KUNMING, China, April 1 /PRNewswire-Asia-FirstCall/ -- China Shenghuo Pharmaceutical Holdings, Inc. (NYSE Amex Equities: KUN) ('China Shenghuo' or the 'Company'), reported financial results for the year ended December 31, 2008.

    Year 2008 Highlights
    -- Total revenue for the year 2008 increased 43.6% to a record $28.69
       million
    -- Gross margin for the year 2008 was 73.2%
    -- Cash provided by operating activities was $1.95 million

'I am pleased to report that China Shenghuo continued to deliver strong revenue growth during 2008,' commented Mr. Gui Hua Lan, CEO of China Shenghuo. 'Our flagship product, Xuesaitong Soft Capsule, again reported strong year-over-year growth, as its sales grew almost 35% in 2008. We continued to expand the product's geographic footprint in China, as we leveraged the strength of our growing internal sales and marketing capabilities. We are also encouraged by the strong performance from our 12Ways cosmetics products and OTC drugs. As we enter 2009, we expect our flagship Xuesaitong Soft Capsule product to continue as a major generator of our overall sales. However, we believe that our 12Ways cosmetics will be a growing contributor to revenue and a key long-term growth driver for the Company.'

Total revenue for the full year 2008 was a record $28.69 million, representing a 43.6% increase from $19.97 million for the 2007 year. The sales growth was largely due to higher sales of the Company's flagship product, Xuesaitong Soft Capsule, as well as an increase in the sale of the 12Ways cosmetic products by our expanding business to more cities and provinces. Specifically, the increase is due to (i) an increase of $6.50 million in revenue from our main product, Xuesaitong Soft Capsules and two other prescription drugs; (ii) an increase of $0.68 million in revenue from other pharmaceuticals and export to other countries; (iii) an increase of $0.95 million in revenue from our 12Ways cosmetic products; (iv) fluctuations in foreign exchange rates and other retail sales of $0.5 million. Xuesaitong Soft Capsule accounted for approximately 87% of the total net revenues in 2008. It is expected that revenues from the 12Ways cosmetics products will contribute a bigger portion of the total revenue going forward.

Our costs of products sold for the year ended December 31, 2008 was approximately $7.69 million, an increase of approximately $2.65 million from approximately $5.04 million for the year ended December 31, 2007. The increase in the cost of products sold is due to the increase in sales of our products and a slight increase in production costs per unit in 2008 compared to 2007, because of the increase in the price of our main raw material and other ingredients.

Gross profit for 2008 was $20.99 million, an increase of 40.6% from the $14.94 million a year ago. Gross profit margin was 73.2%, a slight decline from 74.8% for the 2007 year. The gross margin decline was mainly due to higher production costs as the price of raw materials increased during the year.

Selling expenses for the year ended December 31, 2008 were $13.27 million, an increase of $6.43 million when compared with 2007. Selling expenses accounted for 46.3% of total revenue in 2008, as compared to 34.2% of total revenue in 2007. The primary reasons for the increase are (i) an increase of $4.20 million of commissions that we paid to sales representatives and sales offices in an effort to stimulate the sales in existing and new markets; (ii) an increase of $1.80 million in advertising of new products, particularly in our cosmetics line; and (iii) the impact of the fluctuation in foreign exchange rate and other expenses of $0.40 million.

General and administrative ('G&A') expenses for 2008 were $10.86 million, an increase of $4.98 million, when compared with $5.88 million for the 2007 year. Overall, G&A expenses accounted for 37.8% of total revenue in 2008 as compared to 29.4% in 2007. The increase was primarily a result of an increase in legal, auditing and other expenses related to being a public company and an increase in management expenses due to the expansion of business. In 2008, we incurred one-time, additional auditing and legal fees because of the internal investigation conducted by the Audit Committee of the Company regarding the accounting errors identified by our independent auditor, resulting in the restatement of our financial statements for fiscal year 2007 and the first fiscal quarter of 2008.

The operating loss for 2008 was $3.47 million, as compared with operating income of $1.94 million in the prior year.

For the 2008 year, the Company recorded a net loss of $4.64 million, and a fully diluted loss per share of $0.24, compared to net income of $1.72 million, and fully diluted earnings per share of $0.09 in 2007.