KUNMING, China, May 15 /PRNewswire-Asia-FirstCall/ -- China Shenghuo
Pharmaceutical Holdings, Inc. (NYSE Amex Equities: KUN) ('China Shenghuo' or
the 'Company'), which is engaged in the research, development, manufacture,
and marketing of pharmaceutical, nutritional supplement and cosmetic products
in the People's Republic of China ('PRC'), today reported unaudited financial
results for the first quarter ended March 31, 2009.
First Quarter 2009 Financial Highlights
-- Total revenues increased 23.4% year-over-year to $6.8 million
-- Gross margin rose to 66% from 61.7% in the same period of 2008
-- Net cash provided by operations was $890,299 compared with negative
cash flow of 391,880 in the same period of 2008
Mr. Gui Hua Lan, Chief Executive Officer of China Shenghuo, commented,
'Despite a seasonally slow first quarter, which included the Chinese New Year
holiday in early February, we are pleased with our double-digit top-line
growth and our gross margin expansion, as they reflected our customer growth,
expanding distribution network, and diversified product portfolio. Our
flagship Xuesaitong Soft Capsule and the innovative 12 Ways cosmetics products
continued to produce meaningful growth in a difficult market environment.'
First Quarter 2009 Financial Results
Revenues for the first quarter of 2009 increased 23.4% to $6.8 million
compared to $5.5 million for the same period in 2008. The improvement was
primarily due to increased sales of the Company's main product, Xuesaitong
Soft Capsules, as well as the 12 Ways cosmetics products.
Gross profit for the first quarter of 2009 increased 32% to $4.5 million
over $3.4 million for the same period in 2008. Gross margin for the first
three months of 2009 was 66%, compared with 61.7% for the same period in 2008.
The increase in gross margin was primarily due to the improved sales of both
Xuesaitong and 12 Ways cosmetics products, which carry higher profit margin.
Sales and marketing expenses for the first quarter of 2009 were $6.4
million compared with $1.6 million for the same period of 2008. The Company's
main product has been sold to patients through hospitals developed by sales
representatives, however, the Company believes it is in its best long term
interest to grow its operations in the OTC market which will produce higher
profit margins and has decided to expand into the OTC market in 2009. In
connection with the Company moving its operations towards the OTC market, the
Company has adopted a policy to absorb a significantly higher percentage of
costs incurred by sales representatives than in the past in order to get sales
representatives' cooperation in developing the OTC market. The costs to each
sale to be borne by the Company are being accrued in Selling Expenses.
General and administrative expenses decreased 57.6% to $1 million in the
first quarter of 2009 compared with $2.5 million for the same period in 2008,
primarily due to the decrease in bad debt expenses on accounts receivables and
sales representative advances. Beginning in 2009, however, instead of
advancing sales representatives money to sustain or develop a particular
market, we reimburse those sales representatives selling and marking expenses
when they present proper expense vouchers. The Company believes this provides
better control of its expenses.
Total operating loss for the first quarter of 2009 was $2.9 million
compared with operating loss of $841,050 for the same period of 2008.
Net loss for the first quarter of 2009 was $2.9 million, or $0.15 per
diluted share. This compares to a net loss of $852,660, or $0.04 earnings per
diluted share for the same period of 2008.
Balance Sheet
As of March 31, 2009, the Company's total cash and cash equivalents
amounted to $908,596 as compared with $1.6 million as of December 31, 2008.
Total shareholders' equity amounted to $4.4 million as of March 31, 2009.
Drugs Pipeline
China Shenghuo has a number of drugs currently in phase II clinical trials
with the State Food and Drug Administration (SFDA) for prescription use. The
Company's drug portfolio development strategy mainly focuses on three major
markets - cardio- and cerebro-vascular diseases, peptic ulcer diseases and
general health products.
