Shineco, Inc. Reports Third Quarter of 2018 Financial Results
BEIJING, May 17, 2018 /PRNewswire/ -- Shineco, Inc. ("Shineco" or the "Company"; NASDAQ: TYHT), a producer and distributor of Chinese herbal medicines, organic agricultural produce, specialized textiles, and other health and well-being focused plant-based products in China, announced today its financial results for the third quarter ended March 31, 2018.
Mr. Yuying Zhang, Chairman and Chief Executive Officer of Shineco, Inc., commented, "We are delighted that our increased capital spending in 2017 has translated into increased profitability in 2018. Our business in Xinjiang factory has turned a profit, and our sales in Shandong have remained stable. This is reflected in our financial results. Shineco's gross profit had increased by 102% to $5.26 million, our operating margin had increased by 8.4 percentage points to 29.4%, and our gross margin had increased by 6.7 percentage points to 39.4% compared to the same period of last year."
Mr. Zhang concluded, "The market's response to our Luobuma product line has been immensely positive, as reflected by an impressive sales increase of 388.6% to $5.48 million from $1.12 million from the same period of last year. We are pleased with the recognition from our clients, as we continue to innovate and expand in the future."
Third Quarter of 2018 Financial Highlights
For the Three Months Ended March 31 ----------------------------------- ($ millions, except per share data) 2018 2017 % Change ---- ---- -------- Revenue 13.34 7.94 68.0% Luobuma products 5.48 1.12 388.6% Chinese medicinal herbal products 3.30 3.05 8.3% Other agricultural products 4.56 3.77 20.9% Gross profit 5.26 2.60 102.2% Gross margin 39.4% 32.8% 6.7% Operating income 3.92 1.67 135.0% Operating margin 29.4% 21.0% 8.4% Net income attributable to Shineco 4.55 1.92 136.8% EPS 0.21 0.09 135.2% ---- ---- -----
- Revenues increased by 68.0% to $13.34 million for the three months ended March 31, 2018 from $7.94 million for the same period last year.
- Gross profit increased by 102.2% to $5.26 million for the three months ended March 31, 2018 from $2.60 million for the same period last year. Gross margin increased by 6.7 percentage points to 39.4% from 32.8% for the same period of last year.
- Net income attributable to Shineco increased by 136.8% to $4.55 million, or $0.21 per basic and diluted share, for the three months ended March 31, 2018 from $1.92 million, or $0.09 per basic and diluted share, for the same period last year. The increases in net income and earnings per share were primarily due to an increase in gross profit, partially offset by an increase in general and administrative expenses.
Third Quarter of 2018 Financial Results
Revenues
Revenues for the three months ended March 31, 2018 increased by $5.40 million, or 68.0%, to $13.34 million from $7.94 million for the same period of last year, mainly due to increased sales of all products.
For the Three Months Ended March 31 ----------------------------------- 2018 2017 ---- ---- ($ millions) Revenues COGS Gross Revenues COGS Gross Margin Margin ------ ------ Luobuma products 5.48 2.36 56.9% 1.12 0.57 49.2% Chinese medicinal herbal products 3.30 2.56 22.0% 3.05 2.28 24.7% Other agricultural products 4.56 3.15 31.0% 3.77 2.47 34.4% Business and sales related taxes - 0.01 - - 0.02 - Total 13.34 8.08 39.4% 7.94 5.34 32.8% ----- ---- ---- ---- ---- ----
Revenues from Luobuma products increased by $4.36 million, or 388.6%, to $5.48 million for the three months ended March 31, 2018 from $1.12 million for the same period of last year, mainly due to establishment of new subsidiary, Xinjiang Taihe, which generated revenue of $5,210,768.
Revenues from Chinese medicinal herbal products increased by $0.25 million, or 8.3%, to $3.30 million for the three months ended March 31, 2018 from $3.05 million for the same period of last year. The increase was primarily due to more fulfilled sales orders from customers for the three months ended March 31, 2018 than the same period in 2017.
Revenues from other agricultural products increased by $0.79 million, or 20.9%, to $4.56 million for the three months ended March 31, 2018 from $3.77 million for the same period of last year. The sales of other agricultural products were mainly derived from sales of yew trees and our storage services. The increase was mainly due to the increase in sales volume of yew trees since the public realized the air purification function of the yew trees.
