Mr. Yuying Zhang, Chairman and Chief Executive Officer of Shineco, commented, “We are proud of all that we have accomplished in our first full year as an independent publicly traded company and pleased to report the fourth quarter of 2017 financial results with a 68.2% increase in net income and a 57.6% increase in EPS. As we reflect back on the year, we are pleased with the significant progress we have made as we begin to unlock the potential of our businesses by investing to establish the Institute of Chinese Apocynum Industrial Technology Research and Apocynum Industrial Park in Xinjiang. These investments presented headwinds to our sales and profit performance in the short term, we are confident that our strategy will best-position Shineco for continued success for the long term. We expect to sustain good momentum in our financial performance and we anticipate another year of good growth with stable margins and further progress in revenue and net income.”

Fourth Quarter of 2017 Financial Highlights

For the Three Months Ended June 30

($ millions, except per share data)

2017

2016

% Change

Revenue

8.06

8.13

-0.9%

Luobuma products

0.86

0.85

0.8%

Chinese medicinal herbal products

3.52

3.60

-2.3%

Other agricultural products

3.69

3.68

0.1%

Gross profit

2.27

2.18

4.0%

Gross margin

28.2%

26.8%

1.3%

Operating income

2.19

1.20

82.8%

Operating margin

27.2%

14.7%

12.4%

Net income attributable to Shineco

2.35

1.40

68.2%

EPS

0.114

0.072

57.6%

  • Net income increased by 68.2% to $2.35 million, or $0.114 per basic and diluted share, for the three months ended June 30, 2017 from $1.40 million, or $0.072 per basic and diluted share, for the same period of last year. The increases in net income and earnings per share were primarily due to lower operating expenses in 2017 versus the same period of 2016.
  • Operating income increased by 82.8% to $2.19 million from $1.20 million, for the same period of last year.
  • Gross profit increased by 4.0% to $2.27 million for the three months ended June 30, 2017 from $2.18 million for the same period of last year. Gross margin increased by 1.3 percentage points to 28.2% from 26.8% for the same period of last year.
  • Revenues decreased by 0.9% to $8.06 million for the three months ended June 30, 2017 from $8.13 million for the same period of last year, mainly due to the price fluctuation of the Chinese Medicine Market.

Fourth Quarter of 2017 Financial Results

Revenues

Revenues for the three months ended June 30, 2017 decreased by $0.07 million, or 0.9%, to $8.06 million from $8.13 million for the same period of last year, mainly due to the decreased sales of products.

For the Three Months Ended June 30

2017

2016

($ millions)

Revenues

COGS

Gross
Margin

Revenues

COGS

Gross
Margin

Luobuma products

0.86

0.31

63.3%

0.85

0.36

57.8%

Chinese medicinal herbal products

3.52

2.90

17.5%

3.60

3.04

15.6%

Other agricultural products

3.69

2.52

31.7%

3.68

2.61

29.0%

Business and sales related taxes

0.02

0.03

Total

8.06

5.76

28.6%

8.13

6.04

25.8%

Revenues from Luobuma products increased by $0.01 million, or 0.8%, to $0.86 million for the three months ended June 30, 2017 from $0.85 million for the same period of last year, mainly due to the increased sales from online platform.

Revenues from Chinese medicinal herbal products decreased by $0.08 million, or 2.3%, to $3.52 million for the three months ended June 30, 2017 from $3.60 million for the same period of last year. The decrease was primarily due to the price fluctuation in the Chinese Medicine Market. The average currency exchange rates for the three months ended June 30, 2017 and 2016 were 1 RMB to $0.1457 USD and 1 RMB to $0.1531 USD, respectively, which represented a decrease of 4.8%.

Revenues from other agricultural products increased by $0.002 million, or 0.1%, to $3.69 million for the three months ended June 30, 2017 from $3.68 million for the same period of last year. The increase was mainly attributable to the added electronic warehousing.

Gross profit and Gross Margin

Total cost of goods sold decreased by $0.28 million, or 4.6%, to $5.76 million for the three months ended June 30, 2017 from $6.04 million for the same period of last year. Gross profit increased by $0.09 million, or 4.0%, to $2.27 million for the three months ended June 30, 2017 from $2.18 million for the same period of last year. Overall gross margin increased by 1.3 percentage points to 28.2% for the three months ended June 30, 2017, compared to 26.8% for the same period of last year.

Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 63.3%, 17.5%, and 31.7%, respectively, for the three months ended June 30, 2017. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 57.8%, 15.6%, and 29.0%, respectively, for the same period of last year.

Operating income

Selling expenses decreased by $0.1 million, or 24.8%, to $0.29 million for the three months ended June 30, 2017 from $0.39 million for the same period of last year, primarily due to decreased advertising expenses and promotion expenses. General and administrative expenses decreased by $0.81 million, or 136.6%, to negative $0.22 million for the three months ended June 30, 2017 from $0.59 million for the same period of last year. The decrease in general and administrative expenses was primarily attributable to account receivable collected and expenditure controlled. As a result, total operating expenses decreased by $0.90 million, or 92.1%, to $0.08 million for the three months ended June 30, 2017 from $0.98 million for the same period of last year.

Operating income increased by $0.99 million, or 82.8%, to $2.19 million for the three months ended June 30, 2017 from $1.20 million for the same period of last year. Operating margin was 27.2% for the three months ended June 30, 2017, compared to 14.7% for the same period of last year.

Net income

Net income increased by $0.95 million, or 68.2%, to $2.35 million for the three months ended June 30, 2017 from $1.40 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 June 30, 2017 was $2.35 million, or $0.114 per basic and diluted share. This compared to net income attributable to common shareholders of $1.40 million, $0.072 per basic and diluted share, for the same period of last year.

Full Year 2017 Financial Results  

For the Years Ended June 30

($ millions, except per share data)

2017

2016

% Change

Revenue

33.59

35.21

-4.6%

Luobuma products

3.62

4.39

-17.4%

Chinese medicinal herbal products

13.25

14.03

-5.6%

Other agricultural products

16.72

16.79

-0.4%

Gross profit

10.74

11.08

-3.1%

Gross margin

32.0%

31.5%

0.5%

Operating income

7.45

7.34

1.4%

Operating margin

22.2%

20.9%

1.3%

Net income attributable to Shineco

8.47

8.14

4.1%

EPS

0.41

0.42

-2.5%

Revenues

Revenues for the twelve months ended June 30, 2017 decreased by $1.61 million, or 4.6%, to $33.59 million from $35.21 million for the same period of last year, mainly due to decrease in sales across all of our products. 

For the Years Ended June 30

2017

2016

($ millions)

Revenues

COGS

Gross
Margin

Revenues

COGS

Gross
Margin

Luobuma products

3.62

1.70

53.2%

4.39

1.97

55.0%

Chinese medicinal herbal products

13.25

10.12

23.6%

14.03

10.99

21.7%

Other agricultural products

16.72

10.96

34.5%

16.79

11.07

34.0%

Business and sales related taxes

0.08

0.09

Total

33.59

22.85

32.0%

35.21

24.12

31.5%

Revenues from Luobuma products decreased by $0.76 million, or 17.4%, to $3.62 million for the twelve months ended June 30, 2017 from $4.39 million for the same period of last year, mainly due to both the decreased sales price and decreased sales volume of our products.

Revenues from Chinese medicinal herbal products decreased by $0.79 million, or 5.6%, to $13.25 million for the twelve months ended June 30, 2017 from $14.03 million for the same period of last year. The decrease was primarily due to the depreciation of RMB against USD. The average currency exchange rates for the twelve months ended June 30, 2017 and 2016 were 1 RMB to $0.1468 USD and 1 RMB to $0.1555 USD, respectively, which represented a decrease of 5.6%.

Revenues from other agricultural products decreased by $0.07 million, or 0.4%, to $16.72 million for the twelve months ended June 30, 2017 from $16.79 million for the same period of last year. The decrease was mainly attributable to the depreciation of RMB against USD as mentioned above.

Gross profit and Gross Margin

Total cost of goods sold decreased by $1.27 million, or 5.2%, to $22.85 million for the twelve months ended June 30, 2017 from $24.12 million for the same period of last year. Gross profit decreased by $0.34 million, or 3.1%, to $10.74 million for the twelve months ended June 30, 2017 from $11.08 million for the same period of last year. Overall gross margin increased by 0.5 percentage points to 32.0% for the twelve months ended June 30, 2017, compared to 31.5% for the same period of last year.

Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 53.2%, 23.6%, and 34.5%, respectively, for the twelve months ended June 30, 2017. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 55.0%, 21.7%, and 34.0%, respectively, for the same period of last year.

