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Global Pharm Holdings Group, Inc. Announces Second Quarter 2011 Financial Results

August 12, 2011

SHENZHEN, China, Aug. 12, 2011 /PRNewswire-Asia/ — Global Pharm Holdings Group, Inc. (OTCBB: GPHG) (“Global Pharm” or the “Company”), a China-based growing vertically integrated pharmaceutical company engaged in pharmaceutical-related products distribution, and Traditional Chinese Medicine (“TCM”) herbs cultivation and processing business through its subsidiaries in Anhui, Jilin and Shandong provinces, today announced its unaudited financial results for the second quarter ended June 30, 2011.

Second Quarter 2011 Highlights

  • Net revenues were $45.4 million, an increase of 48.7% over the second quarter of 2010
  • Gross profit was $7.4 million, an increase of 33.2% over the second quarter of 2010, with gross margin of 16.3%
  • Operating income was $5.5 million, an increase of 55.4% over the second quarter of 2010
  • Net income was $3.9 million, or $0.15 per diluted share, an increase of 72.6%, as compared to $2.3 million, or $0.12 per diluted share, for the same period in 2010
  • In April 2011, Global Pharm established two TCM herbal plantation companies located in Jinan city of Shandong province, and Bozhou city of Anhui province
  • In May 2011, the company successfully acquired two city-level pharmaceutical distributors in the cities of Zibo and Tai’an of Shandong province

“We are pleased that Global Pharm had a strong operating performance during the second quarter of 2011, delivering solid operating results, expanding our higher margin TCM herbal cultivation business and strengthening our sales coverage in Shandong province through acquisitions of two city-level distributors. A significant synergy is emerging through the integrated value chain extending to our business units. We will stick to the selective acquisition strategy to enhance our local market leadership by expanding our market coverage and enlarging our sales channels,” commented Mr. Yunlu Yin, Chief Executive Officer of Global Pharm.

    Second Quarter 2011 Financial Summaries (unaudited)
    ---------------------------------------------------

                          Three months ended June 30      Change
                          --------------------------      ------
    (in millions $,
     except per-share
     data in $)                  2011                2010
    Net revenue                  45.4                30.5      48.7%
    Gross profit                  7.4                 5.5      33.2%
    Income from operation         5.5                 3.5      55.4%
    Income before income
     taxes                        5.4                 3.5      54.0%
    Net income                    3.9                 2.3      72.6%
    Total comprehensive
     income                       4.3                 2.3      84.8%
    Basic and diluted
     earnings per share          0.15                0.12      25.0%
    -------------------          ----                ----      ----

Total net revenue was $45.4 million for the three months ended June 30, 2011, an increase of 48.7% compared with the same period in 2010. The increase in revenue largely reflects strong sales of the Company’s pharmaceutical products distribution segment, which contributed $39.7 million or 87.6% of the Company’s total sales in the quarter, compared with $24.3 million or 79.7% of the total revenue in the corresponding quarter in 2010.

Below is a breakdown of sales per business segment for the three months ended June 30, 2011 and 2010, respectively:


                     For the three months ended June 30 - Net revenue
    in USD except
     percentage                             2011                     2010
    -------------                           ----                     ----
                                        % of net                % of net
                                        --------                --------
                                        revenue                  revenue
                                        -------                  -------
         Pharmaceutical
               products    $39,738,572      87.6   $24,338,686       79.7
           distribution
     TCM processing and      5,647,763      12.4     4,314,919       14.1
           distribution
     Herbal cultivation
                    and              -         -             -          -
                  sales
        Flower tea bags              -       0.0     1,877,372        6.1
                                   ---       ---     ---------        ---
                  Total    $45,386,335     100.0   $30,530,977      100.0
                           ===========     =====   ===========      =====


    in USD except
     percentage                   Change
    -------------                 ------
                                          %
                                         ---
         Pharmaceutical
               products  $15,399,886      63.3
           distribution
     TCM processing and    1,332,844      30.9
           distribution
     Herbal cultivation
                    and            -        NA
                  sales
        Flower tea bags  (1,877,372)        NA
                          ----------        --
                  Total  $14,855,358      48.7
                         ===========      ====

