American Oriental Misses - Analyst Blog
August 15 2011 - 6:39AM
Zacks
American Oriental Bioengineering’s (AOB) second
quarter 2011 earnings per share came in at $0.05, lower than the
Zacks Consensus Estimate and the year-ago earnings by $0.02 each.
Earnings in the second quarter of 2011 were hurt by lower
revenues.
American Oriental, based in Beijing, China, together with its
wholly-owned subsidiaries, is a pharmaceutical company which
develops, manufactures and commercializes both plant-based
pharmaceutical and plant-based nutraceutical products.
Quarter in Details
Revenues in the reported quarter declined 30% to $54.1 million.
Weakness in the manufacturing segment (down 31.8%) was responsible
for the slide in revenues. Revenues were well below the Zacks
Consensus Estimate of $82 million.
American Oriental earns revenue from two operating segments --
manufacturing and distribution. While the manufacturing business
accounted for approximately 93.6% (50.3 million) of the company’s
total revenue, the distribution business – Nuo Hua generated the
remaining revenues of $3.8 million.
American Oriental records manufacturing revenues from two
sources -- pharmaceutical and nutraceutical products. Sales from
the pharmaceutical product line declined approximately 36.2% to
$40.7 million. Sales of nutraceutical products decreased 4.0% to
$9.5 million in the reported quarter. The change in product mix
impacted revenues.
Gross margin declined to 47.8% from 51.5% in the year ago
quarter. Increased raw material prices coupled with the
implementation of new taxes and surcharge brought down the
margin.
Operating expenses in the reported quarter declined
approximately 36.4% to $19.6 million. Research and development
(R&D) expenses were almost flat at $3.1 million. Selling,
general & administrative expenses decreased 32.4% to $11.3
million.
American Oriental’s cost cutting initiatives resulted in the
decline. Advertising expenses plummeted 63.1% to $3.4 million due
to reduced promotion of over-the-counter drugs following the
company’s shift in strategy.
We currently have a Neutral recommendation on American
Oriental.
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