China Shenghuo Pharmaceutical Holdings, Inc. (AMEX: KUN) released its 2007 financial statement last week, reporting that its net earnings were $4 million on sales of $20 million. The revenue figure was virtually identical with the 2006 number, though earnings were up from $3.5 million. However, the report was lower than expected because earlier this year, as it announced its first-half results, China Shenghuo said it expected revenues to hit $25 million for full-year 2007.

The company said that it instituted stricter credit policies in the second half of 2007, and limited its sales and marketing efforts to 80 distributors with strong financial reputations, moves that kept revenues from increasing. But it also raised prices for its products and increased its production efficiency, which offset the effects of the lower volume,

The company said that 90% of its revenues came from Xuesaitong Soft Capsules, a traditional Chinese medicine that increases blood circulation.

China Shenghuo said the SFDA gave approval in January to Tian Xin Soft Capsules, an OTC nutritional supplement that, like Xuesaitong Soft Capsules, is based on the Sanchi root. The company has also begun a Phase III clinical trial for Wei Dingkang Soft Capsules, a traditional Chinese medicine that treats peptic ulcer disease by inhibiting the growth of helicobacter pylori.

The company expects its financial performance to improve in 2008. It called for revenues to fall in a range between $27.0 million and $30.0 million and net income to be between $5.0 million and $6.5 million.

Disclosure: none.