Revenue up by 16.9% YOY to $115 million, Winner Medical

Winner Medical Group Inc, a leading manufacturer of medical dressings, medical disposables and non-woven fabric made from 100% natural PurCotton products in China, reported consolidated financial results for the fourth quarter and full fiscal year ended September 30, 2010.

Mr. Jianquan Li, Chairman and Chief Executive Officer of Winner Medical, commented, "During the past year we made significant progress on several of our growth initiatives, which are evidenced in our full year results and stable gross margins. We are pleased with our full year results despite a challenging fourth quarter, a period where we experienced market effects from European debt crisis and rising raw material prices.

“Faced with these pressures, the Company increased its selling prices, to pass along raw material cost increases to customers, signed long term contracts with its raw material suppliers and entered into several cotton forward contracts to hedge future price fluctuations. During fiscal year 2010, we enhanced our production efficiencies and implemented more stringent cost controls, which enabled us to improve our margins and increase profitability.

"We are confident that the actions we have taken will yield further operating benefits during 2011. Our brand and competitive position continues to improve as rising commodity costs drive smaller competitors to reduce output. As we adjusted prices and gained additional market share by expanding distribution in China and abroad, we are confident in achieving our target of 20% to 30% revenue growth per annum," Mr. Li concluded.

Fourth Quarter 2010 Unaudited Financial Results

Net Sales
For the fourth quarter of fiscal 2010, Winner Medical reported net sales revenue of $28.2 million, an increase of 2.1% compared to the same period last year. The slight increase was mainly due to the fact that sales to North and South America remained robust, which was driven by increased orders from American and Brazilian clients. However, this sales was offset by the high price of cotton at certain points during the fourth quarter 2010.

In response, the Company increased its selling price to clients, who postponed orders as they relied on inventory for certain periods. Also, orders to Europe slowed as the debt crisis hit, and clients located in Greece and Spain in particular postponed or cancelled orders. As of December 8, 2010, most of the Company's clients have accepted adjusted selling prices.

Gross Profit
For the fourth quarter of fiscal 2010, gross profit was $8.8 million, an increase of 5.8% over $8.4 million in the same period of fiscal 2009. Gross margin was 31.3%, versus 30.2% in the fourth quarter of fiscal 2009. Winner Medical's gross margin remained unchanged due to progressively increasing its selling price. At the same time, the Company signed long term contracts with its raw material suppliers and purchased cotton futures contracts in the China futures exchange market, as a way to hedge against some of the volatility in the cost of cotton.

Selling, General and Administrative Expenses
Selling, general and administrative expenses increased by 13.7% to $5.6 million in the fourth quarter of fiscal 2010, from $5.0 million in the fourth quarter of fiscal 2009. This increase was mainly due to the increase in transportation fees, growth in its sales force and expenses related to the opening of PurCotton retail stores.

Income Taxes
The income tax provision for the three months ended September 30, 2010 was $0.1 million, compared to $0.9 million for the same period in 2009. This decrease was mainly due to an accrued tax provision of $0.6 million in the fourth quarter of 2009 and a tax loss of $0.2 million in the fourth quarter of 2010 for Shenzhen PurCotton Technology Co., Ltd., a wholly-owned subsidiary which was established on December 7, 2009.

Net Income Attributable to Winner Medical Group Inc
Net income attributable to Winner Medical Group Inc. increased by 5.9% to $3.1 million, or $0.13 per basic and diluted share, compared to net income of $2.9 million, or $0.13 per basic and diluted share, for the fourth quarter of last fiscal year. The slightly increase was mainly attributable to increases in selling prices in conjunction with rising cotton prices. At the same time, the Company adopted lean production management to reduce manufacturing unit cost and improve production efficiency.