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Winner Medical reports results

March 6, 2012

Winner Medical Group Inc. a leading China-based exporter and retailer of high-quality medical dressings and consumer products made from 100% cotton, reported increased by 22.6% to $41.3 million from $33.7 million during the first quarter. Gross profit increased by 8.6% to $10.3 million from $9.5 million in the same quarter of the previous fiscal year.

Jianquan Li, chairman of the board of directors and chief executive officer of Winner Medical, comments, “During the past quarter, we achieved revenue growth in both our medical and PurCotton businesses. Sales in Europe, our largest market, increased 45.8% to $13.1 million in the first quarter of fiscal year 2012, despite the lower selling prices of certain products due to a challenging macro environment brought on by the European debt crisis and tightening budgets at hospitals. We are particularly encouraged by increasingly strong domestic sales in China, which reached $12.1 million in the three-month period ended December 31, 2011. As a percentage of revenue, sales in China increased to 29.3%, second only to Europe.”

Europe remained the company’s largest market with strong sales of $13.1 million, representing an annual increase of 45.8% from $9 million in the same quarter of fiscal 2011. In particular, sales generated from the U.K. and Sweden increased by 54.3% and 50.9%, respectively.

Meanwhile, sales in North and South America slightly decreased by 6.7% year-over-year to $8.2 million from $8.7 million. This was mainly due to decreased orders from certain customers who sought to reduce production costs in the economic recession and major customers in the U.S. adjusting procurement plans for certain medical dressing products.

Sales in Japan remained stable with a marginal year-over-year increase of 2.9% to $5.4 million from $5.3 million. The company believes that stability in its sales to the Japanese market is attributable to customers in Japan trying to maintain purchasing levels. As a percentage of total sales, Japan comprised 13.2% in the first quarter of fiscal 2012 compared to 15.7% in the same quarter of the previous year.

China has replaced North and South America to become the company’s second largest market. Domestic sales increased by 47.6% year-over-year to $12.1 million from $8.2 million, mainly driven by increased sales of  “Winner” branded medical products and “PurCotton” branded products. Sales of medical products in China increased to $4.9 million, representing a growth in sales of medical products of 30.5% compared to the same quarter of the previous fiscal year.

The existing four manufacturing lines for PurCotton jumbo rolls are operating at approximately 100% capacity due to demand. As a result, in December 2011 the company ordered two new PurCotton jumbo roll manufacturing lines. The sanitary napkin manufacturing line started trial production at the end of October 2011 and is currently running at approximately 50% of expected capacity, which is in line with management's expectation. In addition, two PurCotton baby diaper manufacturing lines have been installed and were expected to start trial production in February 2012. In January 2011, the company established Winner (Huanggang) Cotton Processing, Co. Ltd. to process seed cotton. The company expects that self-processing seed cotton will allow for more stringent quality control and reduced raw material costs, contributing to both the revenue and net income. This cotton processing line is currently meeting approximately 30% of the company’s annual cotton production needs.