First China Pharma Announces Unaudited Financials and Issues Guidancefor Q3 2012
Revenues Increase 22% From 2011, Growth Remains Positive for 2012
KUNMING, CHINA, Nov 19, 2012 (Menafn - MARKETWIRE via COMTEX) --First China Pharmaceutical Group, Inc. (otcqb:FCPG) ("First China"or the "Company"), a rapidly growing and technologically advancedpharmaceutical distribution company based in Yunnan, China, todayannounced its unaudited financial results for the three-month periodended Sep. 30, 2012.
Q3 Fiscal 2012 Highlights
First China is particularly pleased to announce that it has achievedan all new record high for sales achieved in the Company's fiscalthird quarter.
Sales for the third quarter 2012 were 17.4 million compared to 14.2million in 2011, representing an increase of over 22%. The increaseis attributed to our cooperation accord with Anhui Hua YuanPharmaceutical Inc., through which we have the ability to purchaseproducts that in many instances is at lower than wholesale prices. Asa result, we can offer competitive pricing on a number of products inorder to attract high volume resellers.
Gross profit for Q3, 2012 increased to 1.8 million, as compared to agross profit of 1.0 in 2011, an increase of 73%. This increase isprimarily due to escalated sales while maintaining gross margins.Gross margin for 2012 was 10% compared to 7% in 2011 and net incomewas up 25% to 1.0 million, largely due to expanded sales volume ofhigh margin specialty herbal medicines.
Overall, improved profitability is fundamentally due to increasedsales. The Company's cooperation accord with Anhui Hua YuanPharmaceutical Inc. allowed for an expansion of inventory selectionwhich led to a significant boost in resale opportunities. Inaddition, the Company's expanded inventory introduced a number ofspecialized natural Chinese herbs for sale to drug manufacturers,which underscores the ongoing success of an internal policyinitiative that was implemented in 2011. Increased utilization of theCompany's internet fulfillment platform led to higher order frequencyby both institutional and professional retail customers. All of theabove factors contributed to the combined sales growth for thecurrent period.
Income from Operations increased by 60% compared to the same periodin 2011, largely due to the Company's improved management ofadministrative costs as sales increased. Income before tax for the 3month period ending September 30, 2012 increased by 24% to 1.3million, however, the Company cautions that this improvement inincome is partially attributed to Derivative Income of 431,336.
Year-to-date income before tax is reported as down 35%, which isprincipally due to "Derivative Losses" as reported by the Companyearlier in fiscal 2012. Derivative Income or Losses are non-cashincreases or decreases to the income statement that are a result ofthe Black Scholes derivative valuation of the warrants issued by theCompany in relation to the financing in April 2011. The valuation ofthese warrants is required by US GAAP and can produce either anon-cash gain or loss; depending upon the fair market value of thecommon stock. As such, this adjustment to the income statement is anon-cash transaction and does not adversely or positively affect theCompany's working capital.
The Company continues to have a positive outlook for October andNovember of 2012. However, the proposed relocation of the head officeand warehouse to a new larger facility in December could adverselyimpact our sales figures for December and the fourth quarter. Toensure a smooth transition, the Company has determined the necessityshut down operations for a few days in order to maximize logisticalcontrol and to effect timely allocation of resources. In addition toour relocation, the coming Chinese Spring Festival in early February2013 will bring an anticipated softening of sales figures during thisperiod. However, the Company believes our ongoing cooperation withAnhui Hua Yuan Pharmaceutical Inc. will continue to grow and yieldsignificant results for the remainder of the year and is anticipatedto lead towards improved profit margins overall.
Policies introduced by the Chinese government to increasepharmaceutical spending on a per-capita basis have introducedeconomic pressures on the margins of many pharmaceuticaldistributors. Small distributors are finding it difficult to remainin business, and drug manufacturers are unwilling to extend credit todistributors. The efficiency of First China's internet fulfillmentplatform continues to perform as a significant strategic advantageover the majority of the Company's competitors. Our redesignedwebsite offers improved online order fulfillment processes and willbe operational in early January 2013. The ordering platform willenable increased handling of orders and transactions, a key elementto the Company's success.
"Our business model is strong and takes advantage of the government'spolicy to lower the cost of drugs. With additional capital ourexpanded product line and inventory holdings can fuel tremendousgrowth. We continue to work diligently to satisfy our customer andshareholders," stated Mr. Wang, CEO of First China.
This press release does not constitute an offer to sell or thesolicitation of an offer to buy securities, nor shall there be anysale of securities in any jurisdiction in which such offer,solicitation or sale would be unlawful prior to the registration orqualification under the securities laws of such jurisdiction. Furtherdetails of the Company's business, finances, appointments andagreements can be found as part of the Company's continuous publicdisclosure as a reporting issuer under the Securities Exchange Act of1934 filed with the Securities and Exchange Commission's ("SEC")EDGAR database.
About First China Pharmaceutical Group, Inc. (otcqb:FCPG)
First China Pharmaceutical Group, Inc. aims to develop a high growthpharmaceutical distribution company generating significant revenuefrom the sale of healthcare products in China. As part of itsbusiness strategy, the Company has acquired the assets of Kun MingXin Yuan Tang Pharmacies Co. Ltd. (XYT), which includes a strategicadvantage over its competitors as it is one of a handful ofpharmaceutical distribution companies in Yunnan Province that hasobtained government approval to market and fill orders using theinternet. First China Pharmaceutical Group plans to continue therapid growth of the company from its current position as a providerof approximately 7,100 drugs to more than 4,700 pharmacies, hospitalsand clinics in China's Yunnan Province. For more information visit:www.firstchinapharma.com.
Notice Regarding Forward-Looking Statements
This news release contains "forward-looking statements" as that termis defined in Section 27A of the United States Securities Act of1933, as amended and Section 21E of the Securities Exchange Act of1934, as amended. Statements in this press release which are notpurely historical are forward-looking statements and include anystatements regarding beliefs, plans, expectations or intentionsregarding the future. Such forward-looking statements include, amongother things, treatment of VAT reserve, accrual of VAT, opportunitiesto expand sales and market share, Chinese government increasingpharmaceutical spending, sales strategy, need for capital, businessoutlook for 2012, Company growth and acquisition plans, and use ofinternet licenses. Actual results could differ from those projectedin any forward-looking statements due to numerous factors. Theseforward-looking statements are made as of the date of this newsrelease, and we assume no obligation to update the forward-lookingstatements, or to update the reasons why actual results could differfrom those projected in the forward-looking statements. Although webelieve that any beliefs, plans, expectations and intentionscontained in this press release are reasonable, there can be noassurance that any such beliefs, plans, expectations or intentionswill prove to be accurate. Investors should consult all of theinformation set forth herein and should also refer to the riskfactors disclosure outlined in our annual report on Form 10-K for themost recent fiscal year, our quarterly reports on Form 10-Q and otherperiodic reports filed from time-to-time with the Securities andExchange Commission.
ON BEHALF OF THE BOARD First China Pharmaceutical Group, Inc.-------------------------------------------------
Zhen Jiang Wang
Chairman and CEO
Evergreen Investor Relations, Inc.
SOURCE: First China Pharmaceutical Group, Inc.
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