Revenue from the pharmaceutical products distribution segment increased by $15.4 million, or approximately 63.3%, to $39.7 million for the three months ended June 30, 2011, as compared to $24.3 million for the same period in 2010. The increase was primarily due to a series of marketing activities to promote sales, a broader product portfolio and improved efficiency in fulfilling sales orders. Revenue from the Company’s TCM processing and distribution segment increased to $5.6 million for second quarter of 2011, compared to $4.3 million for the comparable period in 2010. Revenue from the herbal cultivation and sales segment was nil for both the second quarter of 2011 and 2010, due to the sale of the Company’s entire herbal inventory in the first quarter of 2011 and at the end of 2009, and the fact that all of our herbs were at the cultivation stage for the second quarter of 2011. The Company has suspended its flower tea bags business segment on April 25, 2011, so revenue was nil for the second quarter of 2011 from this segment.

Gross profit and gross margin for the second quarter of 2011 – the Company’s gross profit was $7.4 million, an increase of 33.2%, from $5.5 million in the same period in 2010. Gross margin decreased to 16.3% for the second quarter of 2011, from 18.1%, for the comparable period in 2010, primarily attributable to increased costs of TCM products and reduction of sales prices due to competition for the second quarter of 2011.

Operating expenses for the second quarter of 2011 were $0.9 million, increased by $0.7 million from same period in 2010, primarily due to increased advertising, freight and labor costs to support business growth and expansion.

Income from operation for the second quarter of 2011 increased 55.4% to $5.5 million, or 12.0%, of revenue, from $3.5 million, or 11.4%, of revenue for the second quarter of 2010.

Net income for the second quarter of 2011 increased to $3.9 million, or $0.15 per fully diluted share, compared to $2.3 million, or $0.12 per fully diluted share, in the second quarter of 2010, based on 26.0 million and 19.1 million weighted average diluted shares outstanding, respectively. This increase primarily reflects a shift in sales mix toward higher margin prescription products and herbal products in the first quarter of 2011.

    Six Months 2011 Financial Summaries (unaudited)
    -----------------------------------------------
                          Six months ended June 30      Change
                          ------------------------      ------
    (in millions $,
     except per-share
     data in $)                 2011               2010
    -----------------           ----               ----
    Net revenue                 87.5               59.3      47.6%
    -----------                 ----               ----      ----
    Gross profit                15.2               10.6      43.1%
    ------------                ----               ----      ----
    Income from operation       12.1                8.1      49.9%
    ---------------------       ----                ---      ----
    Income before income
     taxes                      12.1                8.1      49.2%
    --------------------        ----                ---      ----
    Net income                   9.2                5.7      61.8%
    ----------                   ---                ---      ----
    Total comprehensive
     income                      9.7                5.7      69.5%
    -------------------          ---                ---      ----
    Basic and diluted
     earnings per share         0.35               0.30      16.7%
    -------------------         ----               ----      ----

Total net revenue was $87.5 million for the six months ended June 30, 2011, an increase of 47.6%, compared with the same period in 2010. The revenue increase primarily reflects strong sales of the pharmaceutical products distribution segment, which contributed $72.2 million or 82.5% of the Company’s total sales in the first half of 2011, compared to $47.4 million or 79.9% of the total revenue in the corresponding period last year.

