reclassified certain of the figures presented for comparative purposes to conform to the financial statement presentation adopted in the current period. Certain prior year's figures have been recast to conform with U.S. GAAP accounting standards. Complete financial statements are available at www.glglifetech.com and www.sedar.com .

(1) EBITDA is a non-GAAP financial measure. GLG calculates it by adding to net income before taxes (1) Depreciation and amortization expense as reported on the cash flow statement, (2) Other Income (Expenses), (3) Stock-based compensation expense, (4) Non-cash asset impairment losses and other non-cash provisions and (5) Non-controlling interest. This might not be the same definition used by other companies. For the discussion of EBITDA, and the reconciliation of EBITDA to net income before taxes and after minority interest under US GAAP, please see 'Non-GAAP Financial Information.

Revenue for the three months ended December 31, 2011 which was derived from stevia sales and the sale of consumer beverage products was $0.5 million, a decrease of 98% compared to $19.3 million in revenue for the same period last year.

Revenue for the twelve months ended December 31, 2011 was $24.8 million compared to $58.9 million for the same period in 2010, a decrease of 58% compared to revenue for the same period last year. The total revenue was composed of $17.1 million for stevia sales and $7.7 million for consumer products sales.

Cost of sales for the three months ended December 31, 2011 was $3.2 million compared to $15.5 million in cost of sales for the same period last year.  Cost of sales as a percentage of revenues was 678% compared to 80% in the fourth quarter of 2010. The prior period does not have any consumer product business reflected as that business only commenced in 2011.

Cost of sales for the twelve months ended December 31, 2011 was $26.4 million compared to $41.4 million for the same period in 2010. This was composed of $19.7 million for the stevia business and $6.7 million for the consumer products business.

For the three months ended December 31, 2011 the cost of sales related to the stevia business was $2.9 million compared to $15.5 million in cost of sales for the same period last year ($12.6 million decrease or 81%). The 81% decrease is due to the lower volume of extract sold compared to the previous year. 

Cost of sales for the three months ended December 31, 2011 for stevia as a percentage of revenues was 1526% compared to 80% in the same period last year. The largest impact on the cost of sales as a percentage of revenue was the fixed non-cash amortization charges in cost of sales that were not sufficiently covered by the amount of revenue generated for the stevia segment and additional charges driven by lower utilization of stevia facilities in the fourth quarter that would ordinarily flow to inventory during periods of higher plant utilization.

For the twelve months ended December 31, 2011 the cost of sales related to the stevia business was $19.7 million compared to $41.4 million in cost of sales for the same period last year ($21.7 million decrease or 52%). The 52% decrease is due to the lower volume of extract sold compared to the previous year. 

Cost of sales for the twelve months ended December 31, 2011 for stevia as a percentage of revenues was 115% compared to 70% in the same period last year. The largest impact on the cost of sales as a percentage of revenue was the fixed non-cash amortization charges in cost of sales that were not sufficiently covered by the amount of revenue generated for the stevia segment and additional charges driven by lower utilization of stevia facilities in the third and fourth quarters that would ordinarily flow to inventory during periods of higher plant utilization. 

For the three months ended December 31, 2011, cost of sales related to the consumer products business was $0.3 million and includes costs associated with bottling the beverage products, supplies and ingredients used to manufacture the beverages, and shipping the products to the different distribution channels. The average cost of sales per bottle increased 10.9% in the fourth quarter compared to the third quarter, as it reflected the addition of the more expensive vitamin enriched waters to the product mix. By product line, the cost of sales for RTD tea products decreased 3.1% while the cost of sales for vitamin enriched waters increased slightly by 1.6%. Packaging costs as a percentage of product costs were lower in the fourth quarter, accounting for 56.3%, although it was still the largest component of product costs. Average OEM charges as a percentage of product costs were down slightly in the fourth quarter compared with the third quarter. AN0C has lower ingredient costs by utilizing GLG stevia extracts relative to the use of sugar. Higher sugar costs have been often cited by the China beverage industry previously as a cost input that was impacting their margins.

