from GLG Life Tech Corporation (isin : CA3617932015)
GLG Life Tech Corporation Reports 2023 Second Quarter Financial Results
VANCOUVER, BC / ACCESSWIRE / August 14, 2023 / GLG Life Tech Corporation (TSX:GLG) ("GLG" or the "Company"), a global leader in the agricultural and commercial development of high-quality zero-calorie natural sweeteners, announces financial results for the three and six months ended June 30, 2023. The complete set of financial statements and management discussion and analysis are available on SEDAR and on the Company's website at www.glglifetech.com.
FINANCIAL SUMMARY
The Company reported revenues of $2.0 million in the second quarter of 2023, compared to $2.8 million in revenue for the second quarter of 2022. The Company's gross profit margin was unchanged at 32% for the second quarters of both 2022 and 2023.
The Company reported revenues of $3.6 million for the six months ended June 30, 2023, compared to $5.5 million for the same period last year. The Company's gross profit margin decreased by two percentage points to 29% for the period, compared to 31% for the same period last year.
The Company continues its efforts to closely manage its SG&A expenses, lowering these expenses in both the three and six month periods in 2023, compared to the respective prior periods in 2022.
For the three months ended June 30, 2023, the Company had a net loss attributable to the Company's shareholders of $2.7 million, a decrease of $2.8 million or 51% over the comparable period in 2022 ($5.5 million). The Company reported a net loss per share of $0.07 for the second quarter of 2023, compared to a net loss per share of $0.14 for the second quarter of 2022.
For the six months ended June 30, 2023, the Company had a net loss attributable to the Company's shareholders of $9.1 million, a decrease of $0.6 million or 6% over the comparable period in 2022 ($9.7 million). The Company reported a net loss per share of $0.24 for the first six months of 2023, compared to a net loss per share of $0.25 for the same period in 2022.
CORPORATE DEVELOPMENTS
2023 AGM Voting Results
The Company held its Annual and Special General Meeting on June 16, 2023. The shareholders voted in all nominated directors, with favorable votes for each exceeding 99%. Dr. Luke Zhang continues as Chairman of the Board and Chief Executive Officer and Brian Palmieri continues as Vice Chairman of the Board.
Company Outlook
In recent quarters, one of the most critical items that management has focused on and continues to focus on is the development and implementation of plans to stem the losses that the Company has suffered in recent years and to ameliorate the Company's financial position. As a result of those sustained losses, the Company lacks the cash necessary to fully fund the business operations and its strategic product initiatives. The Company continues to manage its cash flows carefully to mitigate risk of insolvency. As a result of these efforts, management has been successful in improving the Company's cash flows. Nevertheless, without an infusion of cash in the months ahead, the Company may not be able to realize its strategic plans and could eventually cease to be a going concern.
To address that cash need, management has negotiated CAD $1 million revolving loan facilities with a third party for working capital purposes. In 2020, management also realized the sale of one of its two idle assets; the sale of the "Runhao" facility resulted in significant debt reduction and better positions the Company to be able to access additional lines of working capital. Management also continues to explore options for the sale or repurposing of its idle "Runyang" primary processing facility in Jiangsu province to further address its cash needs and/or balance sheet.
Another factor that continues to contribute to the Company's financial situation is the competitive price pressure in the stevia market over the last two years that has reduced mainstream "Reb A" products (such as Reb A 80 and Reb A 97) to the lowest price levels in years, although pricing has begun to rise (reflecting the increased cost of raw materials in the most recent harvest). Monk fruit prices have also become highly competitive in the marketplace. To maintain margins at sustainable levels, the Company has focused on improving its production efficiencies, continues to strive for a mix of products that is weighted more heavily on higher margin, specialty products, and has focused more on higher margin direct sales.
The Company's focus on maintaining positive cash flow led the Company to take decisive steps in 2021 and 2022 to reduce its SG&A costs as well as its production costs. Both its North American operations and Chinese operations have significantly reduced SG&A costs. For the last several years, the Company's production capacity has been far greater than its projected order levels as it had sought rapid increases in orders for Reb A products. The Company's aim continues to be to "right-size" its Chinese operations - i.e., to optimize its staffing and production planning to meet the Company's projected production requirements while retaining the ability to accommodate growth in future order volumes - and management made significant progress in this area and continues striving to optimize staffing and production plans. As a result, this has enabled the Company to sell its goods at more competitive and/or more profitable prices although the competitive price pressures remain strong.
The Company continues to explore options to significantly improve its balance sheet and cash flows, whether through restructuring of debt or other opportunities for infusions of cash to address the debt load. Having closed the idle asset sale in 2020 and having successfully implemented right-sizing efforts to manage costs, having entered into the joint venture, and continuing to optimize production efficiencies, costs, and planning, management is proceeding down the best available path to increased financial stability and improved profitability.