Below is a breakdown of sales per business segment for the six months ended June 30, 2011 and 2010, respectively:


                       For the six months ended June 30 - Net revenue
    in USD except
     percentage                             2011                      2010
    -------------                           ----                      ----
                                        % of net                 % of net
                                        --------                 --------
                                        revenue                   revenue
                                        -------                   -------
       Pharmaceutical
             products      $72,169,822      82.5   $47,360,171        79.9
         distribution
       TCM processing
                  and       10,365,812      11.9     9,000,270        15.2
         distribution
               Herbal
      cultivation and        4,679,373       5.3             -           -
                sales
      Flower tea bags          275,075       0.3     2,899,196         4.9
                               -------       ---     ---------         ---
                Total      $87,490,082     100.0   $59,259,637       100.0
                           ===========     =====   ===========       =====


    in USD except
     percentage                 Change
    -------------               ------
                                        %
                                       ---
       Pharmaceutical
             products   $24,809,651     52.4
         distribution
       TCM processing
                  and     1,365,542     15.2
         distribution
               Herbal
      cultivation and     4,679,373       NA
                sales
      Flower tea bags    (2,624,121)   (90.5)
                         ----------    -----
                Total   $28,230,445     47.6
                        ===========     ====

Revenue from the pharmaceutical products distribution segment increased by $24.8 million, or approximately 52.4%, to $72.2 million for the six months ended June 30, 2011, as compared to $47.4 million for the same period in 2010. Revenue from the TCM processing and distribution segment increased by 15.2% to $10.4 million for the six months ended June 30, 2011, compared to $9.0 million for the same period last year. Revenue from the herbal cultivation and sales segment was $4.7 million for the first half of 2011, and nil for the comparable period in 2010, due to the sale of all of the Company’s herbal products at the year ended December 31, 2009. The decrease of 90.5% of sales in the flower tea bags segment was due to the increasing competition during first quarter of 2011 and our decision to suspend the flower tea bags operation since April 25, 2011.

Gross profit and gross margin for first half of 2011 – our gross profit was $15.2 million, an increase of 43.1%, from $10.6 million for the same period in 2010. Gross margins decreased to 17.4% for the first half of 2011, from 17.9% for the comparable period in 2010, primarily due to increased costs of TCM products and reduction of sales prices due to competition for the first half of 2011.

Operating expenses for the first half of 2011 were $1.4 million, an increase of $1.0 million in the same period in 2010, primarily due to increased advertising, freight and labor costs to support business growth and expansion.

Income from operation for the first half of 2011 increased 50.0% to $12.1 million or 13.9% of revenue, from $8.1 million or 13.6% of revenue for the first half of 2010.

Net income for the first half of 2011 increased to $9.2 million, or $0.35 per fully diluted share, compared to $5.7 million, or $0.30 per fully diluted share, in the first half of 2010, based on 26.0 million and 19.1 million weighted average diluted shares outstanding, respectively. This increase primarily reflects a shift in sales mix toward higher margin prescription products and herbal products in the first half of 2011.

Financial Condition

As of June 30, 2011, the Company had $9.1 million in cash and $24.9 million in accounts receivable compared with $4.3 million and $19.8 million as of December 31, 2010, respectively. The increase was consistent with increased sales. Net working capital was $26.3 million, compared with $17.4 million as of December 31, 2010. As of June 30, 2011, the Company had $0.5 million in short-term debt compared with $2.0 million as of December 31, 2010. Stockholders’ equity totaled $27.7 million as of June 30, 2011, compared with $17.6 million at the end of 2010.

For the six months ended June 30, 2011, the Company generated $5.3 million cash from operating activities, having no significant variance as compared to $5.8 million for the comparable period in 2010. The Company used $0.9 million in investing activities for the six months ended June 30, 2011 compared to $9,000 for the comparable period in 2010, primarily as a result of increased expenditures relating to purchases of new subsidiaries and equipment. Net cash provided by financing activities was $0.3 million for the six months ended June 30, 2011, as compared to $3.0 million used for the comparable period in 2010. After an offset between a bank loan repayment and the credit from bank acceptance, the $0.3 million contribution of financing activity in six months ended June 30, 2011 was from the non-controlling interest.

