Navigation Links
China Nepstar Chain Drugstore Reports Second Quarter 2011 Financial Results
Date:8/23/2011

SHENZHEN, China, Aug. 23, 2011 /PRNewswire-Asia-FirstCall/ -- China Nepstar Chain Drugstore Ltd. (NYSE: NPD) ("Nepstar" or the "Company"), the largest retail drugstore chain in China based on the number of directly operated stores, today announced its unaudited financial results for the second quarter ended June 30, 2011.

Financial HighlightsFor the quarter ended June 30, 2011:

  • Revenue increased by 7.3% to RMB606.6 million (US$93.8 million), compared to revenue of RMB565.2 million in the second quarter of 2010.
  • Same store sales increased by 9.8% over the same period in 2010.
  • Gross margin was 47.8%.
  • Net income was RMB6.5 million (US$1.0 million).
  • Net cash flow from operations was RMB42.6 million (US$6.6 million).

  • Mr. Simin Zhang, Chairman of the Board of Nepstar, commented, "Our merchandise diversification efforts continue to help mitigate the negative impact of price cuts imposed by government on pharmaceutical products. During the quarter, we achieved a 9.8% increase in same store sales compared to that in the second quarter of 2010. While we are expanding our revenues, we remain focused on optimizing our product mix, both in pharmaceutical categories and in non-pharmaceutical categories, to protect gross margins."

    "Driving revenue growth and remaining competitive with an optimal product mix remain the central themes of our strategy at this stage," continued Mr. Zhang. "We are encouraged that our existing customers are attracted to the new product categories we have introduced so far and we are utilizing this opportunity to highlight service quality and the overall shopping experience in an effort to improve average spending per customer visit and same store productivity."

    Second Quarter ResultsDuring the second quarter of 2011, the Company opened 18 new stores and closed 40 stores. As of June 30, 2011, Nepstar had a total of 2,511 stores in operation.

    Revenue for the quarter increased by 7.3% to RMB606.6 million (US$93.8 million), compared to revenue of RMB565.2 million for the same period in 2010. Increase in sales of non-pharmaceutical products continued to reduce the negative impact on drug sales from ongoing healthcare reform that has led to price cuts and the diversion of patients from drugstores.

    Second quarter revenue contribution from prescription drugs was 19.1%, OTC drugs was 35.2%, nutritional supplements was 19.1%, traditional Chinese herbal products was 3.8% and convenience and other products was 22.8%.

    Same store sales (for 2,239 stores opened before December 31, 2009) for the second quarter of 2011 increased by 9.8% compared to the same period in 2010. This growth was mainly attributable to increased sales of non-pharmaceutical products.  

    Nepstar's portfolio of private label products included 1,818 products as of June 30, 2011. Sales of private label products represented approximately 31.3% of revenue and 42.3% of gross profit for the second quarter of 2011. The Company continued to make efforts to provide high-quality yet reasonably-priced private label products in the convenience products category. In the second quarter, private label products' contribution to sales of the convenience products category reached 27.2%, helping maintain a reasonably favorable gross profit margin level on sales of convenience products.

    Second quarter gross profit was RMB289.9 million (US$44.9 million), compared to RMB283.2 million in the same period of 2010. Gross margin in the second quarter of 2011 was 47.8%, compared to 50.1% in the second quarter of 2010 and 47.7% in the first quarter of 2011. The decrease in gross margin year over year was mainly due to mandatory price cuts on pharmaceuticals and changes in revenue mix as the Company introduced more convenience products with a lower gross margin.

    Sales, marketing and other operating expenses as a percentage of revenue in the second quarter of 2011 decreased to 41.8% compared to 42.7% in the second quarter of 2010. This decrease was primarily due to higher sales revenue generated from the merchandise diversification strategy and rigorous cost control efforts.

    General and administrative expenses as a percentage of revenue in the second quarter of 2011 were 4.6%, remaining stable compared to the second quarter of 2010.

    As the result of the factors discussed above, income from operations in the second quarter of 2011 was RMB8.2 million (US$1.3 million) compared to a loss of RMB12.6 million in the second quarter of 2010. The loss in the second quarter of 2010 was due to a one-time non-recurring penalty charge in the amount of RMB26 million (US$3.8 million) imposed by State Administration of Foreign Exchange of the People's Republic of China (the "SAFE penalty").

