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Zungui Haixi reports strong revenue growth of 34%
May '11
Zungui Haixi Corporation, a China-based manufacturer of sportswear and casual footwear, announced its financial results for the three and nine months ended March 31, 2011. All amounts are in Canadian dollars unless otherwise indicated.

“We are very pleased to report a continuation of our strong growth for the quarter which is a product of the continued success the ZUNGUI brand is realizing in new and existing markets,” said Mr. Yanda Cai, Chief Executive Officer.

“In addition to continued strong revenue growth of 34%, we grew our earnings per share and improved our gross margin while continuing to make substantial investments in our future, including expending significant resources in marketing our brand, developing our corporate store network and incentivizing our distributors. We have begun construction on our new ten storey building and are working diligently to complete the upgrades on our five existing productions lines that will supplement our production capacity.”

Highlights for the Third Quarter and Year-To-Date:

• Diluted earnings per share (“EPS”) of 9 cents for the quarter compared to 8 cents for the same quarter last year;
• Excluding the increased advertising expenses of $1.4 million and subsidy provisions of $1.4 million, EPS would have been 12 cents or a 44% increase over the same quarter last year;
• Revenue increased 34% to $44.6 million for the quarter and 26% to $142.9 million for the year-to-date;
• In RMB, revenue increased 36% to RMB 297.8 million for the quarter and 30% to RMB 941.0 million for the year-to-date;
• Revenue before subsidies increased 38% to $46.2 million for the quarter and 30% to $148.8 million for the year-to-date;
• Gross margin improved to 27.2% for the quarter compared to 26.7% for the same quarter last year;
• Added 30 net new distributor owned retail outlets compared to 15 in the same quarter last year;
• Opened 3 net new corporate-owned retail outlets in the quarter;
• Corporate-owned retail outlets reported third quarter revenue of $2.9 million ($5.2 million year-to-date) compared to $0.1 million ($0.3 million year-to-date) for the same quarter last year reflecting a start up phase of development;
• Selling expenses increased $3.2 million in the quarter compared to the same quarter last year primarily due to increased advertising expenditures of $1.4 million and operating expenses of the corporate stores of $1.4 million;
• Net income increased 4% to $5.4 million for the quarter and decreased 5% to $17.4 million for the year-to-date on increased subsidy provisions to distributors and selling expenses; and,
• Diluted EPS of 28 cents for the year-to-date compared to 34 cents for the same period last year on a 14% increase in the weighted average number of shares outstanding in the period and increased advertising expenses and subsidy provisions of $9.7 million which impacted the EPS by 12 cents.

On a trailing 12 month basis, the Company's revenue was $193.5 million, net income was $26.0 million and diluted EPS was 42 cents.

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 Corporation

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Courtesy: Commonwealth Bank of Australia

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