Subsequent Events

On July 5, 2011, the Company completed the acquisition of 100% equity interest of Bozhou Xinghe Pharmaceutical Co., Ltd, a TCM herb processing manufacturer in Bozhou city of Anhui province (for more information about the Bozhou Xinghe acquisition, please refer to the Form 8-K filed with the Securities and Exchange Commission (the “SEC”) and press release issued, each on July 8, 2011).

On August 1, 2011, the Company completed the acquisition of Pacific Asia Pharm Investment Group Co., Limited (“Pacific Asia”). After the completion of this acquisition, the Company indirectly manages Guangdong Guo Yao Pharmaceutical Franchises Co., Ltd. (“GDGY”) through a serious of contractual arrangements. GDGY is a pharmaceutical-related products distributor who manages and supplies to a chain of 1,234 drug stores in Guangdong province. (For more information about the Pacific Asia acquisition, please refer to the 8-K filed with the SEC and press release issued, each on August 4, 2011).

On August 3, 2011, the Company completed the acquisition of Quantum Magic Integrator Fund Co., Limited (“Quantum”). After the completion of this acquisition, Shandong Hua Wei Pharmaceutical Co., Ltd., a city-level pharmaceutical distributor in Weifang city of Shandong province, becomes a wholly owned subsidiary of the Company. (For more information about the Quantum acquisition, please refer to the Form 8-K filed with the SEC and press release issued, each on August 3, 2011)

Business Outlook

“For the first half of 2011, with our focus in the Shandong province market, we are very pleased with the performance of our distribution business and the expansion of our sales network,” said Mr. Yunlu Yin, Chief Executive Officer of Global Pharm. “For the six months ended June 30, 2011, we sold approximately 11,800 different types of products, had more than 4,250 clients and expanded our distribution coverage into the cities of Zibo and Tai’an of Shandong province. The Company effectively utilized its developing intensive purchase power in Shandong province for more attractive procurement prices and valued-added services from pharmaceutical manufacturers.”

Subsequent to the second quarter of 2011, the Company completed acquisitions of a TCM herbal pieces processing plant in Bozhou city of Anhui province and a city-level distributor in Weifang city of Shandong province and, through various contractual arrangements, the Company indirectly manages a distributor in Guangdong province, who supplies to more than 1,200 local chain drugstores. For the remaining six months of 2011, the Company expects to focus its efforts on consolidating the newly acquired units, in order to deliberately integrate its value chain vertically. The Company’s consolidation goals are to enrich its product portfolio, leverage its aggregate sales by upgrading the effectiveness of its sales channel and intensify its purchasing power for obtaining more profit-enhancing products. With the proven track record of the Company’s acquisition capability, it will continue to selectively acquire more distributors who will offer outstanding complementary benefits to its business.

About Global Pharm

Global Pharm Holdings Group, Inc., a growing integrated pharmaceutical company, is engaged in the pharmaceutical distribution, Traditional Chinese Medicine (TCM) herb plantation and herbal pieces processing business in China. The Company focuses on building regional distribution channels, as well as local capillary sales network with high-margin products portfolio. Currently, its sales network covers Shandong, Guangdong, Jilin and Anhui provinces, as well as other developed provinces in China. Global Pharm intends to establish an integrated value chain in the pharmaceutical industry through strategic acquisitions within TCM production, pharmaceutical distribution and retail sectors. Global Pharm anticipates it will achieve a solid distribution capacity and develop into a major rapid-growing and profitable pharmaceutical company. For further information, please visit the Company’s corporate website at http://www.globalpharmholdings.com.

Forward-looking Statements

Certain statements set forth in this press release contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, our management as well as estimates and assumptions made by our management. Such statements reflect the current view of our management with respect to future events and are subject to risks, uncertainties, assumptions and other factors as they relate to our industry, our operations and results of operations, plans for future facilities, capital-expenditure plans and any businesses that we may acquire. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the U.S. federal securities laws, we do not intend to update any of the forward-looking statements to conform them to actual results.