    Interest income for the second quarter was RMB5.6 million (US$0.9 million), compared to RMB5.3 million in the second quarter of 2010. The increase in interest income was mainly due to an increase in interest rates set by the Chinese government in the first half of the year. Dividend income from cost method investments was RMB0.9 million (US$0.14 million) for the second quarter of 2011, compared to RMB0.03 million in the second quarter of 2010. Equity in income of an equity method investee was a loss of RMB0.4 million (US$0.06 million), compared to an income of RMB1.5 million in the second quarter of 2010.

    Nepstar's effective tax rate was 55.1% for the second quarter of 2011, compared to -130.2% for the same period in 2010. The negative effective tax rate for the second quarter of 2010 was primarily a result of the non-deductible SAFE penalty recorded in the second quarter of 2010.

    Net income for the second quarter of 2011 was RMB6.5 million (US$1.0 million), which represented RMB0.06 (US$0.01) basic and diluted earnings per American depositary share ("ADS"). This compares to a net loss of RMB13.4 million, which represented RMB0.12 basic and diluted loss per ADS in the same period in 2010. The total number of outstanding ordinary shares of the Company as of June 30, 2011 was 207.7 million. The weighted average number of ordinary shares in the second quarter of 2011 was 207.8 million. Each ADS represents two ordinary shares of the Company.

    As of June 30, 2011, Nepstar's total cash, cash equivalents and bank deposits were RMB1.003 billion (US$155.2 million) and its shareholders' equity was RMB1.377 billion (US$213.0 million).

    In the second quarter of 2011, net cash flow from operations was RMB42.6 million (US$6.6 million).

    Business Outlook"Entering into the second half of 2011, we typically enjoy some seasonal benefit from higher sales of cold and flu remedies as well as nutritional supplements, heading into the fall and winter. However, government policy remains a challenge. The recently announced price cut by the National Development and Reform Commission over certain pharmaceuticals will become effective on September 1st, affecting a total of 295 medicines including 290 prescription drugs and five OTC drugs Nepstar currently carries in our stores.

    "We do believe that the Chinese healthcare sector reform will ultimately reset the competitive landscape of the entire drug supply chain in China. In the meantime, we are doing our best to strategize on ways to optimize our product offerings and sustain the momentum we have achieved to date," concluded Mr. Zhang.

    Conference Call InformationThe Company will host a conference call, to be simultaneously webcast, on Tuesday, August 23, 2011 at 8:00 a.m. Eastern Time / 8:00 p.m. Beijing Time. Interested parties may participate in the conference call by dialing +1-877-407-9210 (North America) or +1-201-689-8049 (International) approximately five minutes before the call start time.  A live web cast of the conference call will be available on the Nepstar website at www.nepstar.cn.

    A replay of the call will be available shortly after the conclusion of the conference call through August 30, 2011 at 11:59 p.m. Eastern Time or August 31, 2011 at 11:59 a.m. Beijing Time. An archived webcast of the conference call will be available on the Nepstar website at http://www.nepstar.cn.  Interested parties may access the replay by dialing +1-877-660-6853 (North America) or +1-201-612-7415 (International) and entering account number 286 and conference ID number 376909.

    About China Nepstar Chain Drugstore Ltd.China Nepstar Chain Drugstore Ltd. (NYSE: NPD) is China's largest retail drugstore chain based on the number of directly operated stores. As of June 30, 2011, the Company had 2,511 stores across 74 cities, one headquarter distribution center and 14 regional distribution centers in China. Nepstar uses directly operated stores, centralized procurement and a network of distribution centers to provide its customers with high-quality, professional and convenient pharmacy services and a wide variety of other merchandise, including OTC drugs, nutritional supplements, herbal products, personal care products, family care products, and convenience products including consumables. Nepstar's strategy of centralized procurement, competitive pricing, customer loyalty programs and private label offerings has enabled it to capitalize on the robust economic growth in China and to take advantage of the demographic trend in China to achieve a strong brand and leading market position. For further information, please go to http://www.nepstar.cn.

