Zungui Haixi Corporation
TSX VENTURE : ZUN

Zungui Haixi Corporation

September 30, 2010 07:00 ET

Zungui Haixi Reports Year End Fiscal 2010 Financial Results

TORONTO, ONTARIO--(Marketwire - Sept. 30, 2010) - Zungui Haixi Corporation (TSX VENTURE:ZUN), a China-based manufacturer of sportswear and casual footwear, today announced its financial results for the fourth quarter and year ended June 30, 2010. All amounts in this release are in Canadian dollars unless otherwise indicated. 

"Our fourth quarter and fiscal year 2010 results reflect strong growth in both our revenue and net income," indicated Mr. Yanda Cai, Chief Executive Officer. "Our financial results continue to demonstrate consistent performance and we are pleased to have this opportunity to update shareholders on our progress."

"We have seen further growth in the number of retail outlets with 1,931 retail outlets in the network as at September 30, 2010 comparing to 1,682 retail outlets when we went public in December, 2009. During the last year, we have produced over 11 million pairs of shoes from both internal and outsourced manufacturing capacity, a 38% increase over the prior year. We are pleased by the performance of Mr. Li since his appointment as Chief Operating Officer."

Mr. Yanda Cai further continued, "we are reviewing our brand positioning to continue to keep pace with the changes in fashion trends and will launch a new brand strategy for our sports shoes in November. In conjunction with this, we will launch a more expansive advertising campaign developed with external support and disburse more of the funds raised during the initial public offering." 

Highlights for the Fourth Quarter and Year:

  • Revenue increased 14% to $50.6 million for the quarter and 18% to $163.9 million for the year;
  • In RMB, revenue increased 31% to RMB 335.8 million for the quarter and 30% to RMB 1,061.3 million for the year ended June 30, 2010;
  • Gross margin of 28.4% for the fourth quarter and 27.2% for the year ended June 30, 2010 compared to 27.1% and 26.9% for the comparative periods of 2009, respectively;
  • Net income increased 12% to $8.6 million for the quarter and 17% to $27.0 million for the year ended June 30, 2010;
  • Net income increased 27% to RMB 57.0 million for the quarter and 29% to RMB 174.6 million for the year ended June 30, 2010;
  • Diluted earnings per share of 14 cents compared to 15 cents for the same quarter last year based on a 25% increase in the weighted average number of shares outstanding in the period; and,
  • Diluted earnings per share increased 4% to 48 cents for the year compared to 46 cents for the last year on a 13% increase in the weighted average number of shares outstanding in the period.

The results were impacted by the movement of the Chinese currency relative to the Canadian dollar. During the fourth quarter ended June 30, 2010 the average foreign exchange rate used to convert one Chinese Renminbi ("RMB") was 0.1506 expressed in Canadian dollars compared to 0.1707 for the same quarter of 2009. If the 2010 fourth quarter results were converted at the prior year's average exchange rate for the quarter, 2010 fourth quarter earnings per share would have been 16 cents. For the year end June 30, 2010, the average foreign exchange rate used to convert one RMB was 0.1545 expressed in Canadian dollars compared to 0.1698 for the same period last year. If the fiscal year 2010 results were converted at the prior year's average exchange rate for 2009, 2010 full year earnings per share would have been 53 cents, resulting in a 14% increase in earnings per share. 

Audited Consolidated Financial Statements and Management's Discussion and Analysis

The Company's audited consolidated financial statements for the year ended June 30, 2010 and Management's Discussion and Analysis for the same period can be found on the Company's website at www.zunguihaixi.com and www.sedar.com

Conference Call

Zungui will host a conference call to discuss the fourth quarter results at 9am (EDT) September 30, 2010. The details are as follows:

Dial-in number: 1-800-446-4472 or 416-695-7848
Taped rebroadcast (until midnight on October 14, 2010): 1-800-408-3053
Taped replay access passcode: 1754237

About Zungui Haixi

Zungui Haixi Corporation, through its wholly owned subsidiaries, is engaged in the manufacture and sale of athletic footwear, apparel and accessories, and also casual footwear, in the People's Republic of China. Both product lines are marketed under the ZUNGUI brand. Zungui Haixi distributes its products to consumers throughout China through an extensive network of retail outlets which exclusively carry ZUNGUI branded products. There are 62,259,500 common shares issued and outstanding. The corporate website is www.zunguihaixi.com.