For Additional Information Contact
Global Pharm Holdings Group, Inc.
Ms. Susan Liu
Phone: +86-755-3693-9373
Email: susanliu@globalpharmholdings.com

-FINANCIAL TABLES FOLLOW–


                           GLOBAL PHARM HOLDINGS GROUP, INC.
                         CONDENSED CONSOLIDATED BALANCE SHEETS
                                 June 30, 2011
    ASSETS                        (Unaudited)        December 31, 2010
                                  -----------        -----------------
    Current assets:
      Cash and cash
       equivalents                        $9,144,834             $4,271,498
      Accounts receivable                 24,918,594             19,771,619
      Inventories                         18,980,396             16,058,760
      Restricted cash                      1,213,714              1,538,251
      Other current assets                 1,978,407              1,326,660
                                           ---------              ---------
         Total current assets             56,235,945             42,966,788
    Property, plant and
     equipment, net                          676,529                210,665
    Intangible assets, net                   297,874                      -
    Goodwill                                 374,143                      -
         Total assets                    $57,584,491            $43,177,453
                                         ===========            ===========

    LIABILITIES AND
     STOCKHOLDERS' EQUITY
    Current liabilities:
        Short-term loans                    $464,145             $1,972,150
        Bank acceptance                    1,528,560                 21,212
        Accounts payable and
         accrued expenses                 22,023,372             20,944,923
        Income and other taxes
         payable                           2,076,102              1,728,499
        Due to related parties             3,813,329                882,505
         Total current
          liabilities                     29,905,508             25,549,289
                                          ----------             ----------

    Stockholders' equity:
        Common stock, par value,
         $0.001 per share,
         100,000,000                          26,000                 26,000
         shares authorized,
          26,000,000 issued and
          outstanding.
        Additional paid-in
         capital                           9,200,623              9,200,623
        Statutory surplus
         reserves                          1,310,701              1,310,701
        Retained earnings                 15,764,962              6,546,406
        Accumulated other
         comprehensive income              1,032,115                544,434
                                           ---------                -------
         Total shareholders'
          equity -Global Pharm
          Holdings Group, Inc.            27,334,401             17,628,164
        Non-controlling
         interests                           344,582                      -
         Total stockholders'
          equity                          27,678,983             17,628,164
                                          ----------             ----------
         Total liabilities and
          stockholders' equity           $57,584,491            $43,177,453
                                         ===========            ===========


                      GLOBAL PHARM HOLDINGS GROUP, INC.
     CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                 (Unaudited)

                                              Three months ended June
                                                        30,
                                                 2011              2010
                                                 ----              ----
    Revenues, net                         $45,386,335       $30,530,977
    Cost of goods sold                     38,003,386        24,989,792
                                           ----------        ----------
    Gross profit                            7,382,949         5,541,185
    Expenses:
      Operating expenses                      936,732           233,371
      General and administrative              987,391         1,794,759
                                              -------         ---------
    Income from operations                  5,458,826         3,513,055
      Interest income (expense)                   843            13,226
      Miscellaneous expense                    28,418                 -
                                               ------               ---
    Income before income taxes              5,431,251         3,526,281
      Provision for income taxes            1,513,005         1,255,682
                                            ---------         ---------
    Net income - including non-
     controlling interest                   3,918,246         2,270,599
    Net loss - non-controlling
     interests                                  1,361                 -
    Net income -Global Pharm
     Holdings Group, Inc.                   3,919,607         2,270,599
    Other comprehensive income
       Foreign currency translation
        adjustment                            338,623            33,092
                                              -------            ------
    Total comprehensive income             $4,258,230        $2,303,691
                                           ==========        ==========
    Earnings per share of common
     stock:
         Basic and diluted earnings per
          share                                 $0.15             $0.12
                                                =====             =====
    Basic and diluted weighted
     average shares                        26,000,000        19,094,000
                                           ==========        ==========


