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»11/12/2009 [Industry news]
China Yongxin\'s revenue decline by 29.8% in Q3 2009

China Yongxin Pharmaceuticals, Inc. (Yongxin), a leading pharmaceutical distributor and chain drugstore operator, announced that its net revenue totalled approximately $10.8 million for the three months ended September 30, 2009, a decline of 29.8percent from $15.5 million for the same period of 2008, due to lower sales from its wholesale business as result of a change in its sales strategy

 
China Yongxin Pharmaceuticals, Inc. (Yongxin), a leading pharmaceutical distributor and chain drugstore operator, announced that its net revenue totalled approximately $10.8 million for the three months ended September 30, 2009, a decline of 29.8percent from $15.5 million for the same period of 2008, due to lower sales from its wholesale business as result of a change in its sales strategy. In the third quarter, Yongxin shifted its focus to the retail sector as the benefits from China\'s proposed National Medical Policy for its wholesale business segment have taken longer than initially anticipated. Cost of goods sold for the third quarter of 2009 decreased to $12.4 million, or 70.9percent of net revenue, from $7.7 million, or 80.3percent in the 2008 third quarter, largely in line with sales decline. The company release noted that its gross profit for the three months ended September 30, 2009 totalled $3.1 million, or 29.1 percent of net sales, compared with gross profit of $3.0 million, or 19.7percent of net sales, for the same period of 2008. The improvement in gross margin was mainly due to a better sales mix and a focus on higher margin products, including cosmetics and certain health and organic products. Operating expenses totalled approximately $3.3 million for the third quarter of 2009, up 168.7percent from $1.2 million in the third quarter of 2008. As a percentage of net revenue, third-quarter 2009 total operating expenses amounted to 30.4percent, compared to third-quarter 2008 operating expenses at 7.9 percent of net revenue. This was largely attributable to a sharp increase in general and administrative expenses, which more than quintupled in the third quarter, primarily driven by allowance for doubtful accounts for accounts receivable and accrued litigation fees. Selling expenses rose moderately by 6.3percent as the company opened two new retail stores during the third quarter. Other income amounted to $1.1 million for the three months ended September 30, 2009, an increase of 85.5percent from $0.5 million for the same period in 2008, largely due to higher sponsorship and rebates from customers and suppliers in combination with an 87.6percent decline in interest expenses. Total revenue for the first nine months of 2009 was approximately $29.2 million, down 35.1 percent from the first nine months of 2008. Gross profit for the first nine months of 2009 was $8.0 million, a decrease of 3.7percent from gross profit of $8.4 million in the comparable period a year ago. Gross margin was 27.8percent for the first nine months of 2009, up from 18.7percent for the same period in 2008. The company recorded an operating income of $1.7 million, compared with operating income of $4.4 million in the first nine months of 2008. Net income attributable to common shares for the first nine months of 2009 was $1.9 million, compared with $3.1 million in the first nine months of 2008. Basic and diluted earnings per share were $0.06 for the first nine months of 2009 compared to 0.10 in the first nine months of 2008. As of September 30, 2009, Yongxin had 1.4 million in cash and cash equivalents, and approximately $12.1 million in working capital. As of September 30, 2009, shareholders\' equity was $20.5 million. For the first nine months of 2009, the company generated $2.6 million in cash from operations versus $3.7 million for the same period in 2008. \"While we recognize that many of our products depend on discretionary spending, we expect as the economy continues to recover and consumer confidence picks up further, sales will gain momentum in 2010 and beyond. In the third quarter, we maintained our sales activities and saw improved gross margin as the company\'s shift to higher margin products in its retail segment contributed to a more profitable mix of business. Management believes that overall gross profit will continue to improve for the remainder of 2009 and into next year,\" commented Mr. Yongxin Liu, Chairman and Chief Executive Officer of Yongxin. \"Further, we have initiated distribution of essential drugs and believe the government\'s new efforts on centralized distribution and the broader healthcare reform provide a myriad of growth opportunities. As one of the leading drug distributors in Northeastern China, we are well positioned to capitalize on these developments and build sustainable and long-term shareholder value,\" concluded Mr. Liu.

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