Caution Regarding Forward-Looking Statements

Certain statements in this press release contain forward-looking information that involve risk and uncertainties. Statements other than statements of historical fact contained in this press release may be forward-looking statements within the meaning of certain securities laws, including, without limitation, statements involving management's expectations, intentions and beliefs concerning the domestic PRC sportswear industry, the competitive landscape in this industry and the general economy, statements regarding the future financial position or results of the Company, business strategies, proposed acquisitions, growth opportunities, budgets, litigation, projected costs and plans and objectives of or involving the Company. Such statements should be considered forward-looking statements, Wherever possible, words such as "may", "would", "could", "will", "anticipate", "believe", "plan", "expect", "intend", "estimate", "aim", "endeavour", "project", "continue" and similar expressions have been used to identify forward-looking statements.

These forward-looking statements reflect management's current beliefs and business judgement with respect to future events and are based on information currently available to management. Forward-looking statements involve significant known and unknown risks, uncertainties and assumptions, and you should not place undue reliance on these forward-looking statements. Although management believes its current beliefs and assumptions are reasonable, many factors could cause Zungui's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, without limitation, those listed in the "Risk Factors" section of the Company's other filings with Canadian securities regulatory authorities at www.sedar.com. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements prove incorrect, actual results, performance or achievements could vary materially from those expressed or implied by the forward-looking statements contained in this press release. The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement. These forward-looking statements are made as of and speak as of the date of this press release and the Company does not intend to, or assume any obligation to, update or revise these forward-looking statements to reflect new information, events, results or circumstances or otherwise after the date on which such statement is made as to reflect the occurrence of unanticipated events, except as required by law, including securities laws. 

Zungui Haixi Corporation

Consolidated Balance Sheets

[Expressed in thousands of Canadian Dollars]
 
    June 30, 2010       June 30, 2009
Current assets            
  Cash $ 85,876     $ 23,757
  Accounts receivable, net   34,128       22,202
  Prepaid expenses   343       510
  Inventories   3,498       2,984
  Other receivables   1,331       1,234
  Future income taxes   58       61
Total current assets   125,234       50,748
             
Property, plant and equipment   6,470       5,331
Total assets $ 131,705     $ 56,079
             
Current liabilities            
  Accounts payable and accrued liabilities $ 30,288     $ 15,624
  Bank loan   -       511
  Taxes payable   4,974       4,287
  Due to related party   440       482
Total current liabilities   35,702       20,904
             
Shareholders' equity            
  Share capital   33,451       -
  Paid-in capital   -       -
  Contributed surplus   3,282       1,174
  Surplus reserve funds   4,774       1,938
  Retained earnings   56,161       32,021
  Accumulated other comprehensive income (loss)   (1,665 )     42
Total shareholders' equity   96,003       35,175
             
Total liabilities and shareholders' equity $ 131,705     $ 56,079
               
               
Zungui Haixi Corporation  
Consolidated Statements of Income and Comprehensive Income  
[Expressed in thousands of Canadian Dollars, except per share data]  
               
    Three Months Ended       Year Ended  
      June 30,        June 30,  
    2010       2009       2010       2009  
                       
                               
Revenue $ 50,553     $ 44,349     $ 163,885     $ 138,730  
Cost of sales   36,187       32,316       119,373       101,323  
Gross profit   14,366       12,033       44,512       37,407  
Selling expenses   762       725       2,325       3,234  
Research and development expenses   223       166       761       484  
General and administrative expenses   1,309       741       3,705       2,135  
Foreign exchange loss   198       -       198       -  
Other income, net   (84 )     (19 )     (100 )     (52 )
    2,408       1,613       6,889       5,801  
Income before income taxes   11,958       10,420       37,623       31,606  
                               
Income tax expense   3,383       2,823       10,647       8,559  
                               
Net income   8,575       7,597       26,976       23,047  
Other comprehensive income (loss):                              
Unrealized gain(loss) on foreign currency translation of self-sustaining operations   4,259       (2,415 )     (1,707 )     1,654  
                               
Comprehensive income $ 12,834     $ 5,182     $ 25,269     $ 24,701  
                               
Basic and diluted earnings per share $ 0.14     $ 0.15     $ 0.48     $ 0.46  
                               
Weighted average number of shares outstanding   62,259,500       50,000,000       56,403,055       50,000,000  
                               
 
Zungui Haixi Corporation
Consolidated Statements of Shareholders' Equity
[Expressed in thousands of Canadian Dollars]
               
