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Shineco, Inc. Reports Third Quarter of 2018 Financial Results

00:30 EDT 18 May 2018 | PR Newswire

BEIJING, May 18, 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
Margin


Revenues


COGS


Gross
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
Margin


Revenues


COGS


Gross
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
Ended March 31,


For the Three Months
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


$

-

Cision View original content:http://www.prnewswire.com/news-releases/shineco-inc-reports-third-quarter-of-2018-financial-results-300650566.html

Original Article: Shineco, Inc. Reports Third Quarter of 2018 Financial Results

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