SELECTED FINANCIALS
As noted above, the complete set of financial statements and management discussion and analysis for the three and six months ended June 30, 2023, are available on SEDAR and on the Company's website at www.glglifetech.com.
Results from Operations
The following results from operations have been derived from and should be read in conjunction with the Company's annual consolidated financial statements for 2022 and the condensed interim consolidated financial statements for the six-month period ended June 30, 2023.
| 3 Months Ended June 30 | % Change | 6 Months Ended June 30 | % Change | |||||||||||||||||||
In thousands Canadian $, except per share amounts | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||
Revenue | $ | 2,004 | $ | 2,771 | (28) | % | $ | 3,561 | $ | 5,514 | (35) | % | ||||||||||
Cost of Sales | $ | (1,355) | $ | (1,887) | 28 | % | $ | (2,518) | $ | (3,830) | 34 | % | ||||||||||
% of Revenue | (68) | % | (68) | % | 0 | % | (71) | % | (69) | % | (1) | % | ||||||||||
Gross Profit | $ | 650 | $ | 884 | (26) | % | $ | 1,043 | $ | 1,685 | (38) | % | ||||||||||
% of Revenue | 32 | % | 32 | % | 1 | % | 29 | % | 31 | % | (1) | % | ||||||||||
Expenses | $ | (1,020) | $ | (1,031) | (1) | % | $ | (2,052) | $ | (2,115) | (3) | % | ||||||||||
% of Revenue | (51) | % | (37) | % | (14) | % | (58) | % | (38) | % | (20) | % | ||||||||||
Loss from Operations | $ | (370) | $ | (147) | (152) | % | $ | (1,009) | $ | (430) | (135) | % | ||||||||||
% of Revenue | (18) | % | (5) | % | (13) | % | (28) | % | (8) | % | (21) | % | ||||||||||
Other Expenses | $ | (2,350) | $ | (5,335) | 56 | % | $ | (8,160) | $ | (9,336) | 13 | % | ||||||||||
% of Revenue | (117) | % | (193) | % | 75 | % | (229) | % | (169) | % | (60) | % | ||||||||||
Net Loss before Income Taxes | $ | (2,720) | $ | (5,482) | 50 | % | $ | (9,169) | $ | (9,766) | 6 | % | ||||||||||
% of Revenue | (136) | % | (198) | % | 62 | % | (257) | % | (177) | % | (80) | % | ||||||||||
Net Loss | $ | (2,720) | $ | (5,482) | 50 | % | $ | (9,169) | $ | (9,766) | 6 | % | ||||||||||
% of Revenue | (136) | % | (198) | % | 62 | % | (257) | % | (177) | % | (80) | % | ||||||||||
Net Loss Attributable to Non-Controlling Interest (NCI) | $ | (37) | $ | (32) | (16) | % | $ | (78) | $ | (64) | (22) | % | ||||||||||
Net Loss Attributable to GLG | $ | (2,683) | $ | (5,450) | 51 | % | $ | (9,091) | $ | (9,702) | 6 | % | ||||||||||
% of Revenue | (134) | % | (197) | % | 63 | % | (255) | % | (176) | % | (79) | % | ||||||||||
Net Loss per share (LPS, Basic & Diluted) | $ | (0.07) | $ | (0.14) | 51 | % | $ | (0.24) | $ | (0.25) | 5 | % | ||||||||||
Other Comprehensive Income | $ | 7,551 | $ | 1,758 | 330 | % | $ | 7,529 | $ | 2,739 | 175 | % | ||||||||||
% of Revenue | 377 | % | 63 | % | 313 | % | 211 | % | 50 | % | 162 | % | ||||||||||
Comprehensive Net Income (Loss) | $ | 4,831 | $ | (3,724) | 230 | % | $ | (1,640) | $ | (7,027) | 77 | % | ||||||||||
Comprehensive Income (Loss) Attributable to NCI | $ | 51 | $ | (11) | 564 | % | $ | 6 | $ | (32) | 119 | % | ||||||||||
Comprehensive Income (Loss) Attributable to GLG | $ | 4,780 | $ | (3,713) | 229 | % | $ | (1,646) | $ | (6,995) | 76 | % | ||||||||||
% of Revenue | 239 | % | (134) | % | 373 | % | (46) | % | (127) | % | 81 | % | ||||||||||
Revenue
Revenue for the three months ended June 30, 2023, was $2.0 million compared to $2.8 million in revenue for the same period last year. Sales decreased by 28% or $0.8 million for the period ending June 30, 2023, compared to the prior period. The decrease in sales is primarily attributable to decreases in stevia sales both domestically in China and internationally, and to a lesser degree a decrease in monk fruit sales. International sales continue to predominate, making up over 99% of the Company's revenues in the second quarter of 2023 (91% in second quarter of 2022).
