China Shenghuo Pharmaceutical Holdings, Inc. Reports Financial Results for the Second Quarter of 2011

Tue Aug 16, 2011 12:32am EDT

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China Shenghuo Pharmaceutical Holdings, Inc. Reports Financial Results for the Second Quarter of 2011

PR Newswire

KUNMING, China, Aug. 16, 2011 /PRNewswire-Asia-FirstCall/ -- China Shenghuo Pharmaceutical Holdings, Inc. (NYSE Alternext US: KUN) ("China Shenghuo" or the "Company"), today reported unaudited financial results for the second quarter ended June 30, 2011.

Second Quarter 2011 Highlights

  • Total revenue increased to $10.9 million for the second quarter of 2011, representing 58% year-over-year growth.
  • Gross margin for the second quarter of 2011 increased to $6.9 million, as compared to approximately $4.4 million for the same period of 2010.
  • Net cash provided by operating activities increased to $2.84 million for the six months ended June 30, 2011 from $1.46 million for the same period of 2010.
  • Net income (loss) attributable to shareholders increased to $104,325 for the second quarter of 2011, as compared to net loss of $31,192 for the same period of 2010.

Second Quarter 2011 Results

Sales: Sales for the three months ended June 30, 2011 was approximately $10.9 million, an increase of approximately $4.0 million, or 58%, from approximately $6.9 million for the three months ended June 30, 2010. The increase in sales was primarily due to the Company’s main product Xuesaitong’s sales increasing in Tianjin City and Yunnan Province as Xuesaitong was listed on the PIC list of Tianjin City since the second quarter in 2010 and the Company strengthened sales promotion in Yunnan Province.

Cost of goods sold: Our cost of sales for the three months ended June 30, 2011 was approximately $4.0 million, an increase of $1.5 million, or 61%, from approximately $2.5 million for the three months ended June 30, 2010. The increase in cost of sales was due to the increase of the sales volume and the purchase price of Sanqi which is the main raw material of our main product Xuesaitong. Although we have started to grow Sanqi, we will not be able to harvest until 2014 because it has a three year growth cycle. In addition, the Zhonghuang Hotel began trial operation since January 2011 which has contributed $0.6 million to the increase of cost of sales.

Gross profit: Our gross profit for the three months ended June 30, 2011 was approximately $6.9 million as compared with approximately $4.4 million for the three months ended June 30, 2010, an increase of $2.5 million, or 57%. Gross profit as a percentage of revenues was approximately 63% for the three months ended June 30, 2011, a decrease of 1% from 64% for the three months ended June 30, 2010. The slightly decrease in gross profit percentage was primarily due to the increase of cost of sales set forth above.

Selling expense: Selling expenses were approximately $4.9 million for the three months ended June 30, 2011, an increase of $1.9 million, or 67%, from approximately $3.0 million for the three months ended June 30, 2010. The primary reason for the increase in selling expenses was due to increase of sales commission to sales representative in line with the sales increment.

General and administrative expense: General and administrative expenses were approximately $1.2 million for the three months ended June 30, 2011, an increase of $0.3 million, or 36%, from approximately $0.9 million for the three months ended June 30, 2010. The increase was primarily due to the increase of the management’s traveling and conference expenses for expanding our sales channel. In addition, Zhonghuang Hotel began trial operation since January 2011 which has contributed $78,100 to the increase of general and administrative expense.

Research and development expense: Research and development expense for the three months ended June 30, 2011 was $144,849, as compared to $175,538 for the three months ended June 30, 2010, a decrease of approximately $30,689. The decrease was primarily due to the expenditures in the second quarter of 2010 for outside experts for trial test for Dencichine amounted to $98,240.

Other expenses: Other expenses were $439,357 for the three months ended June 30, 2011, which consisted of interest expense and non-operating expense, offset by subsidy income, interest income and non-operating income, an increase of $119,508, or 37%, from $319,849 for the three months ended June 30, 2010. The increase was mainly due to more interest expenses occurred as compared the same period in 2010.

Income tax expense: Income tax expense was $12,183 for the three months ended June 30, 2011 as compared to income tax expense of $52,615 for the three months ended June 30, 2010. The tax expense was mainly from medicine segment for the Company and the deferred assets benefit from provisions for inventory.

Net income (loss) attributable to shareholders: Net income increased to $104,325 for the three months ended June 30, 2011 as compared to the net loss of $31,192 for the three months ended June 30, 2010. Offset by the increase in raw material price and the expenses related to the trial operation of Shenghuo Plaza, the increase in net income was primarily due to less operating expenses increment as compared to the sales amount.

