Synutra International, Inc. (SYUT) has reported a 58.92 percent plunge in profit for the quarter ended Dec. 31, 2016. The company has earned $4.94 million, or $0.09 a share in the quarter, compared with $12.04 million, or $0.21 a share for the same period last year. Revenue during the quarter went down marginally by 0.19 percent to $109.05 million from $109.26 million in the previous year period. Gross margin for the quarter contracted 1173 basis points over the previous year period to 38.95 percent. Total expenses were 93.68 percent of quarterly revenues, up from 81.11 percent for the same period last year. That has resulted in a contraction of 1257 basis points in operating margin to 6.32 percent.
Operating income for the quarter was $6.89 million, compared with $20.63 million in the previous year period.
Mr. Liang Zhang, chairman and chief executive officer of Synutra, commented, "Despite the intensified competition in the Chinese infant milk formula industry, we were able to maintain our net sales at a consistent level year-over-year with a 1.8% increase in sales of our core Nutritional Food segment. We are pleased to see ongoing strong sales momentum for our ultra-high temperature ("UHT") liquid milk product that we launched under the ‘Dutchcow’ brand in the fourth quarter of fiscal 2016. We were actively involved in both online and offline sales activities, and were pleased that our sales of UHT liquid milk more than tripled in the December quarter when compared to the previous quarter. We believe this product is on its way to becoming a staple in the liquid milk market segment."
For fiscal year 2017, Synutra International, Inc. forecasts revenue to be in the range of $350 million to $400 million.
Working capital turns negative
Working capital of Synutra International, Inc. has turned negative to $85.87 million on Dec. 31, 2016 from positive $33.28 million on Dec. 31, 2015. Current ratio was at 0.78 as on Dec. 31, 2016, down from 1.11 on Dec. 31, 2015. Cash conversion cycle (CCC) has decreased to 33 days for the quarter from 85 days for the last year period. Days sales outstanding went up to 23 days for the quarter compared with 20 days for the same period last year.
Days inventory outstanding has decreased to 89 days for the quarter compared with 154 days for the previous year period. At the same time, days payable outstanding went down to 79 days for the quarter from 90 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 $517.91 million as on Dec. 31, 2016, up 7.61 percent or $36.62 million from $481.29 million on Dec. 31, 2015. Total debt was 63.47 percent of total assets as on Dec. 31, 2016, compared with 63.57 percent on Dec. 31, 2015. Debt to equity ratio was at 3.85 as on Dec. 31, 2016, up from 3.73 as on Dec. 31, 2015. Interest coverage ratio deteriorated to 1.92 for the quarter from 5.01 for the same period last year.
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