Gross profit and Gross Margin
Total cost of goods sold increased by $2.74 million, or 51.3%, to $8.08 million for the three months ended March 31, 2018 from $5.34 million for the same period of last year. Gross profit increased by $2.66 million, or 102.2%, to $5.26 million for the three months ended March 31, 2018 from $2.60 million for the same period of last year. Overall gross margin increased by 6.7 percentage points to 39.4% for the three months ended March 31, 2018, compared to 32.8% for the same period of last year.
Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 56.9%, 22.0%, and 31.0%, respectively, for the three months ended March 31, 2018. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 49.2%, 24.7%, and 34.4%, respectively, for the same period of last year.
Operating income
Selling expenses increased by $0.08 million, or 27.4%, to $0.39 million for the three months ended March 31, 2018 from $0.30 million for the same period of last year, primarily due to the acquisition of a new subsidiary, Tianjin Tajite, in October 2017. The increase in selling and distribution expenses was also a result of increased promotion expenses as the Company enhanced its online sales promotions, partially offset by decreased rent expense of warehouse and salary expenses due to more effective cost control during the three months ended March 31, 2018 compared to the same period of 2017. General and administrative expenses increased by $0.33 million, or 51.5%, to $0.96 million for the three months ended March 31, 2018 from $0.63 million for the same period of last year. The increase in general and administrative expenses was primarily due to the incorporation and acquisition of new subsidiaries, Tiankunrunze in last quarter of fiscal year 2017, and Xinjiang Taihe and Tianjin Tajite in fiscal year 2018. As a result, total operating expenses increased by $0.41 million, or 43.6%, to $1.34 million for the three months ended March 31, 2018 from $0.94 million for the same period of last year.
Operating income increased by $2.25 million, or 135.0%, to $3.92 million for the three months ended March 31, 2018 from $1.67 million for the same period of last year. Operating margin was 29.4% for the three months ended March 31, 2018, compared to 21.0% for the same period of last year.
Net income
Net income increased by $2.55 million, or 130.4%, to $4.51 million for the three months ended March 31, 2018 from $1.96 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the three months ended March 31, 2018 was $4.55 million, or $0.21 per basic and diluted share. This compared to net income attributable to common shareholders of $1.92 million, $0.09 per basic and diluted share, for the same period of last year.
Nine Months Ended March 31, 2018 Financial Results
For the Nine Months Ended March 31 ---------------------------------- ($ millions, except per share data) 2018 2017 % Change ---- ---- -------- Revenue 35.28 25.53 38.2% Luobuma products 10.41 2.77 276.0% Chinese medicinal herbal products 10.23 9.73 5.2% Other agricultural products 14.64 13.04 12.3% Gross profit 12.17 8.47 43.6% Gross margin 34.5% 33.2% 1.3% Operating income 8.11 5.25 54.4% Operating margin 23.0% 20.6% 2.4% Net income attributable to Shineco 9.41 6.12 53.7% EPS 0.45 0.30 49.3% ---- ---- ----
Revenues
Revenues for the nine months ended March 31, 2018 increased by $9.75 million, or 38.2%, to $35.28 million from $25.53 million for the same period of last year, mainly due to increased sales of all products.
For the Nine Months Ended March 31 ---------------------------------- 2018 2017 ---- ---- ($ millions) Revenues COGS Gross Revenues COGS Gross Margin Margin ------ ------ Luobuma products 10.41 4.81 53.7% 2.77 1.37 50.0% Chinese medicinal herbal products 10.23 7.89 22.5% 9.73 7.20 25.6% Other agricultural products 14.64 10.36 29.2% 13.04 8.44 35.3% Business and sales related taxes - 0.06 - - 0.05 - Total 35.28 23.11 34.5% 25.53 17.06 33.2% ----- ----- ---- ----- ----- ----
Revenues from Luobuma products increased by $7.64 million, or 276.0%, to $10.41 million for the nine months ended March 31, 2018 from $2.77 million for the same period of last year, mainly due to revenue generated by a new subsidiary, Xinjiang Taihe, of US$ 8,145,196. Moreover, the increase of revenue from this segment was due to increased sales volume of our health awareness related products. The Company also enhanced online sales promotions during the nine months ended March 31, 2018, which contributed to more sales revenue overall.