    Safe Harbor StatementThis press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the quotations from management in this press release and the Company's strategic operational plans and business outlook, contain forward-looking statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

    Exchange Rate InformationThe United States dollar (US$) amounts disclosed in this press release are presented solely for the convenience of the reader. Translations of amounts from RMB into United States dollars for the convenience of the reader were calculated at the certified exchange rate of  US$1.00 = RMB6.4635 on June 30, 2011 as set forth in the H.10 weekly statistical release of the Federal Reserve Board.  No representation is made that the RMB amounts could have been, or could be, converted into US$ at that rate on June 30, 2011, or at any other date. The percentages stated are calculated based on RMB amounts.

    ContactsLucia Qian
    China Nepstar Chain Drugstore Ltd.
    Vice President, IR
    Phone: +86-755-2641-4065
    Email: qianrt@nepstar.cn

    Dixon Chen
    Grayling
    Investor Relations
    Tel: +1-646-284-9403
    Email: dixon.chen@grayling.com

    Ivette Almeida
    Grayling
    Media Relations
    Tel: +1-646-284-9455
    Email: ivette.almeida@grayling.com

    Tables FollowChina Nepstar Chain Drugstore Ltd.Unaudited Condensed Consolidated Statements of Operations(amounts in thousands – except per-share data)Three-month period endedJune 30, 2010June 30, 2011June 30, 2011RMB

    RMB

    USDRevenue

    565,216

    606,580

    93,847Cost of goods sold

    (281,990)

    (316,663)

    (48,992)Gross profit

    283,226

    289,917

    44,855Sales, marketing and other operating expenses

    (241,427)

    (253,567)

    (39,231)General and administrative expenses

    (28,863)

    (28,115)

    (4,350)Other expense

    (25,540)

    -

    -(Loss) / Income from operations

    (12,604)

    8,235

    1,274Interest income

    5,279

    5,621

    870Dividend income from cost method investments

    31

    934

    144Equity in income of an equity method investee

    1,475

    (391)

    (60)(Loss) / Income before income tax expense

    (5,819)

    14,399

    2,228Income tax expense

    (7,576)

    (7,940)

    (1,228)Net (loss) / income attributable toChina Nepstar Chain Drugstore Ltd.

    (13,395)

    6,459

    1,000Basic (loss) / earnings per ordinary share(0.06)0.030.005Basic (loss) / earnings per ADS

    (0.12)

    0.06

    0.01Diluted (loss) / earnings per ordinary share(0.06)0.030.005Diluted (loss) / earnings per ADS

    (0.12)

    0.06

    0.01China Nepstar Chain Drugstore Ltd. Unaudited Condensed Consolidated Balance Sheets(amounts in thousands)As ofAs ofAs ofDecember 31,June 30,June 30,201020112011RMBRMBUSDASSETSCurrent assets:Cash, cash equivalents and bank deposits

    1,139,796

    1,003,247

    155,217Restricted cash

    5,000

    -

    -Accounts receivable, net of allowance for doubtful accounts

    83,722

    81,023

    12,535Amounts due from related parties

    12,358

    3,410

    528Prepaid expenses, deposits and other current assets

    127,750

    119,972

    18,562Inventories

    433,265

    408,171

    63,150Deferred tax assets

    3,551

    2,358

    365Total current assets

    1,805,442

    1,618,181

    250,357Non-current assets:Property and equipment, net

    192,019

    171,584

    26,547Rental deposits

    41,811

    40,901

    6,328Cost method investments

    12,638

    12,638

    1,955Equity method investment

    35,151

    35,779

    5,535Land use right

    8,227

    -

    -Intangible assets, net

    2,919

    3,248

    502Goodwill

    51,089

    51,819

    8,017Deferred tax assets

    1,813

    2,195

    340Deposits for acquisitions

    2,000

    1,000

    155Total non-current assets

    347,667

    319,164

    49,379TOTAL ASSETS

    2,153,109

    1,937,345

    299,736LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities:Accounts payable

    313,773

    296,434

    45,863Amounts due to related parties

    24,461

    17,659

    2,732Accrued expenses and other payables

    131,330

    110,036

    17,024Income tax payable

    52,520

    62,838

    9,722Dividend payable

    -

    29,076

    4,499Deferred income

    26,102

    15,147

    2,343Total current liabilities

    548,186

    531,190

    82,183Non-current liabilities:Deferred income

    18,794

    18,334

    2,837Deferred tax liabilities

    16,922

    11,100

    1,717Total non-current liabilities

    35,716

    29,434

    4,554Total liabilities

    583,902

    560,624

    86,737Shareholders' equity:Share capital

    164

    164

    25Treasury stock

    -

    (4,797)

