- Net sales increased 12.8% year over year to $18.8 million
- Gross profit increased 18.5% to $10.8 million from $9.1 million in the fourth quarter of fiscal year 2011 Gross margin increased to 57.1% from 54.4% in the year ago period
- Net income was $5.4 million, or $0.14 per diluted share, as compared to $5.6 million, or $0.15 per diluted share in the fourth quarter of fiscal year 2010
- In October 2011, the Company appointed Mr. Zack Zibing Pan as an Independent Director and Chairman of the Company's Audit Committee
- In December 2011, China Botanic successfully developed a new Siberian Ginseng (Acanthopanax) Polysaccharide Extract Powder and was awarded the Scientific and Technological Achievements Appraisal Certificate by the Science and Technology Bureau of Heilongjiang Province
Full Year 2010 Highlights
- Net sales increased 31.8% year over year to $72.7 million
- Gross profit increased 46.8% to $43.2 million from $29.4 million in fiscal year 2010
- Gross margin increased to 59.4% from 53.3% in the year ago period
- Net income was $25.9 million, or $0.69 per diluted share, compared to $17.9 million, or $0.47 per diluted share in fiscal year 2010
- $14.1 million invested in exclusive 30 year Siberian Ginseng resource use right and cultivation rights
- $9.1 million invested in purchase of five new patents
"During the fourth fiscal quarter and fiscal year 2011, we reported strong financial performance as a result of increase in average selling prices of our existing range of products and our ability to introduce successful new products ," stated Mr. Shaoming Li, Chairman and Chief Executive Officer of China Botanic. "We engaged in aggressive sales and marketing efforts to promote our new products and increase market penetration of our existing product portfolio. We also continued to generate strong cash flow from operations, which allows us to capitalize on attractive growth opportunities, including acquisition of patent rights, Siberian Ginseng cultivation rights and invest in our Ah City phase two expansion plan. We believe such investments will strengthen our market share and generate long term shareholder value in years to come."
Fourth Quarter Fiscal Year 2011
Results During the three months ended October 31, 2011, net revenue increased by 12.8% to $18.8 million from $16.7 million in the same period of 2010. Such revenue increase was primarily attributable to the increase in average selling prices (ASP) of China Botanic's products and greater market recognition of the Company's new products and its Siberian Ginseng Series products as a result of its marketing efforts.
Gross profit increased 18.5% to $10.8 million compared to $9.1 million in the fourth quarter of fiscal 2010. Gross margin increased to 57.1% as compared to 54.4% in the same period of 2010. The significant increase in gross margin during the quarter was mainly due to the increase in ASP across all of the Company's products, which was partly offset by the increase of raw material prices. China Botanic anticipates the cost of raw materials will rise in 2012 due to inflationary price increases.
Operating expenses for the fourth quarter of fiscal 2011 were $3.9 million, as compared to $3.5 million in the same period last year. Sales and distribution expenses rose 24.9% to $1.6 million from $1.3 million a year ago. The spending increase reflected the Company's efforts to expand its distribution network across China and increase market share and awareness of its products. General and administrative expenses decreased slightly to $1.3 million from $1.4 million in the year ago period. Research and development expenses were $1.0 million, up 27.3% from $0.8 million in the year ago period, reflecting the Company's continued commitment to invest into new product development and other research efforts.
Operating income in the fourth quarter was $6.9 million, up 22.3% from $5.6 million in the fourth quarter of 2010. Operating margin increased year-over-year to 36.4% from 33.6%.
The Company incurred income tax expenses of $1.5 million in the fourth quarter of fiscal 2011, compared to no taxes paid for the comparable period in 2010, due to the 15% tax rate imposed effective January 1, 2011. As a result of the increase in income taxes applicable for the fourth quarter ended October 31, 2011, net income declined 4.7% to $5.4 million, or $0.14 per diluted share, from $5.6 million, or $0.15 per diluted share for the same period a year ago.