Operating income

Selling expenses decreased by $0.27 million, or 15.6%, to $1.48 million for the twelve months ended June 30, 2017 from $1.76 million for the same period of last year, primarily due to decreased advertising expenses, promotion expenses, and service fees of e-commerce websites, partially offset by increased rent expense of warehouses during the twelve months ended June 30, 2017 compared to the same period of 2016. General and administrative expenses decreased by $0.17 million, or 8.8%, to $1.81 million for the twelve months ended June 30, 2017 from $1.99 million for the same period of last year. The decrease in general and administrative expenses was primarily attributable to the recovery of allowance for doubtful accounts as a result of collection, partially offset by the increased general and administrative expenses of our Shineco holding company, which were $1.05 million and nil for the twelve months ended June 30, 2017 and 2016. As a result, total operating expenses decreased by $0.45 million, or 12.0%, to $3.29 million for the twelve months ended June 30, 2017 from $3.74 million for the same period of last year.

Operating income increased by $0.10 million, or 1.4%, to $7.45 million for the twelve months ended June 30, 2017 from $7.34 million for the same period of last year. Operating margin was 22.2% for the twelve months ended June 30, 2017, compared to 20.9% for the same period of last year.

Net income

Net income increased by $0.33 million, or 4.1%, to $8.47 million for the twelve months ended June 30, 2017 from $8.29 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the twelve months ended June 30, 2017 was $8.47 million, or $0.41 per basic and diluted share. This compared to net income attributable to common shareholders of $8.14 million, $0.42 per basic and diluted share, for the same period of last year.

Financial Condition

As of June 30, 2017, the Company had cash and cash equivalents of $23.15 million, compared to $22.01 million as of June 30, 2016. Net cash used in operating activities was $2.74 million for the twelve months ended June 30, 2017, compared to net cash provided by operating activities of $13.29 million for the same period of last year. Net cash used in investing activities was $0.73 million for the twelve months ended June 30, 2017, compared to net cash provided by investing activities of $3.95 million for the same period of last year. Net cash provided by financing activities was $5.38 million for the twelve months ended June 30, 2017, compared to net cash used in financing activities of $0.26 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 http://tianyiluobuma.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.

CONSOLIDATED BALANCE SHEETS

ASSETS

June 30,

June 30,

2017

2016

CURRENT ASSETS:

Cash 

$

23,154,551

$

22,009,374

Accounts receivable, net

14,480,004

6,372,970

Due from related parties

448,833

850,707

Inventories

2,346,273

4,608,179

Advances to suppliers, net

2,396,123

53,024

Loans to third parties, net

830,090

560,234

Other receivables, net

535,700

463,361

Short-term deposit

158,894

100,270

Prepaid expenses

375,459

33,117

TOTAL CURRENT ASSETS

44,725,927

35,051,236

Property and equipment at cost, net of accumulated depreciation and amortization

10,320,396

11,035,199

Land use right, net of accumulated amortization

1,346,631

1,408,765

Investments

5,695,080

4,766,847

Deposit for business acquisition

2,065,686

Long-term deposit and other noncurrent assets

112,883

120,357

Prepaid leases

3,784,533

4,338,892

Deferred tax assets

233,834

327,492

TOTAL  ASSETS

$

68,284,970

$

57,048,788

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Short-term loans

$

2,663,628

$

2,745,945

Accounts payable

158,068

259,803

Advances from customers

5,439

9,597

Due to related parties 

257,880

244,915

Other payables and accrued expenses

337,107

1,999,622

Taxes payable

1,608,926

1,278,142

TOTAL LIABILITIES

5,031,048

6,538,024

Commitments and contingencies

EQUITY:

Common stock; par value $0.001, 100,000,000 shares authorized; 21,034,072 and 19,320,882 shares issued and outstanding at June 30, 2017 and 2016

21,034

19,321

Additional paid-in capital

22,737,302

17,344,466

Statutory reserve 

3,484,449

3,242,139

Retained earnings

39,064,743

30,837,399

Accumulated other comprehensive loss

(3,140,982)

(1,887,929)

Total Stockholders’ equity of Shineco, Inc.