    (742)Additional paid-in capital

    1,501,809

    1,296,371

    200,568Accumulated other comprehensive loss

    (41,563)

    (40,895)

    (6,327)Retained earnings

    108,797

    125,878

    19,475Total shareholders' equity

    1,569,207

    1,376,721

    212,999TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

    2,153,109

    1,937,345

    299,736
    '/>"/>

    SOURCE China Nepstar Chain Drugstore Ltd.
    Copyright©2010 PR Newswire.
    All rights reserved

    Related medicine technology :

    1. HUYA Bioscience Intl Announces Clinical Trial Milestones in China for Promising New Anti-Arrhythmic Compound; Data Supports Desirable Safety Profile
    2. HUYA Bioscience Intl Announces World-Class Clinical Advisory Team for New Anti-Arrhythmic Compound Sourced From China
    3. HUYA Bioscience Intl Announces First Pre-IND Outcome for a Development Stage Compound Sourced From China - HBI-8000, Promising New Cancer Compound
    4. HUYA Bioscience Intl Announces Pre-IND Outcome for HBI-3000 - Promising Anti-Arrhythmia Compound Sourced From China
    5. China Sky One Medical, Inc. Announces 26 New Drugs in Clinical Trials
    6. RHEI Pharmaceuticals Announces the Initiation of the Final Clinical Study for Approval of Tibozole in China
    7. Varian Medical Systems to Exhibit Cancer Treatment and X-ray Imaging Technologies at China Med Exhibition
    8. China Sky One Medical, Inc. Achieves Significant Breakthrough in Research for Sudden Cardiac Death (SCD) Early Examination Kit
    9. China Animal Welfare Law Under Review While 36,000 Dogs Culled
    10. China-Biotics, Inc. Prices $69 Million Public Offering of Common Stock
    11. Clifford Chance Advises Pfizer on Conditional Clearance in China of Its Merger with Wyeth
    Post Your Comments:
    *Name:
    *Comment:
    *Email:
    (Date:6/23/2016)... -- Research and Markets has announced the addition ... - Forecast to 2022" report to their offering. ... to date financial data derived from varied research sources to ... potential impact on the market during the next five years, ... of sub markets, regional and country level analysis. The report ...
    (Date:6/23/2016)... Research and Markets has announced the addition of ... their offering. The current ... environment for MedImmune to enter. The US ageing population creates ... drive considerable growth for effective anti-influenza medications. The introduction of ... but development is still in its infancy. ...
    (Date:6/23/2016)... , , , WHEN: ... , , , , LOCATION: , , , Online, with ... , EXPERT PANELISTS:  , , , Frost & Sullivan,s Global Vice ... Senior Industry Analyst, Divyaa Ravishankar and Unmesh Lal, Program Manager , ... industry is witnessing an exceptional era. Several new demand spaces, such ...
    Breaking Medicine Technology:
    (Date:6/24/2016)... ... ... a crisis. Her son James, eight, was out of control. Prone to extreme mood shifts ... upset him, he couldn’t control his emotions,” remembers Marcy. “If there was a knife ... and say he was going to kill them. If we were driving on the ...
    (Date:6/24/2016)... ... June 24, 2016 , ... Comfort Keepers® of San Diego, CA is excited ... To Recovery® program to drive cancer patients to and from their cancer treatments. ... highest quality of life and ongoing independence. Getting to and from medical treatments ...
    (Date:6/24/2016)... (PRWEB) , ... June 24, 2016 , ... ... Living, is proud to recognize Dr. Barry M. Weintraub as a prominent plastic ... most beautiful women in the world, and the most handsome men, look naturally ...
    (Date:6/24/2016)... ... June 24, 2016 , ... Venture Construction Group (VCG) sponsors ... on June 20th at the Woodmont Country Club at 1201 Rockville Pike, Rockville, Maryland, ... to helping service members that have been wounded in battle and their families. Venture ...
    (Date:6/24/2016)... ... 24, 2016 , ... To succeed under value-based payments, healthcare ... unsure how to move forward, given the need to sustain current operations. PYA ... to an organization’s specific needs. , PYA Principal Martie Ross states, “Healthcare providers ...
    Breaking Medicine News(10 mins):