Shineco, Inc. Reports Third Quarter of 2017 Financial Results

BEIJING, May 15, 2017 /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, today announced its financial results for the third quarter ended March 31, 2017.

Mr. Yuying Zhang, Chairman and Chief Executive Officer of Shineco, Inc., commented, "We are very pleased to report solid financial results for the third quarter of 2017 with meaningful improvement of a 3.6% increase in revenues and 10.3% increase in net income. We saw continued growth in the medicine market as the sales of our Luobuma or "Bluish Dogbane" products increased by 2.7% and other agricultural products increased by 10.7%, respectively. Our margins, including both gross margin and operating margin were also enhanced in the third quarter, highlighting our strong execution despite a relatively challenging macro and industry environment. Looking ahead, we expect to continue expanding our geographic presence within the China market. We believe we are well positioned for a strong growth in the years to come."

Third Quarter of 2017 Financial Highlights

• Revenues increased by 3.6% to $7.94 million for the three months ended March 31, 2017 from $7.66 million for the same period of last year, mainly due to increased sales of products.
• Gross profit increased by 19.9% to $2.60 million for the three months ended March 31, 2017 from $2.17 million for the same period of last year. Gross margin increased by 4.4 percentage points to 32.8% from 28.3% for the same period of last year.
• Net income attributable to Shineco increased by 10.3% to $1.92 million, or $0.091 per basic and diluted share, for the three months ended March 31, 2017 from $1.74 million, or $0.090 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 an increase in gross profit, partially offset by an increase in operating expenses and a decrease in other income.

Third Quarter of 2017 Financial Results

Revenues

Revenues for the three months ended March 31, 2017 increased by $0.28 million, or 3.6%, to $7.94 million from $7.66 million for the same period of last year, mainly due to increased sales of products.

Revenues from Luobuma products increased by $0.03 million, or 2.7%, to $1.12 million for the three months ended March 31, 2017 from $1.09 million for the same period of last year, mainly due to the increase in sales price of our products.

Revenues from Chinese medicinal herbal products decreased by $0.12 million, or 3.7%, to $3.05 million for the three months ended March 31, 2017 from $3.17 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 three months ended March 31, 2017 and 2016 were 1 RMB to $0.1451 USD and 1 RMB to $0.1529 USD, respectively, which represented a decrease of 5.1%.

Revenues from other agricultural products increased by $0.37 million, or 10.7%, to $3.77 million for the three months ended March 31, 2017 from $3.41 million for the same period of last year. The increase was mainly attributable to the increase in the unit price of our yew trees.

Gross profit and Gross Margin

Total cost of goods sold decreased by $0.15 million, or 2.8%, to $5.34 million for the three months ended March 31, 2017 from $5.49 million for the same period of last year. Gross profit increased by $0.43 million, or 19.9%, to $2.60 million for the three months ended March 31, 2017 from $2.17 million for the same period of last year. Overall gross margin increased by 4.4 percentage points to 32.8% for the three months ended March 31, 2017, compared to 28.3% for the same period of last year.

Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 49.6%, 25.2%, and 34.4%, respectively, for the three months ended March 31, 2017. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 55.0%, 20.0%, and 28.1%, respectively, for the same period of last year.

Operating income

Selling expenses decreased by $0.06 million, or 15.9%, to $0.30 million for the three months ended March 31, 2017 from $0.36 million for the same period of last year, primarily due to decreased service fees of e-commerce websites during the three months ended March 31, 2017, compared to the same period of last year. General and administrative expenses increased by $0.17 million, or 36.5%, to $0.63 million for the three months ended March 31, 2017 from $0.46 million for the same period of last year. The increase in general and administrative expenses was primarily attributable to the increased labor expenses as well as expensed related to our initial public offerings such as attorney fees and auditing fees. As a result, total operating expenses increased by $0.11 million, or 13.5%, to $0.94 million for the three months ended March 31, 2017 from $0.82 million for the same period of last year.