Revenues from Chinese medicinal herbal products increased by $0.51 million, or 5.2%, to $10.23 million for the nine months ended March 31, 2018 from $9.73 million for the same period of last year. The increase was primarily due to more fulfilled sales orders from customers for the nine months ended March 31, 2018 than the same period in 2017.
Revenues from other agricultural products increased by $1.60 million, or 12.3%, to $14.64 million for the nine months ended March 31, 2018 from $13.04 million for the same period of last year. The increase was mainly attributable to the increase in sales volume of yew trees since the public realized the air purification function of the yew trees.
Gross profit and Gross Margin
Total cost of goods sold increased by $6.06 million, or 35.5%, to $23.11 million for the nine months ended March 31, 2018 from $17.06 million for the same period of last year. Gross profit increased by $3.70 million, or 43.6%, to $12.17 million for the nine months ended March 31, 2018 from $8.47 million for the same period of last year. Overall gross margin increased by 1.3 percentage points to 34.5% for the nine months ended March 31, 2018, compared to 33.2% for the same period of last year.
Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 53.7%, 22.5%, and 29.2%, respectively, for the nine months ended March 31, 2018. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 50.0%, 25.6%, and 35.3%, respectively, for the same period of last year.
Operating income
Selling expenses increased by $0.05 million, or 3.9%, to $1.23 million for the nine months ended March 31, 2018 from $1.19 million for the same period of last year, primarily due to the acquisition of a new subsidiary, Tianjin Tajite, in October 2017. The increase in selling and distribution expenses was also a result of increased promotion expenses as the Company enhanced its online sales promotions, partially offset by decreased rent expense of warehouse and salary expenses due to more effective cost control during the nine months ended March 31, 2018 compared to the same period of 2017. General and administrative expenses increased by $0.79 million, or 39.0%, to $2.82 million for the nine months ended March 31, 2018 from $2.03 million for the same period of last year. The increase in general and administrative expenses was primarily attributable to the incorporation and acquisition of new subsidiaries, Tiankunrunze in second quarter of fiscal year 2017, and Xinjiang Taihe and Tianjin Tajite in fiscal year 2018. The increase in general and administrative expenses was also a result of increased professional service fees, such as attorney's fees, consulting fees and auditing fees. As a result, total operating expenses increased by $0.84 million, or 26.0%, to $4.05 million for the nine months ended March 31, 2018 from $3.22 million for the same period of last year.
Operating income increased by $2.86 million, or 54.4%, to $8.11 million for the nine months ended March 31, 2018 from $5.25 million for the same period of last year. Operating margin was 23.0% for the nine months ended March 31, 2018, compared to 20.6% for the same period of last year.
Net income
Net income increased by $3.12 million, or 50.0%, to $9.35 million for the nine months ended March 31, 2018 from $6.23 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the nine months ended March 31, 2018 was $9.41 million, or $0.45 per basic and diluted share. This compared to net income attributable to common shareholders of $6.12 million, $0.30 per basic and diluted share, for the same period of last year.
Financial Condition
As of March 31, 2018, the Company had cash and cash equivalents of $28.43 million, compared to $23.15 million as of June 30, 2017. Net cash used in operating activities was $5.34 million for the nine months ended March 31, 2018, compared to net cash used in operating activities of $1.38 million for the same period of last year. Net cash used in investing activities was $0.90 million for the nine months ended March 31, 2018, compared to $1.69 million for the same period of last year. Net cash used in financing activities was $0.45 million for the nine months ended March 31, 2018, compared to net cash provided by financing activities of $5.60 million for the same period of last year.
About Shineco, Inc.
Incorporated in August 1997 and headquartered in Beijing, China, Shineco, Inc. ("Shineco" or the "Company") is a Delaware holding company that uses its subsidiaries' and variable interest entities' vertically- and horizontally-integrated production, distribution and sales channels to provide health and well-being focused plant-based products in China. Utilizing modern engineering technologies and biotechnologies, Shineco produces, among other products, Chinese herbal medicines, organic agricultural produce and specialized textiles. For more information about the Company, please visit www.shinecobiotech.com.