    Three months ended       Year ended  
     June 30,        June 30,  
    2010       2009       2010       2009  
                               
Share Capital                              
Balance, beginning of period $ 33,451     $ -     $ -     $ -  
Issuance of share capital   -       -       35,318       -  
Stock based compensation expense   -       -       (1,867 )     -  
Balance, end of period $ 33,451     $ -     $ 33,451     $ -  
                               
Paid-in Capital                              
Balance, beginning of period $ -     $ 1,174     $ -     $ 1,174  
Reorganization of capital   -       (1,174 )     -       (1,174 )
Balance, end of period $ -     $ -     $ -     $ -  
                               
Contributed Surplus                              
Balance, beginning of period $ 3,168     $ 1,174     $ 1,174     $ -  
Reorganization of capital   -       -       -       1,174  
Stock based compensation expense   114       -       2,108       -  
Balance, end of period $ 3,282     $ 1,174     $ 3,282     $ 1,174  
                               
Retained Earnings                              
Balance, beginning of period $ 50,422     $ 24,424     $ 32,021     $ 8,974  
Net income   8,575       7,597       26,976       23,047  
Transfer to surplus reserve funds   (2,836 )     -       (2,836 )     -  
Balance, end of period $ 56,161     $ 32,021     $ 56,161     $ 32,021  
                               
Surplus Reserve Fund                              
Balance, beginning of period $ 1,938     $ 1,938     $ 1,938     $ 1,938  
Transfer from retained earnings   2,836       -       2,836       -  
Balance, end of period $ 4,774     $ 1,938     $ 4,774     $ 1,938  
                               
Accumulated Other Comprehensive Income                              
Balance, beginning of period $ (5,924 )   $ 2,457     $ 42     $ (1,612 )
Other comprehensive income (loss)   4,259       (2,415 )     (1,707 )     1,654  
Balance, end of period $ (1,665 )   $ 42     $ (1,665 )   $ 42  
                               
Total Shareholders' Equity $ 96,003     $ 35,175     $ 96,003     $ 35,175  
               
 
Zungui Haixi Corporation
Consolidated Statements of Cash Flows
[Expressed in thousands of Canadian Dollars]
               
    For the Three Months Ended       For the Year Ended  
    June 30,       June 30,  
    2010       2009       2010       2009  
Cash flows from operating activities                              
  Net income $ 8,575     $ 7,597     $ 26,976     $ 23,047  
  Items not affecting cash:                              
    Depreciation   261       121       601       487  
    Future income taxes   8       (22 )     (2 )     (30 )
    Provision for doubtful accounts   99       75       144       111  
    Stock based compensation   114       -       242       -  
    Loss on disposal of property, plant and equipment   33       -       33       -  
  Changes in non-cash working capital                              
    Accounts receivable   (8,951 )     (7,809 )     (13,702 )     (9,433 )
    Prepaid expenses   126       63       123       (285 )
    Inventories   1,496       2,009       (747 )     (638 )
    Other receivables   (77 )     (39 )     (195 )     (154 )
    Accounts payable and accrued liabilities   13,066       674       15,689       3,502  
    Taxes payable   1,483       1,328       1,121       798  
Net cash provided by operating activities   16,233       3,997       30,283       17,405  
                               
Cash flows from investing activities                              
  Property, plant and equipment   (1,840 )     -       (2,198 )     (9 )
  Proceeds from sale of equipment   12       -       12       -  
Net cash used in investing activities   (1,828 )     -       (2,186 )     (9 )
                               
Cash flows from financing activities                              
  Proceeds from bank loans   -       -       -       443  
  Repayment of bank loans   (452 )     -       (463 )     (443 )
  Due to related party   -       (2 )     (111 )     440  
  Increase in share capital, net   -       -       35,318       -  
Net cash provided by financing activities   (452 )     (482 )     34,744       440  
                               
Effect of exchange rate changes on cash   3,673       (744 )     (722 )     897  
                               
Net increase in cash   17,626       2,296       62,119       18,733  
                               
Cash, beginning of the period   68,250       21,461       23,757       5,024  
Cash, end of the period $ 85,876     $ 23,757     $ 85,876     $ 23,757  
                               
Supplemental disclosure of cash information                              
  Interest paid in cash $ 6     $ 7     $ 24     $ 38  
  Income taxes paid in cash   1,901       1,544       9,631       7,773  

Contact Information

  • Zungui Haixi Corporation
    Ms. Shelly Gobin
    Chief Financial Officer
    647-726-0192