China Botanic first quarter net sales increase 24.4% to $28.1M

China Botanic Pharmaceutical Inc. (NYSE AMEX: CBP) ("China Botanic" or the "Company"), a developer, manufacturer and distributor of botanical products, bio-pharmaceuticals and Traditional Chinese Medicines ("TCM") in China, today announced financial results for the three months ended January 31, 2012.

First Quarter 2012 Highlights

• Net sales increased 24.4% year over year to $28.1 million
• Gross profit increased 25.4% to $17.3 million from $13.8 million in the first quarter of fiscal 2011
• Gross margin increased to 61.6% from 61.1% in the year ago period
• Net income rose 12.4% to $12.3 million, or $0.33 per diluted share, from $10.9 million, or $0.29 per diluted share, in the first quarter of fiscal 2011

First Quarter Fiscal Year 2012 Results

During the three months ended January 31, 2012, net revenue increased by 24.4% to $28.1 million from $22.6 million in the same period of 2011. The significant revenue growth was mainly due to price increases across all of the Company's products during the quarter and the increasing market recognition of the Company's Siberian Ginseng Series products and other new products, such as Ginseng and Venison Extract (launched in the fourth quarter of fiscal year 2010) and Badger Oil (launched in the first quarter of fiscal year 2011) as a result of China Botanic's marketing efforts. China Botanic is expecting to gain greater market acceptance in 2012 and beyond and anticipates that market demand for its products will continue to grow.

Gross profit increased 25.4% to $17.3 million compared to $13.8 million in the first quarter of fiscal 2011. Gross margin increased to 61.6% as compared to 61.1% in the same period last year. The slight increase in gross margin in the three months ended January 31, 2012 was primarily attributable to increased product pricing and decreased sales rebate from average 13.3% to 8.5% of gross sales, which was partly offset by increasing raw material costs. China Botanic anticipates the cost of raw materials will continue to increase in 2012 at a slow to moderate speed.

Operating expenses for the first three months of fiscal 2012 were $2.9 million, as compared to $2.2 million in the same period last year.

Sales and marketing expenses rose 19.7% to $1.6 million from $1.3 million a year ago, reflecting the Company's investment in advertising activities during the quarter to expand market recognition of the Company's botanic anti-depression series products. General and administrative expenses increased 58.6% to $1.0 million from $0.7 million in the year ago period. This increase was primarily attributable to increased spending on other service fees, amortization expenses, and consulting expenses. Research and development expenses were approximately $236 thousand, up 30.9% from approximately $181 thousand in the year ago period.

Operating income in the first quarter fiscal 2012 increased 24.1% to $14.5 million, compared to $11.7 million in the first quarter of fiscal 2011. Operating margin decreased slightly year-over-year to 51.4% from 51.5%.

The Company incurred income tax expenses of $2.2 million in the first quarter of fiscal 2012, compared to $0.7 million for the comparable period in 2011.  A 15% tax rate was imposed effective January 1, 2011.

Net income increased 12.4% year over year to $12.3 million, or $0.33 per diluted share, from $10.9 million, or $0.29 per diluted share for the same period a year ago.

Financial Condition

As of January 31, 2012, China Botanic had cash of approximately $21.4 million and total current assets of approximately $70.6 million. The Company had working capital of approximately $56.9 million on January 31, 2012, as compared to $40.8 million at the fiscal year end of October 31, 2011. The Company had no long-term debt on its balance sheet at the end of January 31, 2012. Shareholders' equity stood at $113.5 million, compared to $99.7 million as of October 31, 2011. Net cash flow from operating activities for the three months ended January 31, 2012 was $3.4 million compared to $1.3 million for the same period of 2011.

Business Outlook

For fiscal year 2012, China Botanic reaffirms its guidance of revenues of between $91.6 million and $93.1 million, representing an increase of 26% to 28% over fiscal year 2011 revenue of $72.7 million. Revenue growth is expected to be driven largely by sales volume increases from the existing product portfolio. The Company expects net income to be in the range of $32.7 million to $33.2 million, representing an increase of between 26% and 28% over fiscal year 2011 net income of $25.9 million.

"We are pleased to report double digit revenue and net income growth in the first quarter of fiscal year 2012. Our strong growth in sales, profitability, and operating cash flow during the quarter was largely driven by increase in our average selling prices, Siberian Ginseng Series products, Ginseng and Venison Extract product and Badger Oil product," said Mr. Shaoming Li, Chairman and Chief Executive Officer of China Botanic.  "Our Siberian Ginseng products exhibited strong year-over-year sales growth and accounted for 58% of our total revenue in the first quarter of fiscal year 2012 compared with 52% in the same period of last year.  This reflected our continued commitment to create awareness and promote our premier product, the Siberian Ginseng Series, and it will continue to remain our top priority in the future. In addition, our new product, Ginseng and Venison Extract, launched in the fourth quarter of fiscal year 2010 has established a strong foothold in the market and contributed 12.5% of our total sales in the first quarter of fiscal year 2012 compared with 9.4% of total sales in the same period of last year."