Forward-Looking Statements
This press release contains information about Shineco's view of its future expectations, plans and prospects that constitute forward-looking statements. Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors including, but not limited to, risks and uncertainties associated with its ability to raise additional funding, its ability to maintain and grow its business, variability of operating results, its ability to maintain and enhance its brand, its development and introduction of new products and services, the successful integration of acquired companies, technologies and assets into its portfolio of products and services, marketing and other business development initiatives, competition in the industry, general government regulation, economic conditions, dependence on key personnel, the ability to attract, hire and retain personnel who possess the technical skills and experience necessary to meet the requirements of its clients, and its ability to protect its intellectual property. Shineco encourages you to review other factors that may affect its future results in Shineco's registration statement and in its other filings with the Securities and Exchange Commission.
For more information, please contact:
Tina Xiao
Ascent Investor Relations LLC
Phone: +1-917-609-0333
Email: tina.xiao@ascent-ir.com
SHINECO, INC. CONDENSED CONSOLIDATED BALANCE SHEETS March 31, June 30, 2018 2017 ---- ---- (Unaudited) ASSETS CURRENT ASSETS: Cash $28,432,209 $23,154,551 Accounts receivable, net 24,864,469 14,480,004 Due from related parties 409,193 448,833 Inventories 2,765,143 2,346,273 Advances to suppliers, net 3,582,001 2,396,123 Deferred issuance cost 434,000 - Other current assets 818,934 1,900,143 ------- --------- TOTAL CURRENT ASSETS 61,305,949 44,725,927 Property and equipment, net 12,463,088 10,320,396 Land use right, net of accumulated amortization 1,426,571 1,346,631 Investments 6,703,975 5,695,080 Deposit for business acquisition 128,967 2,065,686 Distribution rights 1,175,033 - Long-term deposit and other noncurrent assets 121,494 112,883 Prepaid leases 3,706,730 3,784,533 Deferred tax assets - 233,834 Goodwill 2,230,683 - --------- --- TOTAL ASSETS $89,262,490 $68,284,970 =========== =========== LIABILITIES AND EQUITY CURRENT LIABILITIES: Short-term loans $2,481,156 $2,663,628 Accounts payable 3,242,373 158,068 Advances from customers 6,811 5,439 Due to related parties 206,885 257,880 Other payables and accrued expenses 2,181,904 337,107 Taxes payable 2,385,329 1,608,926 --------- --------- TOTAL CURRENT LIABILITIES 10,504,458 5,031,048 Deferred tax liability 4,229 - ----- --- TOTAL LIABILITIES 10,508,687 5,031,048 ---------- --------- Commitments and contingencies - - EQUITY: Common stock; par value $0.001, 100,000,000 shares authorized; 21,234,072 and 21,034,072 shares issued and outstanding at March 31, 2018 and June 30, 2017 21,234 21,034 Additional paid-in capital 23,171,102 22,737,302 Statutory reserve 4,074,570 3,484,449 Retained earnings 47,880,159 39,064,743 Accumulated other comprehensive loss 2,489,677 (3,140,982) --------- ---------- Total Stockholders' equity of Shineco, Inc. 77,202,742 62,166,546 Non-controlling interest 1,117,061 1,087,376 --------- --------- TOTAL EQUITY 78,319,803 63,253,922 ---------- ---------- TOTAL LIABILITIES AND EQUITY $89,262,490 $68,284,970 =========== ===========
SHINECO, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) For the Nine Months For the Three Months Ended March 31, Ended March 31, --------------- --------------- 2018 2017 2018 2017 ---- ---- ---- ---- REVENUE $35,282,977 $25,531,313 $13,341,281 $7,941,583 ----------- ----------- ----------- ---------- COST OF REVENUE Cost of product and services 23,059,329 17,007,048 8,065,117 5,319,742 Business and sales related tax 55,624 53,228 14,287 19,264 ------ ------ ------ ------ Total cost of revenue 23,114,953 17,060,276 8,079,404 5,339,006 ---------- ---------- --------- --------- GROSS PROFIT 12,168,024 8,471,037 5,261,877 2,602,577 ---------- --------- --------- --------- OPERATING EXPENSES General and administrative expenses 2,820,689 2,029,981 956,765 631,640 Selling expenses 1,232,713 1,186,536 387,494 304,182 --------- --------- ------- ------- Total operating expenses 4,053,402 3,216,517 1,344,259 935,822 --------- --------- --------- ------- INCOME FROM OPERATIONS 8,114,622 5,254,520 3,917,618 1,666,755 --------- --------- --------- --------- OTHER