VANCOUVER, BC / ACCESSWIRE / November 14, 2019 / 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 nine months ended September 30, 2019. 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.
The Company reported revenues of $2.4 million in the third quarter of 2019, a $0.1 million decrease compared to the third quarter of 2018 ($2.5 million). However, the Company reported an increase of seventeen percentage points in gross profit margin for the third quarter 2019 (19%), relative to the same period in 2018 (2%).
The Company reported revenues of $7.2 million in the first nine months of 2019, a $5.6 million decrease compared to the comparable period in 2018 ($12.8 million). However, the Company reported an increase of eight percentage points in gross profit margin for the first nine months of 2019 (19%), relative to the same period in 2018 (11%).
The improvement in gross profit margin was driven by a change in mix of products sold, with a greater percentage of sales of higher-margin stevia products, and improvements in cost management and production efficiency.
The Company continues to closely manage its SG&A expenses, resulting in reduced G&A expenses in both the three- and nine-month periods of 2019 relative to the same periods in 2018.
For the three months ended September 30, 2019, the Company had a net loss attributable to the Company's shareholders of $3.9 million, an increase of $1.4 million or 56% over the comparable period in 2018 ($2.5 million). The Company reported a net loss per share of $0.10 for the third quarter 2019, a $0.04 increase year-over-year.
For the nine months ended September 30, 2019, the Company had a net loss attributable to the Company's shareholders of $11.5 million, an increase of $0.2 million or 2% over the comparable period in 2018 ($11.3 million). The Company reported a net loss per share of $0.30 for the first nine months of both 2019, which was the same net loss per share as for the first nine months of 2018.
New Executive Management Team
Earlier this year, under the guidance of the Company's Board of Directors, including its Chairman and Chief Executive Officer, Dr. Luke Zhang, the Company formed a new executive management team to help the Company improve its financial position, develop new strategic initiatives, and implement best practices in corporate governance, financial planning and analysis, and sales and operations planning.
On January 2, 2019, the Company announced that it had hired one of its Directors, Mr. Paul Block, to serve as President of the Company. Mr. Block assumed that role when the former President, Mr. Brian Meadows, resigned from that role. At that time, the Company also announced that it had promoted Mr. Simon Springett to Chief Operating Officer of the Company. On April 11, 2019, the Company announced that it had hired Mr. Eric Finnsson to serve as Chief Financial Officer of the Company. Together, Dr. Zhang, Mr. Block, Mr. Springett, and Mr. Finnsson make up the Company's executive management team.
One of the most critical items that management is addressing 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 is managing its cash flows carefully to mitigate risk of insolvency. Management has been successful in improving the Company's cash outlook during the third quarter, compared to earlier in the year. 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 prioritized the sale of its idle assets to generate cash. This will also significantly improve the Company's balance sheet. Management expects that it will close on the sale of its idle Qingdao 'Runhao' secondary purification facility in the first half of 2020, although there is uncertainty as to that timing as well as to the final closing of the deal. Upon closing, Management expects that the Company will retain some of the proceeds from that sale to help fund its operations while the remaining proceeds will extinguish a significant portion of the debt held by China Cinda Assets Management (which owns 98% of the Company's Chinese bank debt). Management is also evaluating options for the sale of its idle 'Runyang' primary processing facility in Jiangsu province to further address those same goals.
Another factor contributing to the Company's financial situation is the competitive price pressure in the stevia market over the last year that has reduced mainstream 'Reb A' products (such as Reb A 80 and Reb A 97) to the lowest price levels in years. While these products have historically formed the core of the Company's product sales, the margins on sales of these products have grown increasingly slim. To address this, the Company is taking a three-pronged approach.
First, the Company has taken decisive steps to reduce its SG&A costs as well as its production costs. Its North American operations have already reduced SG&A costs and the Company is in the process of eliminating non-essential costs in its Chinese operations. 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 goal is now 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. Management expects that this will enable the Company to sell its goods at more competitive and/or more profitable prices to secure additional order volumes and/or retain additional margin.
Second, the Company is increasing its focus on specialty stevia products, relative to its Reb A products. These specialty products are more differentiated than Reb A products and can bring more revenue opportunities and more meaningful margin contributions to the Company's bottom line. The Company is also progressing well on implementing a new line of business in the sweetener space distinct from its bulk stevia sales that has the potential to significantly increase the Company's revenues and margins.
Third, the Company is exploring options to enter the CBD market, where it could leverage its production expertise and equipment towards an investment that would jump start its ability to quickly begin producing high-quality low-cost CBD products. While it does not expect to begin any CBD operations in 2019, it is anticipating significant revenues and margins for the second half of 2020 and beyond. Management continues to work on securing the necessary funding to close on this investment.
While the Company continues to face substantial risks and 2019 remains a pivotal year for the Company, management remains optimistic about the future opportunities for the Company. With the expected land sale heading towards closing, right-sizing efforts underway, the optimization of production efficiencies, costs, and planning, and the Company's refocused product strategies, management is proceeding down the best available path to increased financial stability and profitability.
Finalization of Plan To Improve the Company's Capital Structure
On September 9, 2019, the Company announced a newly signed agreement with its primary debtholder, China Cinda Assets Management Corporation Anhui Branch ('Cinda'), through which the Company expects to greatly reduce its Chinese bank debt.
In line with the Company's restructuring goals, the Company has developed a plan to improve its capital structure, achieve major reductions in its debt load, and improve its working capital resources. Two key components of this plan are the reduction of its Chinese bank debt and the sale of assets not essential to the Company's business plans.
Through extensive negotiations with Cinda, GLG and Cinda have signed an agreement that is expected to result in a 78% reduction of the Company's Chinese bank debt, which is approximately CAD 99 million (RMB equivalent). Under the agreement, the Company will complete a schedule of payments over a two-year period totaling approximately CAD 51 million, which will then result in the waiver of an additional approximately CAD 25 million in principal and interest owed to Cinda.
Further, as GLG, Cinda, and an interested buyer have jointly been finalizing contracts for the sale of GLG's 'Runhao' facility (buildings and land use rights) to the buyer, Cinda has agreed to defer commencement of the two-year pay schedule until the sale of Runhao is consummated. This sale will both facilitate GLG's payments under the contract with Cinda and enable GLG to optimize its production costs through the elimination of unneeded idle capacity.
Through this collaboration with Cinda and the resulting improvements to GLG's capital structure, the Company will have more financial flexibility to improve working capital and fuel the growth of premium sweetener products.
Additionally, the Company is presently negotiating with Cinda to resolve the 22% remainder of the outstanding debt. The Company expects to reach a favorable resolution with Cinda on that remaining debt.
2019 AGM Voting Results
The Company held its Annual General Meeting on June 27, 2019, in Vancouver, B.C. 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. Mr. Simon Springett joins the Board for the first time, replacing Mr. He Fangzhen, who, after serving for many years, opted not to seek a Board position this year.
As noted above, the complete set of financial statements and management discussion and analysis for the three and nine months ended September 30, 2019, 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 2018 and the condensed interim consolidated financial statements for the nine-month period ended September 30, 2019.