Revenue for the six months ended June 30, 2023, was $3.6 million compared to $5.5 million in revenue for the same period last year. Sales decreased by 35% or $2.0 million for the six months ending June 30, 2023, compared to the prior period. The sales decrease of $2.0 million was driven primarily by a decrease in international stevia and monk fruit sales, with an additional decrease in domestic (China) stevia sales contributing to the overall decrease. The decrease in stevia sales was driven in part by a temporary slow-down in orders in the first quarter from one of the Company's largest customers and the reduction in monk fruit sales and other stevia revenues was driven by increasingly competitive market pricing for these products. International sales made up over 99% of the Company's revenues in the first six months of 2023 (90% in the first six months of 2022).
Cost of Sales
For the quarter ended June 30, 2023, the cost of sales was $1.4 million compared to $1.9 million in cost of sales for the same period last year ($0.5 million or 28% decrease). Cost of sales as a percentage of revenues was 68% for the second quarters in both 2022 and 2023.
For the six months ended June 30, 2023, the cost of sales was $2.5 million compared to $3.8 million for the same period last year ($1.3 million or 34% decrease). Cost of sales as a percentage of revenues was 71% for the first six months of 2023, compared to 69% in the comparable period in 2022, an increase of 2 percentage points. The increase in cost of sales as a percentage of revenue for the six months ended June 30, 2023, compared to the prior comparable period, is primarily attributable to an increase in idle capacity charges.
Capacity charges charged to the cost of sales ordinarily would flow to inventory and are a significant component of the cost of sales. Only two of GLG's manufacturing facilities were operating during the first six months of 2023, and capacity charges of $0.4 million were charged to cost of sales (representing 16% of cost of sales) compared to $0.4 million charged to cost of sales in the same period of 2022 (representing 9% of cost of sales).
Gross Profit (Loss)
Gross profit for the three months ended June 30, 2023, was $0.6 million, compared to a gross profit of $0.9 million for the comparable period in 2022. The gross profit margin was 32% in the second quarters of both 2022 and 2023.
Gross profit for the six months ended June 30, 2023, was $1.0 million, compared to a gross profit of $1.7 million for the comparable period in 2022. The gross profit margin was 29% in the first six months of 2023 compared to 31% for the same period in 2022, a decrease of 2 percentage points. This 2 percentage point decrease in gross profit margin for the first six months of 2023, relative to the comparable period in 2022, is primarily attributable to an increase in idle capacity charges.
Selling, General and Administration Expenses
Selling, General and Administration ("SG&A") expenses include sales, marketing, general and administration costs ("G&A"), stock-based compensation, and depreciation and amortization expenses on G&A fixed assets. A breakdown of SG&A expenses into these components is presented below:
| 3 Months Ended June 30 | % Change | 6 Months Ended June 30 | % Change | |||||||||||||||||
In thousands Canadian $ | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||
G&A Expenses | $ | 827 | $ | 863 | (4) | % | $ | 1,656 | $ | 1,676 | (1) | % | ||||||||
Depreciation Expenses | $ | 193 | $ | 168 | 15 | % | $ | 396 | $ | 439 | (10) | % | ||||||||
Total | $ | 1,020 | $ | 1,031 | (1) | % | $ | 2,052 | $ | 2,115 | (3) | % | ||||||||
G&A expenses for the three months ended June 30, 2023, were $0.8 million, a decrease of $nil compared to $0.9 million in the same period in 2022. G&A-related depreciation and amortization expenses for the three months ended June 30, 2023, were $0.2 million compared with $0.2 million for the same quarter of 2022.
G&A expenses for the six months ended June 30, 2023, were $1.7 million, a decrease of $nil compared to $1.7 million in the same period in 2022. G&A-related depreciation and amortization expenses for the six months ended June 30, 2023, were $0.4 million compared with $0.4 million for the same period in 2022.
Net Loss Attributable to the Company
| 3 Months Ended June 30 | % Change | 6 Months Ended June 30 | % Change | |||||||||||||||||||
In thousands Canadian $ | 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||
Net Loss | $ | (2,720) | $ | (5,482) | 50 | % | $ | (9,169) | $ | (9,766) | 6 | % | ||||||||||
Net Loss Attributable to NCI | $ | (37) | $ | (32) | (16) | % | $ | (78) | $ | (64) | (22) | % | ||||||||||
% of Revenue | (2) | % | (1) | % | (1) | % | (2) | % | (1) | % | (1) | % | ||||||||||
Net Loss Attributable to GLG | $ | (2,683) | $ | (5,450) | 51 | % | $ | (9,091) | $ | (9,702) | ||||||||||||