I just finished listening to the CC, was able only to join the Q&A section. Not sure if I got all the answers right but here are a few notes from the CC for now:
- Phase 1 is doing 60mt runrate for calendar year (Dec'10) and 75mt for FY (Mar'11), meaning by 4QFY we may be expecting 18.75mt vs. 15mt past q.
- Phase 2 is progressing smoothly, expected to be completed by Mar'11 and start producing in Q1 of FY'11 (ending June'11).
- Main difference b/w the 2 phases: Phase 1 has larger production lines (end products in larger containers), is dedicated more to larger quantities and simpler formula, mainly for large dairy customers. Phase 2 will have smaller production lines (smaller containers where more strains can be produced and mixed based on custom orders), more selectivity and smaller quantities (probably higher prices too from what it sounds).
- they didnot answer the question (or I couldnt understand the answer) about how many metric tons retail were sold in Q1 which would help to figure out the ASP for retail (maybe they dont want competitors to know exact prices?). But I think they said Pudong will be ramped up to 15mt/yr to serve retail orders, meaning 15/4=3.75mt/q vs. max. 3mt/q currently.
- Q1 we have 38 bulk customers, many potential customers are still testing/trying our products and hopefully will become regular customers soon. We also expect existing customers to increase their order size progressively. We are obviously taking market share from our european competitors.
Some quick comments on E/R:
- 40% sales from bulk means about 10MM bulk sales. Assuming 15 mtons, that translates into an Average Selling Price of only $665/kg. Wow, that's low. Last q the ASP was $1133, the q before ASP was $5900/kg. Looks like they are doing hefty discounts to bulk customers to jumpstart the bulk biz and woo customers away from competition. I had assumed $1133/mt, hence my eps estimate was too high.
- great to see more efficiency and higher margins although one would expect a shift toward more bulk (40/60 now vs. 28/72 just a q ago) would result in lower margins b/c bulk sells for much less than retail, approx. 1:6.
We did 61.8% more sales compared to Q1 last year but non GAAP eps jumped 44.4% in spite of a 27.6% increase of fd shares. Without that share increase (due to the 5.4MM shares issued last year to raise 75MM), the eps would have increased 44.4 + 27.6 = 72%, so a whole 10% more than top line increase if nothing else had changed. That laso in the face of heavy discounts of bulk prices. Excellent job in cutting costs and improving operations.
