Shineco, Inc. Reports Second Quarter of 2018 Financial Results

BEIJING, Feb. 13, 2018 /PRNewswire/ -- 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, today announced its financial results for the second quarter ended December 31, 2017.

Mr. Yuying Zhang, Chairman and Chief Executive Officer of Shineco, commented, "We are proud of all that we have accomplished in the first two quarters of our fiscal year and are pleased to report the second quarter of 2018 financial results with a 26.3% increase in net income as compared to the second quarter of 2017. We believe that our investment in our Apocynum Industrial Park and Institute of Chinese Apocynum Industrial Technology Research continues to strengthen the long-term outlook of Shineco as a positive long-term investment. In the short term we have seen tremendous growth in our Luobuma product line and are pleased that we have grown to become a high margin business, with revenues grown 327% compared to the second quarter ended December 31, 2016, and have achieved impressive results following our expansion over this past year. The past six months have been immensely positive for Shineco and we are excited to tackle the challenges and opportunities that the next six months will bring, as we anticipate continued future growth in our revenues and net income."

Second Quarter of 2018 Financial Highlights

• Revenues increased by 25.9% to $14.13 million for the three months ended December 31, 2017 from $11.22 million for the same period of last year, mainly due to increases in sales from Luobuma products and Chinese medicinal herbal products and partially offset by decreased sales from other agricultural products.
• Gross profit increased by 21.9% to $4.82 million for the three months ended December 31, 2017 from $3.95 million for the same period of last year. Gross margin decreased by 1.1 percentage points to 34.1% from 35.2% for the same period of last year.
• Net income attributable to Shineco increased by 26.3% to $3.60 million, or $0.17 per basic and diluted share, for the three months ended December 31, 2017 from $2.85 million, or $0.14 per basic and diluted share, for the same period of last year. The increases in net income earnings per share were primarily a result of the increase in gross profit, partially offset by the increase in general and administrative expenses.

Second Quarter of 2018 Financial Results

Revenues

Revenues for the three months ended December 31, 2017 increased by $2.91 million, or 25.9%, to $14.13 million from $11.22 million for the same period of last year, mainly due to increases in sales from Luobuma products and Chinese medicinal herbal products and partially offset by decreased sales from other agricultural products.

Revenues from Luobuma products increased by $2.98 million, or 327.0%, to $3.89 million for the three months ended December 31, 2017 from $0.91 million for the same period of last year, mainly due to establishment of new subsidiary, Xinjiang Taihe, which generated revenue of $2.93 million.

Revenues from Chinese medicinal herbal products increased by $0.17 million, or 4.8%, to $3.66 million for the three months ended December 31, 2017 from $3.50 million for the same period of last year. The increase was primarily due to more fulfilled sales orders from customers for the three months ended December 31, 2017 than the same period in 2016.

Revenues from other agricultural products decreased by $0.23 million, or 3.4%, to $6.58 million for the three months ended December 31, 2017 from $6.82 million for the same period of last year. The decrease was mainly due to the decrease in revenue of storage services, partially offset by the increased sales of yew trees.

Gross profit and Gross Margin

Total cost of goods sold increased by $2.04 million, or 28.1%, to $9.31 million for the three months ended December 31, 2017 from $7.27 million for the same period of last year. Gross profit increased by $0.86 million, or 21.9%, to $4.82 million for the three months ended December 31, 2017 from $3.95 million for the same period of last year. Overall gross margin decreased by 1.1 percentage points to 34.1% for the three months ended December 31, 2017, compared to 35.2% for the same period of last year.

Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 51.7%, 24.6%, and 29.0%, respectively, for the three months ended December 31, 2017. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 51.0%, 29.1%, and 36.4%, respectively, for the same period of last year.

Operating income

Selling expenses increased by $0.05 million, or 9.6%, to $0.55 million for the three months ended December 31, 2017 from $0.50 million for the same period of last year, primarily due to the acquisition of new subsidiary, Tajite, in October, and increased promotion expenses, partly offset by decreased rent expense of warehouses and service fees of e-commerce websites. General and administrative expenses increased by $0.10 million, or 11.2%, to $1.03 million for the three months ended December 31, 2017 from $0.92 million for the same period of last year. The increase in general and administrative expenses was due to the incorporation of new subsidiaries, Tiankunrunze, Xinjiang Taihe and Tajite in 2017. As a result, total operating expenses increased by $0.15 million, or 10.7%, to $1.58 million for the three months ended December 31, 2017 from $1.43 million for the same period of last year.

Operating income increased by $0.71 million, or 28.2%, to $3.24 million for the three months ended December 31, 2017 from $2.53 million for the same period of last year. Operating margin was 22.9% for the three months ended December 31, 2017, compared to 22.5% for the same period of last year.

