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Winner Medical Group (WWIN) Reports Preliminary Fourth Quarter Results

Yesterday, Winner Medical Group Inc., a China-based exporter and retailer of high-quality medical dressings and consumer products, reported preliminary unaudited consolidated financial results for the fourth quarter that ended on September 30th, 2011. These selected results are unaudited and subject to change.

Compared to last year’s results, Winner’s revenues increased by 46.7% to $41.4 million. Gross profit increased by 21.2% to $10.7 million, up from $8.8 million in the same period of the prior fiscal year. Additionally, gross margin decreased to 25.8% and net income decreased by 14.5% to $2.7 million. Basic and diluted net income-per-share were both $0.11 for the fourth quarter.

Winner’s medical product sales increased to $36.2 million, up from $25.1 million in the same quarter of 2010. The company attributes this to steady sales in Europe, North America and South America (especially Brazil). As a percentage of total sales, sales from medical products represented 87.5%, compared to 88.9% in the same quarter of last year. Sales generated from PurCotton® products increased to $5.2 million in the fourth quarter of fiscal year 2011, a 65.8% increase. As a percentage of total sales, PurCotton® products represented 12.5% in the fourth quarter.

Mr. Jianquan Li, Winner Medical chairman and CEO, commented, “We are pleased to report a revenue increase of 46.7% to $41.4 million for the fourth quarter of fiscal year 2011, driven by both our medical and PurCotton® businesses. Increased sales in various markets reflect customers’ growing recognition of our brand and demand for our products.”

Mr. Li continued, “During the quarter, we continued building up our retail channel for PurCotton® products and opened our 41st chain store, compared to 22 stores operating as of the fourth quarter 2010. All PurCotton® stores are located in major Chinese cities and their operations integrate with our online sales platform. This retail expansion has required the Company to make accompanying investments in operations to support growth, which reduced the Company’s net income for the quarter. However, we feel this investment will increase long-term value for our shareholders and will earn attractive returns over future quarters.”

Mr. Xiuyuan Fang, Winner Medical CFO, added, “Against the macro background of cotton price fluctuations, our gross profit continued to grow, yet pressure was put on the Company’s gross margin, which declined to 25.8% during the quarter. The decrease was driven by a higher average purchasing price of cotton, our primary raw material, as well as an increase in the volume of cotton consumed due to increased orders. As a strategic move, the Company decided to increase raw material inventory of relatively high-quality cotton to hedge against potential future price inflation and continue meet customers’ needs. However, we are pleased to see sales growth in our higher-margin PurCotton® retail business. Such growth is expected to improve the Company’s overall gross margin level in future periods.”

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