Fiscal Year 2011 Results
For the twelve months ended October 31, 2011, total net revenue was $72.7 million, an increase of 31.8% from $55.2 million from fiscal year 2010. Gross profit in the twelve months ended October 31, 2011 rose 46.8% year over year to $43.2 million, representing a gross margin of 59.4% as compared to 53.3% in the fiscal year 2010. Operating income grew 65.9% year-over-year to $29.5 million. In the fiscal year 2011, net income was $25.9 million or $0.69 per diluted share, up from $17.9 million or $0.47 per diluted share in the twelve months ended October 31, 2010.
As of October 31, 2011, China Botanic had cash and cash equivalents of approximately $15.3 million and total current assets of approximately $51.1 million. The Company had working capital of approximately $40.8 million on October 31, 2011, as compared to $47.1 million at the fiscal year ended October 31, 2010. The Company had no long-term debt on its balance sheet at the end of October 31, 2011. Shareholders' equity stood at $99.7 million, compared with $69.8 million as of October 31, 2010. Net cash flow from operating activities for the twelve months ended October 31, 2011 was $21.1 million compared to $23.8 million for the same period of 2010.
- During 2011, the Company paid $14.1 million for 30 years of exclusive usage rights covering approximately 6,667 hectares of undergrowth resources, which is rich in wild Siberian Ginseng plant and approximately 67 hectares of Siberian Ginseng GAP cultivation base in Heilongjiang Province. A final payment of $1.6 million is due in January 2012 bringing the final investment to $15.7 million. With this acquisition of cultivation rights of rich Siberian Ginseng resources, China Botanic estimates it has access to over 75% of the Siberian Ginseng raw materials in China, providing the Company a competitive edge and strengthening its dominant market share in Siberian Ginseng products.
- In the fourth quarter of fiscal year 2011, the Company paid $9.1 million in cash to acquire patent rights to a preparation for Parkinson's disease; a patent for ingredients and preparation for XiangDousu; a patent for Mudouye Extract; a patent for Hongdoushan Extract and a patent for ingredients and preparation for Jizhi Pills. This payment was part of a total investment of $18.1 million for these rights. The remaining $9.0 million is due in one year of using these patents. The Company's R&D team will develop new products for treatment of Parkinson's disease, bronchitis, and drugs to help fight cancer.
- In addition the Company continued to invest in the development of its Ah City phase two plant. An additional $1.9 million was invested during the fiscal year 2011. The Company expects to invest approximately $16.9 million with approximately $9.4 million paid in fiscal year 2012 and $7.6 million paid in fiscal year 2013. The project is expected to be completed in 2013, at which time the new plant will begin operations. The new Ah City Phase II plant is expected to double the Company's annual production capacity facilitating growth in market share and product portfolio expansion.
"Looking into the fiscal year 2012, we believe the market demand for botanical and pharmaceutical products will continue to grow as a result of growing awareness of conditions like depression and melancholy and the government's mandate to enhance healthcare coverage by the public insurance system. In addition, consumers are increasingly making a conscious decision to live a healthy lifestyle and avoid western medicines which pose other side effects. Driven by such market dynamics and our aggressive sales and marketing efforts, we believe our all natural plant based products will achieve greater market acceptance in fiscal year 2012, in particular our Siberian Ginseng (Acanthopanax) Series. We also expect our recently launched product, Ginseng and Venison Extract to make meaningful revenue contribution in fiscal year 2012."
"We expect to be listed as one of China's essential medicine suppliers as the PRC government moves forward with its Health Reforms in 2012. We have also established a Medical Reform Sales Department as a dedicated resource focused on capturing this tremendous growth opportunity," added Mr. Li. "In the longer term, we expect Ah City phase two plant and new products which are currently in our R&D pipeline to provide sizeable contribution to our future revenue and net income growth."
For fiscal year 2012, the Company expects revenues of between $91.6 million and $93.1 million, representing an increase of 26% to 28% over fiscal year 2011 revenue of $72.7 million. Revenue growth is expected to be driven largely by sales volume increases from the existing product portfolio. The Company expects net income to be in the range of $32.7 million to $33.2 million, representing an increase of between 26% and 28% over fiscal year 2011 net income of $25.9 million.