Tiens financial report 2008

Tiens Biotech Group (USA) announced financial results for the third quarter and nine months ended September 30, 2008.

For the third quarter ended September 30, 2008, revenue was $26.2 million, an increase of 137.6% compared to $11.0 million for the third quarter ended September 30, 2007.

Net income for the third quarter of 2008 was $14.5 million, an increase of 377.0% compared to $3.0 million for the same period in 2007.

The increase in revenue for the third quarter of 2008 reflects an increase in revenue for both China and internationally.

For the third quarter of 2008, revenue in China was $14.6 million, an increase of 330.1% compared to $3.4 million for the same period in 2007. During the third quarter, Tianshi Engineering, the affiliated company which markets and sells Tiens' products in China, announced plans to increase the prices of its products in October 2008. Tiens believes that the increase in revenue in the third quarter was due in part to customers stocking up on certain products as a result of the price increase announcement by Tianshi Engineering. Therefore, the increase in sales may not continue through the fourth quarter of 2008. At the present time, however, the price increase of Tianshi Engineering products will not affect the price at which Biological sells to Tianshi Engineering.

For the third quarter of 2008, international revenue was $11.6 million, an increase of 52.1% compared to $7.6 million for the same period in 2007. The increase in international sales reflects further reductions in export restrictions by China for countries in Africa and Asia through the third quarter of 2008.
In August 2007, China's Administration of Quality Supervision, Inspection and Quarantine ("AQSIQ") announced an ongoing national campaign in China against unsafe food and substandard products. The special campaign against poor product quality was launched in response to a series of safety scares involving Chinese products worldwide. The campaign set 20 detailed goals, including twelve "100 percents". For example, 100 percent of food producers should be licensed; 100 percent of agricultural wholesale markets in cities must be monitored; 100 percent of suppliers of raw materials for exported products should be inspected; and 100 percent of agricultural products must be free of five types of strong pesticides. The campaign, which was originally scheduled to finish at the end of 2007, is currently scheduled to continue throughout 2008.
As a result of this campaign by the AQSIQ, there has been a general slow- down and backlog of export clearances for Chinese food products, and, from August 2007 through the first quarter of 2008, Tiens experienced significant delays in obtaining export clearance for all of the products which we sell to our international affiliates. Beginning in the second quarter of 2008, these export restrictions were reduced for exports to countries in Africa and Asia, but remained in place for exports to countries in Europe and the Americas. During the third quarter of 2008, these export restrictions were further reduced.
For the nine months ended September 30, 2008, revenue was $58.7 million, an increase of 41.1% compared to $41.6 million for the nine months ended September 30, 2007.
For the nine months ended September 30, 2008, net income was $22.8 million, an increase of 56.5% compared to $14.6 million for the same period in 2007.
For the nine months ended September 30, 2008, revenue in China was $29.2 million, an 85.5% increase compared to $15.7 million for the same period in 2007. The growth in revenue during the third quarter was offset by a 15% decrease in revenue in China during the first quarter of 2008. During the first quarter of 2008, Tiens believes that sales in China were negatively impacted by continued uncertainty in China regarding the impact of recently enacted direct selling regulations and uncertainty regarding the timing of the direct selling license application process and approval.
For the nine months ended September 30, 2008, international revenue was $29.5 million, an increase of 14.0% compared to $25.8 million for the same period in 2007. This increase in international revenue was mainly due to an increase in sales in Russia and Indonesia.
Other Highlights
Cost of sales for the third quarter of 2008 increased $113.8% to $6.6 million, compared to $3.1 million for the same period in 2007. This increase was mainly due to the increase in revenue for the period. Cost of sales for the period increased at a lower rate than revenue primarily due to the increase in sales of products sold to Tianshi Engineering which have a lower cost compared to products sold to overseas companies.
For the nine months ended September 30, 2008, cost of sales increased 40.7% to $16.9 million, compared to $12.0 million for the same period in 2007. This increase was in line with the increase in revenue for the period and was due to both the increase in sales and the increase in the value of the renminbi against the dollar.
Gross profit for the third quarter of 2008 increased 146.8% to $19.6 million, compared to $7.9 million for the same period in 2007. For the nine months ended September 30, 2008, gross profit increased 41.3% to $41.8 million, compared to $29.4 million for the same period in 2007. The gross profit margin for the third quarter of 2008 was 74.8%, compared to 72.0% for the same period in 2007. This increase reflects the increase in proportion of sales with higher gross profit margins. For the nine months ended September 30, 2008, the gross profit margin was 71.3% compared to 71.2% for the same period in 2007. The increase in gross profit margin during the third quarter was offset by a 4.2% decrease during the first quarter of 2008.