For the twelve months ended December 31, 2011, cost of sales related to the consumer products business was $6.7 million.

Gross loss for the three months ended December 31, 2011 was $2.7 million, a decrease from the $3.8 million in gross profit for the comparable period in 2010. The gross profit margin for the three months period ended December 31, 2011 for the Company as a whole was negative 578% compared to 20% for the three months ended December 31, 2010. The main contributors to the negative gross profit were (1) the high fixed non-cash charges that are allocated to cost of sales each period and sales were not sufficient to contribute enough margin to cover these amortized amounts and, (2) additional charges driven by lower utilization of stevia facilities in the quarter that would ordinarily flow to inventory during periods of higher plant utilization.

Gross loss for the twelve months ended December 31, 2011 was $1.6 million compared to a gross profit of $17.6 million for the comparable period in 2010. The gross profit margin decreased to negative 6% for the twelve months ended December 31, 2011 from 30% for the comparable period in 2010. On a disaggregated basis, stevia products had a gross margin of (15%) and the consumer products had a gross margin of 12%. Gross profit for the stevia adjusted for twelve months of capacity charges ($5.1 million) would have been approximately 15% for the period ending December 31, 2011 compared to fourth quarter 2010 gross profit margin of 20%.

For the three months ended December 31, 2011, the Company had a net loss attributable to the Company of $47.6 million compared to a net loss attributable to the Company of $3.2 for same period in 2010. The net change of $44.4 million was driven by: (1) a decrease in gross profit of $6.5 million and (2) an increase in G&A expenses of $3.6 million, (3) an increase in accounts receivable provisions of $6.4 million and (4) an increase in other income and expenses of $29.4 million (including asset impairment charges of $29.7 million). These items were offset by the increase in loss attributable to non-controlling interests of $0.8 million and a decrease in income tax expense of $0.7 million.

For the twelve months ended December 31, 2011, the Company had a net loss attributable to the Company of $90.5 million, a change of $87.4 million over the comparable period in 2010. The increase in net loss was driven by: (1) a decrease in gross profit of $19.1 million, (2) an increase in G&A expenses of $30.3 million mainly associated with marketing and advertising costs for the start-up of its AN0C joint venture and the provision for accounts receivables and (3) other income and expenses of $42.7 million. These items were offset by the increase in loss attributable to non-controlling interests of $4.6 million and a decrease in income tax expense of $0.1 million.

NON-GAAP Financial Measures

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

Segment Information

Stevia business EBITDA for the three months ended December 31, 2011 was negative $3.6 million compared to $3.7 million in the same period last year. This decrease is driven by lower revenues and gross margin during the fourth quarter of 2011 compared to the fourth quarter of 2010. EBITDA for the stevia business for the twelve months ended December 31, 2011 was lower at negative $5.6 million compared to a positive $16.2 million for the comparable period in 2010.  

EBITDA for the AN0C consumer products business was negative $2.4 million for the three months ended December 31, 2011 and negative $17.2 million for the twelve months ended December 31, 2011. EBITDA performance in the fourth quarter reflects the low revenue in the quarter which reflects the end of the peak season of beverage sales for RTD team and vitamin water products. AN0C Management substantially reduced the level of its advertising expenditures in the fourth quarter 2011 to better rationalize its marketing budget and reduce the EBITDA loss in the fourth quarter 2011. Marketing expenses were reduced by approximately $2.6 million (58% lower) compared with the third quarter 2011. The overall EBITDA loss for AN0C was reduced by $3.5 million (57% reduction) from the EBITDA loss incurred in the third quarter 2011.

Forward-looking statements: This press release contains certain information that may constitute "forward-looking statements" and "forward looking information" (collectively, "forward-looking statements") within the meaning of applicable securities laws. Such forward-looking statements include, without limitation, statements evaluating the market, potential demand for stevia and general economic conditions and discussing future-oriented costs and expenditures. 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, 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, 2010. 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.

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.

The GLG Life Tech Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7994