BEIJING, Sept. 27, 2019 (GLOBE NEWSWIRE) — 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 fiscal year ended June 30, 2019.
Mr. Yuying Zhang, Chairman and Chief Executive Officer of Shineco, commented, “I am clearly disappointed with our 2019 fiscal year financial results but remain confident in our strategy and the fundamentals of our business model. We plan to develop new products and expand our distribution network as well as to grow our business through possible mergers and acquisitions of similar or synergetic businesses, all aimed at increasing awareness of our brand, developing customer loyalty, meeting customer demands in various markets and providing solid foundations for our continuous growth. To meet the increasing demand for our products, we plan to make capital improvements in our existing production facilities which would improve both their efficiency and capacity. In the short-run, we intend to increase our investment in our reliable supply network, personnel training, information technology applications and logistic system upgrades. As 2020 unfolds, we expect to continue to strengthen our competitive positions in industrial hemp industry to lay a firm foundation for long-term sustainable growth.”Fiscal Year 2019 Financial HighlightsRevenue: $31.22 million (at 28.7% gross margin), down 28.9% from $43.90 million (at 33.7% gross margin) in fiscal year 2018, reflecting the decrease in sales across all products.Gross Profit: $8.97 million, down 39.3% from $14.79 million in fiscal year 2018.Operating Income: $0.12 million, down 98.8% from $9.27 million in fiscal year 2018.Net income attributable to Shineco: $0.80 million, compared to $7.59 million in fiscal year 2018.EPS: Net income per share of 0.04, compared to a net income per share of $0.36 in fiscal year 2018.Fiscal Year 2019 Financial ResultsRevenueRevenue for the year ended June 30, 2019 decreased by $12.68 million, or 28.9%, to $31.22 million from $43.90 million for the same period of last year, mainly due to the decrease in sales across all products. Revenue from Luobuma products decreased by $10.22 million, or 93.9%, to $0.66 million for the year ended June 30, 2019 from $10.88 million for the same period of last year, mainly due to the decrease in revenue from Xinjiang Taihe of $8.21 million. As the nature environment in Xinjiang province is very vulnerable, the harvesting of wild Apocynum Venetum is strictly controlled by the local government, and the Company is required to obtain a permit from local authority before harvesting. In fiscal year 2019, the Company only managed to obtain the permit in the end of December 2018. The management estimated that it is unlikely to obtain new permit in the future, hence, the management decided to cease the wild Apocynum Venetum in Xinjiang province, and changed the Company’s strategy to develop industrial Apocynum Venetum business in Shanxi province instead. As a result, no revenue was generated by Xinjiang Taihe during the year ended June 30, 2019. The decrease was also due to the decrease in revenue from Tenet-Jove Xuzhou branch of $1.34 million as the business operation of this branch ceased in November 2017.Revenue from Chinese medicinal herbal products decreased by $0.47 million, or 3.3%, to $13.71 million for the year ended June 30, 2019 from $14.18 million for the same period of last year. The sales of Chinese medicinal herbal products were comparatively stable during the year ended June 30, 2019 as compared to the same period in 2018. The decrease was due to the depreciation of RMB against US$. The average translation rate for the year ended June 30, 2019 and 2018 were at 1 RMB to 0.1466 USD and at 1 RMB to 0.1537 USD, respectively, which represented a decrease of 4.65%.Revenue from other agricultural products decreased by $1.98 million, or 10.5%, to $16.85 million for the year ended June 30, 2019 from $18.83 million for the same period of last year. The decrease was mainly due to the decrease in sales volume of yew trees for the year ended June 30, 2019 as compared to the same period in 2018. The main reason of the decrease was that the Company sold $2.24 million in November 2017 to fulfill a one-time large order from one of the Company’s customers, Qingdao Ship Owners Association.Gross profit and Gross MarginTotal cost of revenue decreased by $6.86 million, or 23.6%, to $22.25 million for the year ended June 30, 2019 from $29.11 million for the same period of last year. Gross profit decreased by $5.82 million, or 39.3%, to $8.97 million for the year ended June 30, 2019 from $14.79 million for the same period of last year. Overall gross margin decreased by 5.0 percentage points to 28.7% for the year ended June 30, 2019, compared to 33.7% for the same period of last year.Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 54.6%, 25.0%, and 31.2%, respectively, for the year ended June 30, 2019. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 55.2%, 24.5%, and 28.7%, respectively, for the same period of last year.Operating incomeGeneral and administrative expenses increased by $4.17 million, or 104.6%, to $8.15 million for the year ended June 30, 2019 from $3.99 million for the same period of last year. The increase in general and administrative expenses was mainly due to an increase in bad debt expense of $4.12 million as well as an offering cost write-off of $0.43 million. The $0.43 million was the valuation of the Commitment Shares retained by IFG Fund upon termination of the Purchase Agreement and Registration Rights Agreement. The increase was partially offset by the decreased general and administrative expenses of $0.34 million for Tajite and Tiankunrunze as a result of reduced business activities during the year ended June 30, 2019.Selling expenses decreased by $0.83 million, or 54.1%, to $0.70 million for the year ended June 30, 2019 from $1.53 million for the same period of last year. The decrease was primarily due to the decrease in selling expenses from Tenet-Jove Xuzhou branch of $0.26 million as the business operation of this branch ceased in November 2017. The decrease was also due to the decrease in advertising expenses, salary expenses and commissions from Tenet-Jove of $0.28 million, $0.14 million and $0.05 million for year ended June 30, 2019.Operating income decreased by $9.16 million, or 98.8%, to $0.12 million for the year ended June 30, 2019 from $9.27 million for the same period of last year.Net incomeNet income decreased by $6.65 million, or 88.3%, to $0.88 million for the year ended June 30, 2019 from $7.53 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the year ended June 30, 2019 was $0.80 million, or $0.04 per basic and diluted share. This compared to net income attributable to common shareholders of $7.59 million, $0.36 per basic and diluted share, for the same period of last year.Financial ConditionAs of June 30, 2019, the Company had cash and cash equivalents of $35.33 million, compared to $31.49 million as of June 30, 2018. Net cash provided by operating activities was $3.50 million for the year ended June 30, 2019, compared to $9.85 million for the same period of last year. Net cash used in investing activities was $0.25 million for the year ended June 30, 2019, compared to $0.75 million for the same period of last year. Net cash provided by financing activities was $1.81 million for the year ended June 30, 2019, compared to net cash used in financing activities of $0.49 million for the same period of last year.About Shineco, Inc.Incorporated in Delaware in August 1997 and headquartered in Beijing, China, Shineco is a holding company. Through its subsidiaries and variable interest entities, Shineco undertakes 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 Shineco, please visit http://tianyiluobuma.com.Forward-Looking StatementsThis 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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