Kingworld Medicines Announces 2012 Interim Results

Gross Profit Margin Rose 1.2 pts to 23.2%
Profit for the Period Increased to Approx. RMB19.67 Million

Actively Optimized Distribution Network
Consolidated Market Share of Products with Competitive Advantages

HONG KONG, Aug. 30, 2012 /PRNewswire-Asia/ --

Kingworld Medicines Group Limited ("Kingworld Medicines" or the "Company", together with its subsidiaries, the "Group", Stock code: 01110), a distributor of renowned branded imported pharmaceutical and healthcare products in the PRC, announces its unaudited interim results for the six months ended 30 June 2012 (the "period under review").

During the period under review, the turnover of the Group was approximately RMB337,166,000 (2011: RMB362,552,000), representing a decrease of approximately 7.0% as compared with the same period last year. Gross profit dropped 1.9% to approximately RMB78,328,000 (2011: RMB79,826,000). Gross profit margin increased 1.2 percentage points to 23.2% (2011: 22.0%). During the period under review, the Group's profit amounted to RMB19,667,000 (2011: RMB19,647,000), basic earnings per share remained at approximately RMB3.16 cents (2011: RMB3.16 cents). The board of directors does not recommend the payment of an interim dividend for the period under review (2011: Nil).

Mr. Zhao Li Sheng, Chairman and Executive Director of Kingworld Medicines, said, "During the first half of 2012, stringent challenges brought by the slowing macro and domestic economies fundamentally caused pressures to the operation of the Group, and created various adverse impacts. Nevertheless, the overall pharmaceutical industry in China remained steady; a stable growth was still recorded at the retail market. Furthermore, with the recently announced 'Extra-Province medical claims' policy by the government, it is expected that medical consumption will be stimulated, and will provide a powerful driving force to the long-term stable development of the Group's businesses."

During the period under review, the Group improved the cooperation with its distributors through the expansion of the coverage of Kingworld Imada Red Flower Oil, with a series of promotional activities to achieve outstanding and effective sales performances of this product. For the six months ended 30 June 2012, the sales for Kingworld Imada Red Flower Oil recorded relatively rapid growth amounting to RMB16,515,000, representing a considerable increase of 32.3% as compared with the same period last year. On the other hand, benefiting from a significant increase in the demand for products to relieve cough and sputum in the market, and the improvement in product display with different forms of marketing and promotional activities, a considerable growth in the sales of Nin Jiom Chuan Bei Pei Pa Candies was thus recorded. For the six months ended 30 June 2012, Nin Jiom Chuan Bei Pei Pa Candies achieved relatively rapid growth in sales amounting to RMB20,232,000, representing a remarkable increase of 61.9% as compared to the same period last year.

In the first half of the year, the Group improved the coverage of the Nin Jiom family's products in the markets within second and third tier cities, especially through cooperation with retail chains at different regions. The coverage of Nin Jiom Chuan Bei Pei

Pa Koa in two specifications, namely 150ml and 300ml, were increased. However, being affected by consumer psychology, practices and tastes, and certain sales flowing to the community hospitals, the retail market for medicines to relieve cough and sputum recorded a slight decline in sales in the first quarter of 2012, the sales of Nin Jiom Chuan Bei Pei Pa Koa also decreased by 8.8% as compared with the same period last year. In addition, owing to the slowdown in the growth of the macro economy, decrease in the consumption power and the medical insurance policies, the sales of Mentholatum product range and Taiko Seirogan fell as compared with the same period last year. For the six months ended 30 June 2012, the sales of Mentholatum product range and Taiko Seirogan amounted to approximately RMB12,119,000 and RMB28,925,000 respectively, representing a decrease of 52.4% and 2.6% over the same period last year respectively.

The Group is applying for the renewal of the import registration license of Flying Eagle Wood Lok Medicated Oil that expired in December 2010. Hence, the sales of Flying Eagle Wood Lok Medicated Oil for the first half of this year were affected to a certain extent. With the approval for the one-off importation of pharmaceutical products obtained by the Group, it is believed that the import for Flying Eagle Wood Lok Medicated Oil will resume and the product will be available for market in the second half of the year. Besides, the import for Kawai Liver Oil Drop, another product of the Group, was temporarily suspended due to the disastrous earthquake in Japan and China banning the import of foodstuff. As the sales of liver oil drop only accounted for about 2.0% of the Group's total sales before the suspension in 2011, the overall effect on the Group was minimal.

Disney Band-Aid is the Group's first attempt and breakthrough in the medical devices sector, which was launched in various provinces and cities all over the China, and has been available for sale in a total of more than 1,000 retail drug stores in the first half of this year. During the period under review, some of these drug stores further increased their orders several times, which reflected the consumers' recognition of this product. For the six months ended 30 June 2012, Disney Band-Aid recorded sales of RMB1,012,000.

In order to strengthen the promotion and marketing for the branded products under the Group and thus further enhance its corporate and brand image, the Group conducted adjustment and optimization to the display booths of "Kingworld Health Family" in various provinces and cities all over the state in the first half of the year. The Group mainly focused on analyzing the store location, sales and display of the existing display booths, and aimed at developing outlets with competitive edge to raise the product sales of the display booths in these stores. Currently, the total number of display booths reached 2,515.

Looking forward, apart from maintaining the leading position of products with competitive advantages in terms of sales, the Group aimed at increasing the brand equity and sales as well as upholding the sound development for its mainstream products by continuously increasing the penetration rate of distribution network and the coverage of products in different channels, and introducing different forms of promotion activities and expansion strategy of its bulk buying business. In the second half of 2012, Flying Eagle Wood Lok Medicated Oil will resume its sales, at the same time, the Group will continue to devote its efforts in expanding the coverage of Disney Band-Aid and enhance the sales and brand equity of this product, with an aim to breed Disney Band-Aid as a new mainstream product of the Group, and to further expand the revenue base of the Group

In order to further enhance the brand image of the "Kingworld Health Family", the Group has planned to launch advertising commercials during the most popular programs of Phoenix TV Chanel and Shenzhen TV. In the second half of the year, the Group will strictly filter the locations of the display booths and expand their scale, through which the total number of display booths will exceed 4,000. Furthermore, the Group will engage in an experimental cooperation with licensed e-Commerce companies for online sale of pharmaceuticals, in order to explore the ways and models to establish e-Commerce sales as well as new channels and new markets for sales.

Commenting on the future, Mr. Zhao Li Sheng concluded, "In response to such an unpredictable economy, the Group will closely monitor the change of economic position and policies within and outside China under the direction of the stated strategies of the Company. We will capitalize on the opportunities and risks arising in the industry, and leverage on our own advantages in brands and network. Looking ahead, the Group will introduce drugs or health care products from a number of channels so as to satisfy the demands from consumers in China, and to steer the stable development of the Group's businesses in the long-term, generating maximum returns for shareholders."

About Kingworld Medicines Group Limited

Kingworld Medicines Group Limited is principally engaged in the distribution of branded imported pharmaceutical and healthcare products in the PRC. The Group ranked among the top 100 importers of its kind in China in 2010 based on imported value. The Group managed a portfolio of 60 products under 10 different functional categories which are manufactured in Japan, Canada, Hong Kong, Taiwan, Thailand and the PRC and sourced from 13 different suppliers. Many of which are established brand names including Nin Jiom Pei Pa Koa, Taiko Seirogan, Kawai Liver Oil Drop series, Flying Eagle Wood Lok Medicated Oil, Imada Red Flower Oil, Kyushin Pill and Mentholatum series.