About China Shenghuo

Founded in 1995, China Shenghuo is primarily engaged in the research, development, manufacture, and marketing of Sanchi-based medicinal and pharmaceutical, nutritional supplement and cosmetic products. Through its subsidiary, Kunming Shenghuo Pharmaceutical (Group) Co., Ltd., it owns thirty SFDA (State Food and Drug Administration) approved medicines, including the flagship product Xuesaitong Soft Capsules, which is currently being listed in the 2010 Provincial Insurance Catalogue of sixteen provinces around China. At present, China Shenghuo incorporates a sales network of agencies and representatives throughout China, which markets Sanchi-based traditional Chinese medicine to hospitals and drug stores as prescription and OTC drugs primarily for the treatment of cardiovascular, cerebrovascular and peptic ulcer disease. The Company also exports medicinal products to Asian countries such as Indonesia, Singapore, Japan, Malaysia, and Thailand and to European countries such as the United Kingdom, Tajikistan, Russia and Kyrgyzstan.  

With the substantial completion of Shenghuo Plaza at the end of 2010, China Shenghuo entered into a new business - the hotel and hospitality business. Two floors of Shenghuo Plaza are designed to be utilized as 12 Ways Chinese Herbal Beauty Demonstration Center.  The balance of Shenghuo Plaza is used as a business hotel - Zhonghuang Hotel, restaurant and banquet facilities and an entertainment venue.  

China Shenghuo is also expanding into the businesses of wellness tourism.  For more information, please visit http://www.shenghuo.com.cn.

Safe Harbor Statement

This press release may contain certain "forward-looking statements," as defined in the United States Private Securities Litigation Reform Act of 1995, that involve a number of risks and uncertainties. There can be no assurance that such statements will prove to be accurate, and the actual results and future events could differ materially from management's current expectations. Such factors include, but are not limited to, risks of litigation and governmental or other regulatory proceedings arising out of or related to any of the matters described in recent press releases, including arising out of the restatement of the Company's financial statements; the Company's ability to refinance or repay loans received; the Company's uncertain business condition; the Company's continuing ability to satisfy any requirements which may be prescribed by the Exchange for continued listing on the Exchange; risks arising from potential weaknesses or deficiencies in the Company's internal controls over financial reporting; the Company's reliance on one supplier for Sanchi; the possible effect of adverse publicity on the Company's business, including possible contract cancellation; the Company's ability to develop and market new products; the Company's ability to establish and maintain a strong brand; the Company's continued ability to obtain and maintain all certificates, permits and licenses required to open and operate retail specialty counters to offer its cosmetic products and conduct business in China; protection of the Company's intellectual property rights; market acceptance of the Company's products; changes in the laws of the People's Republic of China that affect the Company's operations; cost to the Company of complying with current and future governmental regulations; the impact of any changes in governmental regulations on the Company's operations; general economic conditions; and other factors detailed from time to time in the Company's filings with the United States Securities and Exchange Commission and other regulatory authorities. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



Company Contact:

China Shenghuo Pharmaceutical Holdings, Inc.

Ms. Hongling Fei

Director of Securities Department

+86-871-7282698


Investor Relations Contact:

The Trout Group

Mark Xu

+86-15821996861




CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in USD)





June 30,

December 31,


2011



2010




(Unaudited)




Assets:







Current assets:







  Cash and cash equivalents


$

1,347,393


$

1,669,387

  Accounts and notes receivable, net



15,885,445



11,531,027

  Other receivables, net



4,329,926



4,111,315

  Advances to suppliers



538,593



580,168

  Inventories



2,655,397



2,599,351

  Due from related parties



268,275



190,614

  Current deferred tax assets



1,098,492



833,568

  Other current assets



215,568



208,111

Total current assets



26,339,089



21,723,541








  Property, plant and equipment, net



21,801,751



21,069,139

  Other non-current assets



2,466,924



2,554,193

Total assets


$

50,607,764


$

45,346,873




CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (CONT'D)

(Amounts in USD)





June 30,


December 31,


2011


2010

Liabilities and equity:



(Unaudited)




Current liabilities:







  Accounts payable


$

9,303,869


$

8,964,404

  Other payables and accrued expenses



10,955,786



9,699,857

  Sales representative deposits



5,221,051



4,936,429

  Due to related parties



-



79,864

  Short-term borrowings



5,912,806



5,289,178

  Advances from customers



4,258,431



1,158,649

  Taxes payable and other current liabilities



1,172,635



881,506

  Current portion of long-term borrowings



11,496,384



6,039,833

Total current liabilities



48,320,962



37,049,720

Long-term borrowings



-



6,251,227

Total liabilities



48,320,962



43,300,947

Commitments and contingencies







Equity:







  Common stock, $0.0001 par value, 100,000,000 shares authorized and 19,679,400 shares issued and outstanding, both periods



1,968



1,968

  Additional paid-in capital



6,193,927



6,193,927

  Appropriated retained earnings



147,023



147,023

  Accumulated deficit



(5,736,741)



(5,940,439)

  Accumulated other comprehensive income



1,691,178



1,638,109

Total stockholder's equity



2,297,355



2,040,588

Non-controlling interest



(10,553)



5,338

Total equity



2,286,802



2,045,926

Total Liabilities and equity


$

50,607,764


$

45,346,873




CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(Amounts in USD, except shares)



Three months ended June 30,


Six months ended June 30,


2011


2010


2011


2010


 


 


 


 

Sales

$

10,896,460


$

6,882,007


$

20,338,086


$

14,789,009

Cost of goods sold

 

4,007,216


 

2,488,623


 

7,812,908


 

4,564,976

Gross profit

 

6,889,244


 

4,393,384


 

12,525,178


 

10,224,033

Operating expenses:












Selling expenses


4,946,005



2,968,103



9,022,435



8,019,817

General and administrative expenses


1,241,460



915,189



2,271,675



1,599,448

Research and development expense

 

144,849


 

175,538


 

266,574


 

256,389


 

6,332,314


 

4,058,830


 

11,560,684


 

9,875,654

Income from operations

 

556,930


 

334,554


 

964,494


 

348,379

Other income (expenses):







 




Subsidy income


147,144



7,964



154,742



161,562

Interest and other expense

 

(586,501)


 

(327,813)


 

(900,982)


 

(524,415)


 

(439,357)


 

(319,849)


 

(746,240)


 

(362,853)

Income (loss) before income tax


117,573



14,705



218,254



(14,474)

Income tax expense

 

(12,183)


 

(52,615)


 

(27,163)


 

(22,631)

Net income (loss)


105,390



(37,910)



191,091


 

(37,105)

Net gain (loss) attributable non-controlling interests

 

1,065


 

(6,718)


 

(12,607)


 

(8,268)

Net income (loss) attributable to stockholders

$

104,325


$

(31,192)


$

203,698


$

(28,837)

Comprehensive income (loss):

 





 




Net income (loss)


105,390



(37,910)



191,091



(37,105)

Foreign currency translation adjustment

 

29,991


 

4,583


 

49,785


 

4,914

Comprehensive income (loss):

$

135,381


$

(33,327)


$

240,876


$

(32,191)

Comprehensive income (loss) attributable to non-controlling interests


939



(4,986)



(15,891)



(7,173)

Comprehensive income (loss) attributable to stockholders

$

134,442


$

(28,341)


$

256,767


$

(25,018)

Basic and diluted earnings (loss) per share

$

0.01


$

(0.00)


$

0.01


$

(0.00)

Weighted-average number of shares outstanding-basic and diluted

 

19,679,400


 

19,679,400


 

19,679,400


 

19,679,400



CHINA SHENGHUO PHARMACEUTICAL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in USD)



Six months ended June 30,


2011


2010





Net cash provided by operating activities

$

2,845,831


$

1,461,492

Cash flows from investing activities:






Purchase of long-lived assets


(2,627,767)



(4,196,635)

Proceeds from disposal of property


170



212,373

Net cash used in investing activities


(2,627,597)



(3,984,262)







Cash flows from financing activities:






Proceeds from borrowings


10,934,766



21,382,467

Payments on borrowings


(11,486,507)



(19,510,878)

Net cash (used in) provided by financing activities


(551,741)



1,871,589







Effect of foreign currency fluctuation on cash and cash

equivalents



equivalents equivalents


11,513



2,729

Net decrease in cash and cash equivalents


(321,994)



(648,452)

Cash and cash equivalents at beginning of period


1,669,387



1,986,540

Cash and cash equivalents at end of period

$

1,347,393


$

1,338,088







Supplemental information






Cash paid for interest

$

735,008


$

331,511

Cash paid for income taxes

$

70,616


$

-




SOURCE China Shenghuo Pharmaceutical Holdings, Inc.

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