62,166,546

49,555,396

Non-controlling interest

1,087,376

955,368

TOTAL EQUITY

63,253,922

50,510,764

TOTAL LIABILITIES AND EQUITY

$

68,284,970

$

57,048,788

SHINECO, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME 

For the Years Ended June 30,

2017

2016

REVENUE

$

33,592,337

$

35,206,852

COST OF REVENUE

    Cost of product and services

22,776,035

24,037,241

    Business and sales related tax

75,974

85,038

              Total cost of revenue

22,852,009

24,122,279

GROSS PROFIT

10,740,328

11,084,573

OPERATING EXPENSES

    General and administrative expenses

1,813,402

1,988,101

    Selling expenses

1,480,855

1,755,264

              Total operating expenses

3,294,257

3,743,365

INCOME FROM OPERATIONS

7,446,071

7,341,208

OTHER INCOME

    Income from equity method investments

927,697

672,269

    Purchase rebate income

1,136,162

1,124,258

    Other income  

348,181

197,390

    Interest income, net

14,171

135,404

              Total other income 

2,426,211

2,129,321

INCOME BEFORE PROVISION FOR INCOME TAXES

9,872,282

9,470,529

PROVISION FOR INCOME TAXES

1,252,637

1,177,707

NET INCOME

8,619,645

8,292,822

    Less: net income attributable to non-controlling interest

149,991

155,926

NET INCOME ATTRIBUTABLE TO SHINECO, INC.

$

8,469,654

$

8,136,896

COMPREHENSIVE INCOME

    Net income

$

8,619,645

$

8,292,822

    Other comprehensive loss: foreign currency translation loss

(1,271,036)

(3,991,356)

    Total comprehensive income  

7,348,609

4,301,466

    Less: comprehensive income attributable to non-controlling interest

132,008

107,219

COMPREHENSIVE INCOME ATTRIBUTABLE TO SHINECO, INC.

$

7,216,601

$

4,194,247

    Weighted average number of shares basic and diluted

20,616,335

19,320,882

    Basic and diluted earnings per common share

$

0.41

$

0.42

SHINECO, INC.

 CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended June 30,

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

8,619,645

$

8,292,822

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation and amortization

575,196

871,099

Gain from disposal of property and equipment

(8,063)

(Recovery of) provision for doubtful accounts

(342,041)

324,515

Increase in inventory reserve

37,292

290,515

Deferred tax provision (benefit)

86,780

(120,765)

Income from equity method investments

(927,697)

(672,269)

Interest income from loans to related parties

(86,355)

Gain on disposal of investment

(233,249)

Changes in operating assets and liabilities:

Accounts receivable

(8,136,668)

(1,980,619)

Advances to suppliers

(2,339,757)

1,249,897

Inventories

2,122,982

2,834,739

Other receivables

(72,891)

172,176

Prepaid expense and other assets

(401,755)

135,528

Due from related parties

(976,937)

246,026

Prepaid leases

466,759

495,122

Accounts payable

(96,137)

105,382

Advances from customers

(3,950)

(21,266)

Other payables

(1,614,992)

1,008,132

Taxes payable

354,453

292,580

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

(2,744,136)

13,290,365

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisitions of property and equipment

(49,863)

(498,772)

Proceeds from disposal of property and equipment

17,688

Proceeds from withdrawal of investments

466,497

Repayments of loans from third parties

4,839

189,275

Repayments of loans from related parties

565,739

1,366,787

Income received from investments in unconsolidated entities

990,839

2,428,894

Deposit for business acquisition

(2,055,074)

Deposit for potential investment

(200,000)

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

(725,832)

3,952,681

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term loans

2,673,064

3,148,077

Repayment of short-term loans

(2,701,321)

(3,526,423)

Proceeds from initial public offering, net of offering costs

5,394,549

Proceeds from advances from related parties

17,683

122,424

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

5,383,975

(255,922)

EFFECT OF EXCHANGE RATE CHANGE ON CASH

(768,830)

(1,033,855)

NET INCREASE IN CASH

1,145,177

15,953,269

CASH – Beginning of the Year

22,009,374

6,056,105

CASH – End of the Year

$

23,154,551

$

22,009,374

SUPPLEMENTAL CASH FLOW DISCLOSURES:

Cash paid for income tax

$

845,792

$

991,599

Cash paid for interest

$

150,175

$

366,844

SUPPLEMENTAL NON-CASH INVESTING ACTIVITY:

Long-term investment converted to fixed assets

$

$

6,219,960

SOURCE Shineco, Inc

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