Synutra International, Inc (SYUT) has reported a 441.65 percent jump in profit for the quarter ended Sep. 30, 2016. The company has earned $2.76 million, or $0.05 a share in the quarter, compared with $0.51 million, or $0.01 a share for the same period last year.
Revenue during the quarter dropped 5.32 percent to $82.70 million from $87.35 million in the previous year period. Gross margin for the quarter contracted 133 basis points over the previous year period to 45.15 percent. Total expenses were 91.31 percent of quarterly revenues, up from 85.25 percent for the same period last year. That has resulted in a contraction of 606 basis points in operating margin to 8.69 percent.
Operating income for the quarter was $7.18 million, compared with $12.88 million in the previous year period.
Mr. Liang Zhang, chairman and chief executive officer of Synutra, commented, “Our sales in second quarter of fiscal 2017 decreased 5% from the prior year period due to delays at our French project, as distributors reduced order volumes for our domestically produced infant formula products to await delivery of our 100% French-produced infant formula. Despite this challenge in supply chain management, we are glad to see strong positive market acceptance of our ‘made in France’ products, particularly our Super brand series. In addition, we have observed some initial signs of market consolidation after the new infant formula production regulation was announced by the Chinese government in June 2016, and believe that such acceptance also indicates an increased willingness of distributors and mom-and-baby stores to shift more sales to larger manufacturers and brands which can more easily adhere to the new regulations.”
Synutra International, Inc forecasts revenue to be in the range of $450 million to $500 million for fiscal year 2017. For financial year 2017, Synutra International projects net income to be in the range of $10 million to $15 million.
Working capital turns negative
Working capital of Synutra International, Inc has turned negative to $23.33 million on Sep. 30, 2016 from positive $19.41 million on Sep. 30, 2015. Current ratio was at 0.93 as on Sep. 30, 2016, down from 1.06 on Sep. 30, 2015.
Cash conversion cycle (CCC) has decreased to 39 days for the quarter from 125 days for the last year period. Days sales outstanding were almost stable at 22 days for the quarter, when compared with the last year period.
Days inventory outstanding has decreased to 122 days for the quarter compared with 200 days for the previous year period. At the same time, days payable outstanding went up to 106 days for the quarter from 98 for the same period last year.
Debt moves up
Synutra International, Inc has witnessed an increase in total debt over the last one year. It stood at $539.06 million as on Sep. 30, 2016, up 6.23 percent or $31.59 million from $507.47 million on Sep. 30, 2015. Total debt was 67.21 percent of total assets as on Sep. 30, 2016, compared with 68.36 percent on Sep. 30, 2015. Debt to equity ratio was at 3.91 as on Sep. 30, 2016, down from 4.09 as on Sep. 30, 2015. Interest coverage ratio deteriorated to 2.07 for the quarter from 3.07 for the same period last year.
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