Net income

Net income increased by $0.68 million, or 23.6%, to $3.58 million for the three months ended December 31, 2017 from $2.90 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the three months ended December 31, 2017 was $3.60 million, or $0.17 per basic and diluted share. This compared to net income attributable to common shareholders of $2.85 million, $0.14 per basic and diluted share, for the same period of last year.

Six Months Ended December 31, 2017 Financial Results

Revenues

Revenues for the six months ended December 31, 2017 increased by $4.35 million, or 24.7%, to $21.94 million from $17.59 million for the same period of last year, mainly due to increases in sales across all the products.

Revenues from Luobuma products increased by $3.29 million, or 199.4%, to $4.93 million for the six months ended December 31, 2017 from $1.65 million for the same period of last year, mainly due to revenue generated by a new subsidiary, Xinjiang Taihe, of $2.93 million and increased sales volume of our health awareness related products. The Company also enhanced online sales promotions during the six months ended December 31, 2017, which contributed to more sales.

Revenues from Chinese medicinal herbal products increased by $0.25 million, or 3.8%, to $6.93 million for the six months ended December 31, 2017 from $6.68 million for the same period of last year. The increase was primarily due to more fulfilled sales orders from customers.

Revenues from other agricultural products increased by $0.81 million, or 8.8%, to $10.08 million for the six months ended December 31, 2017 from $9.27 million for the same period of last year. The increase was mainly due to the increase in sales volume of yew trees since the public realized the air purification function of the yew trees.

Gross profit and Gross Margin

Total cost of goods sold increased by $3.31 million, or 28.3%, to $15.04 million for the six months ended December 31, 2017 from $11.72 million for the same period of last year. Gross profit increased by $1.04 million, or 17.7%, to $6.91 million for the six months ended December 31, 2017 from $5.87 million for the same period of last year. Overall gross margin decreased by 1.9 percentage points to 31.5% for the six months ended December 31, 2017, compared to 33.4% for the same period of last year.

Gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products were 50.1%, 23.1%, and 28.4%, respectively, for the six months ended December 31, 2017. This compared to gross margins for Luobuma products, Chinese medicinal herbal products, and other agricultural products of 50.4%, 26.0%, and 35.6%, respectively, for the same period of last year.

Operating income

Selling expenses decreased by $0.04 million, or 4.2%, to $0.85 million for the six months ended December 31, 2017 from $0.88 million for the same period of last year, primarily due to decreased rent expense of warehouses, salary expenses, and service fees of e-commerce websites, partially offset by increased promotion expenses. General and administrative expenses increased by $0.47 million, or 33.3%, to $1.86 million for the six months ended December 31, 2017 from $1.40 million for the same period of last year. The increase in general and administrative expenses was primarily due to the incorporation of new subsidiaries, Tiankunrunze, Xinjiang Taihe and Tajite in 2017, as well as increased professional service fees, such as attorney's fees, consulting fees and auditing fees.

Operating income increased by $0.61 million, or 17.0%, to $4.20 million for the six months ended December 31, 2017 from $3.59 million for the same period of last year. Operating margin was 19.1% for the six months ended December 31, 2017, compared to 20.4% for the same period of last year.

Net income

Net income increased by $0.56 million, or 13.2%, to $4.84 million for the six months ended December 31, 2017 from $4.28 million for the same period of last year. After the deduction of non-controlling interests, net income attributable to common shareholders for the six months ended December 31, 2017 was $4.85 million, or $0.23 per basic and diluted share. This compared to net income attributable to common shareholders of $4.20 million, $0.21 per basic and diluted share, for the same period of last year.

Financial Condition

As of December 31, 2017, the Company had cash of $29.35 million, compared to $23.15 million as of June 30, 2017. Working capital as of December 31, 2017 was $44.27 million as compared to $39.69 million at June 30, 2017. Net cash provided by operating activities was $7.78 million for the six months ended December 31, 2017, compared to net cash used in operating activities of $0.15 million for the same period of last year. Net cash used in investing activities was $0.49 million for the six months ended December 31, 2017, compared to $2.78 million for the same period of last year. Net cash used in financing activities was $1.47 million for the six months ended December 31, 2017, compared to net cash provided by financing activities of $5.79 million for the same period of last year.

About Shineco, Inc.

Incorporated in August 1997 and headquartered in Beijing, China, Shineco, Inc. ("Shineco" or the "Company") is a Delaware holding company that uses its subsidiaries' and variable interest entities' 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 the Company, please visit www.tianyiluobuma.com.

Forward-Looking Statements

This 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