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China-Biotics Reports Gains in FY2009

16 July 2009 900 views No Comment

China-Biotics, Inc. (NSDQ: CHBT) reported positive financial results for its 2009 fiscal year, which ended in March. Sales rose 28% to $54.2 million, and non-GAAP net income climbed 19% to $16.9 million, a very healthy margin of 31%.

Revenues were in line with analysts’ expectations, but net income, which equates to 99 cents per diluted share, beat the street estimate of 83 cps.

The company makes probiotic products, which it sells OTC (often through its own stores) and as bulk additives. China-Biotic’s Shining Essence product was responsible for 40% of revenues.

The report was one of those rare examples of non-GAAP earnings being lower than the GAAP numbers. The non-GAAP results did not include a $3.1 million fair market gain in the value of convertible notes. Adding in that gain brings net income up to $20 million or $1.17 cps.

Somewhat controversially, China-Biotics does not include 2.1 million in potential shares from its $25 million convertible note in its per-share calculations. The conversion price is $12, which is over the present price, but the possibility of conversion certainly exists as the shares of China-Biotics are trading currently at $10.20. Without those potential shares, China-Biotics lists 17 million shares outstanding.

China-Biotics also announced that it has completed construction of a new facility in Qingpu with capacity of 150 metric tons annually, which will serve the bulk additive segment of the probiotic market. Trial production is scheduled to begin in Q2 of China-Biotics’ fiscal year, and the company expects revenues from the plant to begin in Q3. Most of its additive production is sold to dairy, food, pharmaceutical, and animal feed manufacturers. The company said it has signed contracts with sixteen commercial customers.

On March 31, 2009, China-Biotics reported cash of $71 million and working capital of $55 million. It generated $23.1 million in cash flow from operations during fiscal 2009, and spent $17.5 million in capital expenditures, mostly to build its new manufacturing facility.

Although China-Biotics did not issue official financial guidance for its 2010 year, analysts project a further 40% gain in revenues during the year to about $74 million.

Initially, China-Biotics’ share price climbed higher in reaction to the earnings announcement, but the stock could not hold the gains and slipped lower in mid-session. It dropped 25 cents to $10.20, giving China-Biotics a price/earnings ratio of 10.3 and a market capitalization of $174 million.

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