                                               Six months ended June 30,
                                               2011                      2010
                                               ----                      ----
    Revenues, net                       $87,490,082               $59,259,637
    Cost of goods sold                   72,279,229                48,632,162
                                         ----------                ----------
    Gross profit                         15,210,853                10,627,475
    Expenses:
      Operating expenses                  1,352,645                   364,999
      General and administrative          1,720,080                 2,165,148
                                          ---------                 ---------
    Income from operations               12,138,128                 8,097,328
      Interest income (expense)              (3,381)                   17,874
      Miscellaneous expense                  30,239                         -
                                             ------                       ---
    Income before income taxes           12,104,508                 8,115,202
      Provision for income taxes          2,887,305                 2,419,451
                                          ---------                 ---------
    Net income - including non-
     controlling interest                 9,217,203                 5,695,751
    Net loss - non-controlling
     interests                                1,353                         -
    Net income -Global Pharm
     Holdings Group, Inc.                 9,218,556                 5,695,751
    Other comprehensive income
       Foreign currency translation
        adjustment                          487,681                    32,226
                                            -------                    ------
    Total comprehensive income           $9,706,237                $5,727,977
                                         ==========                ==========
    Earnings per share of common
     stock:
         Basic and diluted earnings per
          share                               $0.35                     $0.30
                                              =====                     =====
    Basic and diluted weighted
     average shares                      26,000,000                19,094,000
                                         ==========                ==========


                             GLOBAL PHARM HOLDINGS GROUP, INC.
                      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        (Unaudited)
                                                 Six Months Ended June 30,
                                                       2011             2010
                                                       ----             ----
    Cash flows from operating activities
    Net income- including non-controlling
     interest                                    $9,217,203       $5,695,751
      Adjustments to reconcile net income to net
       cash provided by operating activities:
      Stock-based compensation                            -        1,492,100
      Depreciation and amortization                  56,018           29,169
    Changes in operating assets and
     liabilities:
      Accounts receivable                        (4,214,512)      (1,431,800)
      Inventories                                (1,550,865)      (5,409,249)
      Restricted cash                               329,540                -
      Other current assets                          473,282       (1,304,551)
      Accounts payable and other accrued
       liabilities                                 (232,917)       7,380,555
      Income and other taxes payable                305,186         (776,305)
      Due from related party                              -          (33,983)
      Due to related parties                        875,411          132,940
    Net cash provided by operating activities     5,258,346        5,774,627
                                                  ---------        ---------

    Cash flows from investing activities
      Purchase of property, plant and equipment    (302,718)          (9,063)
      Acquisition of subsidiaries, net of cash
       acquired                                    (567,391)               -
    Net cash used in investing activities          (870,109)          (9,063)
                                                   --------           ------

    Cash flows from financing activities:
      Short-term loan borrowing                           -          365,001
      Short-term loan repayments                 (1,529,073)               -
      Bank acceptance                             1,483,968         (219,000)
      Dividend paid to the former shareholders            -       (3,208,521)
      Due from shareholders                               -           24,484
      Contribution from non-controlling interest    344,835                -
                                                    -------              ---
    Net cash provided by (used in) financing
     activities                                     299,730       (3,038,036)
                                                    -------       ----------

    Net increase in cash and cash equivalents     4,687,967        2,727,528
    Effect of exchange rate changes on cash and
     cash equivalents                               185,369          (12,852)
    Cash and cash equivalents -beginning of
     period                                       4,271,498        7,455,147
    Cash and cash equivalents - end of period    $9,144,834      $10,169,823
                                                 ==========      ===========

    Supplemental disclosure of cash flow
     information:
      Cash paid for interest                        $20,662          $12,908
      Cash paid for income taxes                  2,549,041        2,743,066

    Supplemental disclosure of non-cash
     financing activities:
     Accrued purchase price in due to related
      parties                                    $1,639,978               $-

SOURCE Global Pharm Holdings Group, Inc.


Source: newswire



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