Selling, general and administrative expenses were $4.6 million for the third quarter of 2008, an increase of 18.5% compared to $3.9 million for the same period in 2007. The increase was primarily due to increases in salary expense and research and development. Selling, general and administrative expenses as a percentage of sales was 17.4% for the third quarter of 2008 compared to 34.9% for the same period in 2007. For the nine months ended September 30, 2008, selling, general and administrative expenses were $12.9 million, an increase of 22.8% compared to $10.5 million in the same period in 2007. For the nine months ended September 30, 2008, selling, general and administrative expenses as a percentage of sales was 22.0%, compared to 25.3% for the same period in 2007. This decrease reflects the increase in sales.
In China, Tiens sells its products to Tianshi Engineering, an affiliated Chinese company. In order to qualify for a direct selling license in China, Tianshi Engineering is required to produce a part of the products that it sells in China. As a result, in 2006, Tiens began to sell semi-finished products to Tianshi Engineering, which jointly shares licenses with Tiens to produce, manufacture and sell the products. The semi-finished products, which Tiens is now exclusively selling in China, have lower sales prices than the finished products Tiens had previously sold to Tianshi Engineering. The application of Tianshi Engineering for a direct selling license in China is still pending.
Tiens continues to strive to expand its market share in China through the branches, chain stores, and Chinese affiliated companies of Tianshi Engineering. To enhance its position in this competitive market, Tianshi Engineering continues to increase its marketing activities in China, including opening additional branches across China, developing a nation-wide advertising campaign, encouraging media coverage and strengthening the Tiens brand.
As of September 30, 2008, Tiens had $101.5 million of retained earnings and total shareholders' equity of $143.6 million.
Jinyuan Li, Chairman, President and CEO of Tiens, said, "We are extremely pleased with the significant increase in both our domestic and international revenue and continued sequential growth since the first quarter of 2008. We continue to benefit from reduced international export restrictions and are optimistic that our international sales will further increase as additional export restrictions are lifted. We are well positioned to capitalize on our growing international customer base and remain committed to gaining greater market share in China for our high quality products as well."
About Tiens Biotech Group (USA), Inc.
Tiens Biotech Group (USA), Inc. (NYSE Alternext US: TBV) conducts its business operations from Tianjin, People's Republic of China. Tiens primarily engages in the research, development, manufacturing, and marketing of nutrition supplement products, including wellness products and dietary supplements.
Tiens derives its revenues principally from product sales to affiliated companies in China and internationally in 52 countries. Since its establishment, Tiens has developed and produced 33 nutrition supplements, which include wellness products and dietary supplements. Tiens develops its products at its own product research and development center, which employs highly qualified professionals in the fields of pharmacology, biology, chemistry and fine chemistry. Tiens has obtained all required certificates and approvals from government regulatory agencies to manufacture and sell its products in China.
In China, Tiens conducts the marketing and sales of its products through its affiliated company, Tianshi Engineering. Tianshi Engineering markets and sells Tiens' products in China through chain stores, domestic affiliated companies, and its 100 branches. Outside of China, Tiens sells its products to affiliated companies in 52 countries who in turn sell through an extensive direct sales force, or multi-level marketing sales force. The Company's direct sales marketing program is subject to governmental regulation in each of these countries.
Certain statements in this press release constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. Such forward- looking statements are not necessarily indicative of future financial results, and may involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company, to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. The Company's future operating results are dependent upon many factors, including but not limited to:

(i) the Company's ability to obtain sufficient capital or a strategic business arrangement to fund its expansion plans;

(ii) the Company's ability to build the management and human resources and infrastructure necessary to support the growth of its business;

(iii) competitive factors and developments beyond the Company's control;

(iv) whether the Company continues to experience delays in the export clearance of its products;

(v) whether Tianshi Engineering, the Company's affiliate which sells its products in China, obtains a direct selling license in China; and

(vi) other risk factors discussed in the Company's periodic filings with the Securities and Exchange Commission.
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