Operating income increased by $0.32 million, or 23.8%, to $1.67 million for the three months ended March 31, 2017 from $1.35 million for the same period of last year. Operating margin was 21.0% for the three months ended March 31, 2017, compared to 17.6% for the same period of last year.

Net income

Net income increased by $0.18 million, or 10.4%, to $1.96 million for the three months ended March 31, 2017 from $1.77 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, 2017 was $1.92 million, or $0.091 per basic and diluted share. This compared to net income attributable to common shareholders of $1.74 million, $0.090 per basic and diluted share, for the same period of last year.

Nine Months Ended March 31, 2017 Financial Results

Revenues

Revenues for the nine months ended March 31, 2017 decreased by $1.5 million, or 5.7%, to $25.53 million from $27.07 million for the same period of last year, mainly due to both decreased sales price and decreased sales volume of our products as well as the depreciation of RMB against USD. 

Revenues from Luobuma products decreased by $0.77 million, or 21.7%, to $2.77 million for the nine months ended March 31, 2017 from $3.54 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 $0.71 million, or 6.8%, to $9.73 million for the nine months ended March 31, 2017 from $10.43 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 nine months ended March 31, 2017 and 2016 were 1 RMB to $0.1472 USD and 1 RMB to $0.1563 USD, respectively, which represented a decrease of 5.8%. During the nine months ended March 31, 2017, in order to meet the qualifications of a new standard promulgated by the local government, the Company reduced production of certain types of traditional Chinese medicinal herbal products.

Revenues from other agricultural products decreased by $0.07 million, or 0.5%, to $13.04 million for the nine months ended March 31, 2017 from $13.10 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 $1.11 million, or 6.1%, to $17.06 million for the nine months ended March 31, 2017 from $18.17 million for the same period of last year. Gross profit decreased by $0.43 million, or 4.9%, to $8.47 million for the nine months ended March 31, 2017 from $8.90 million for the same period of last year. Overall gross margin increased by 0.3 percentage points to 33.2% for the nine months ended March 31, 2017, compared to 32.9% for the same period of last year.

Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 50.4%, 26.0%, and 35.3%, respectively, for the nine months ended March 31, 2017. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 53.7%, 23.2%, and 35.5%, respectively, for the same period of last year.

Operating income

Selling expenses decreased by $0.18 million, or 13.0%, to $1.19 million for the nine months ended March 31, 2017 from $1.36 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 nine months ended March 31, 2017 compared to the same period of 2016. General and administrative expenses increased by $0.49 million, or 31.7%, to $2.03 million for the nine months ended March 31, 2017 from $1.54 million for the same period of last year. The increase in general and administrative expenses was primarily attributable to the increased labor expenses as well as expenses related to our initial public offerings, such as attorney feels, consulting fees and auditing fees. As a result, total operating expenses increased by $0.31 million, or 10.7%, to $3.22 million for the nine months ended March 31, 2017 from $2.90 million for the same period of last year.

Operating income decreased by $0.74 million, or 12.4%, to $5.25 million for the nine months ended March 31, 2017 from $6.00 million for the same period of last year. Operating margin was 20.4% for the nine months ended March 31, 2017, compared to 22.2% for the same period of last year.

Net income

Net income decreased by $0.63 million, or 9.1%, to $6.23 million for the nine months ended March 31, 2017 from $6.86 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, 2017 was $6.12 million, or $0.30 per basic and diluted share. This compared to net income attributable to common shareholders of $6.74 million, $0.35 per basic and diluted share, for the same period of last year.

Financial Condition

As of March 31, 2017, the Company had cash and cash equivalents of $23.67 million, compared to $22.01 million as of June 30, 2016. Net cash used in operating activities was $1.38 million for the nine months ended March 31, 2017, compared to net cash provided by operating activities of $10.09 million for the same period of last year. Net cash used in investing activities was negative $1.69 million for the nine months ended March 31, 2017, compared to net cash provided by investing activities of $2.73 million for the same period of last year. Net cash provided by financing activities was $5.60 million for the nine months ended March 31, 2017, compared to net cash used in financing activities of $0.52 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

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SOURCE Shineco, Inc