INCOME Income from equity method investments 703,453 699,380 352,801 297,612 Purchase rebate income 1,191,011 846,297 411,076 253,669 Other income 220,270 253,196 80,295 93,888 Interest income (expense), net (41,684) 15,124 (10,360) (25,414) ------- ------ ------- ------- Total other income 2,073,050 1,813,997 833,812 619,755 --------- --------- ------- ------- INCOME BEFORE PROVISION FOR INCOME TAXES 10,187,672 7,068,517 4,751,430 2,286,510 PROVISION FOR INCOME TAXES 834,647 833,661 239,612 328,274 ------- ------- ------- ------- NET INCOME 9,353,025 6,234,856 4,511,818 1,958,236 Less: net income (loss) attributable to non-controlling interest (52,512) 116,006 (40,084) 35,829 ------- ------- ------- ------ NET INCOME ATTRIBUTABLE TO SHINECO, INC. $9,405,537 $6,118,850 $4,551,902 $1,922,407 ========== ========== ========== ========== COMPREHENSIVE INCOME Net income $9,353,025 $6,234,856 $4,511,818 $1,958,236 Other comprehensive income (loss): foreign currency translation gain (loss) 5,714,317 (1,985,492) 2,683,536 528,683 --------- ---------- --------- ------- Total comprehensive income 15,067,342 4,249,364 7,195,354 2,486,919 Less: comprehensive income attributable to non-controlling interest 31,146 80,161 (1,249) 43,720 ------ ------ ------ ------ COMPREHENSIVE INCOME ATTRIBUTABLE TO SHINECO, INC. $15,036,196 $4,169,203 $7,196,603 $2,443,199 =========== ========== ========== ========== Weighted average number of shares basic and diluted 21,080,787 20,477,598 21,176,294 21,034,072 ========== ========== ========== ========== Basic and diluted earnings per common share $0.45 $0.30 $0.21 $0.09 ===== ===== ===== =====
SHINECO, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended March 31, --------- 2018 2017 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $9,353,025 $6,234,856 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 489,835 445,037 Loss from disposal of property and equipment 5,520 - Bad debt expense 47,497 147,770 Increase in inventory reserve 153,029 45,419 Deferred tax (benefit) provision (35,677) 9,790 Income from equity method investments (703,452) (699,380) Interest income from loans to related parties - (86,585) Changes in operating assets and liabilities: Accounts receivable (8,876,896) (7,744,632) Advances to suppliers (939,882) (929,907) Inventories (315,834) 2,613,094 Other receivables 259,946 (864,944) Prepaid expense and other assets 233,107 (192,464) Due from related parties 125,501 361,287 Prepaid leases 361,665 351,480 Accounts payable 2,945,920 185,693 Advances from customers (81,157) 26,247 Other payables 1,716,955 (1,519,339) Taxes payable 604,558 232,390 ------- ------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 5,343,660 (1,384,188) --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of property and equipment (1,721,647) (41,016) Proceeds from disposal of property and equipment 603 - Payment for construction in progress (5,843) - Repayments (advances to) of loans from third parties 831,453 (506,452) Loan advances to related party (53,443) - Repayments of loans from related parties - 567,246 Income received from investments in unconsolidated entities 152,694 551,933 Deposit for business acquisition (123,682) (2,060,548) Deposit for potential investment - (200,000) Cash of subsidiary acquired 23,153 - ------ --- NET CASH (USED IN) INVESTING ACTIVITIES (896,712) (1,688,837) -------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term loans 2,443,100 2,680,184 Repayment of short-term loans (2,820,126) (2,406,426) Stock issuance cost payable - 843,844 Proceeds from initial public offering, net of offering costs - 4,550,705 Repayments of advances from related parties (68,465) (68,984) ------- ------- NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (445,491) 5,599,323 -------- --------- EFFECT OF EXCHANGE RATE CHANGE ON CASH 1,276,201 (861,050) --------- -------- NET INCREASE IN CASH 5,277,658 1,665,248 CASH - Beginning of the Period 23,154,551 22,009,374 ---------- ---------- CASH - End of the Period $28,432,209 $23,674,622 =========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid for income taxes $702,064 $579,566 ======== ======== Cash paid for interest $98,017 $109,208 ======= ======== SUPPLEMENTAL NON-CASH INVESTING ACTIVITY: Issued 200,000 shares of deferred issuance cost $434,000 $ - ======== === ===
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SOURCE Shineco, Inc