China Yongxin said that the increase in net income was primarily related to higher margin sales and was largely due to an increase in gross profit resulting from a change in the composition of products sold, specifically, an increase in retail product sales.
China Yongxin posted net revenues of $47.58m, a decrease of 19.5%, compared to $59.11m for the year ago period. The decrease in total revenue was due to the transition of the company’s sales strategy, which, because of the uncertain direction of the National Medical Policy, had been refocused from the wholesale business to the retail and medical facilities sector.
However, China Yongxin was able to reduce the cost of sales to net sales percentage from approximately 80% in 2008 to 66% in 2009 due to a change in product mix in which the proportion of products sold with higher profit margins increased, such as cosmetics and certain health and nutritional products.
The company improved its gross profit margin by approximately 37.2% from $11.9m to $16.3m. The increase in gross margins was primarily due to higher margin retail and medical facilities sales.
Operating expenses were $7.1m, compared to $6m. Selling expenses remained at approximately the same level, at $3.5m. General and administrative expenses for 2009 increased approximately 43% to $3.6m, compared to $2.5m in 2008. The majority of the increase was related to litigation which was recently concluded.
Income from operations was approximately $9.2m, an increase from the $5.9m for 2008. Operating margins were 18% and 9.8% for 2009 and 2008, respectively. A substantial portion of the increase resulted from the expansion of the hospital market business and the increase of the sale of the health care, cosmetic and nutrition products as well as medical facilities sales.
Yongxin Liu, chairman and CEO of China Yongxin, said: “Our income growth in 2009 indicates that our business model has placed the company in a strong position to take positive advantage of increased government support of health care and the continued expansion of the economy in China.”