HONG KONG, Sept. 19 Shanghai Century (Amex: SHA), aspecial purpose acquisition company, today announced that Sichuan KelunPharmaceutical Co., Ltd (Kelun), China's largest producer of intravenous (IV)solution products, has provided Shanghai Century with unaudited financialhighlights with respect to the consolidated results of operations of Kelun andits subsidiaries and variable interest entity (Kelun Group) for the first halfof 2007.
As previously announced on May 29, 2007, Shanghai Century entered into adefinitive agreement to acquire Kelun, China's largest producer of intravenous(IV) solution products, and on August 16, 2007, filed a preliminary proxystatement with the U.S. Securities and Exchange Commission seeking approvalfrom its shareholders.
In preparing Kelun Group's consolidated results of operations for the sixmonths ended June 30, 2006 and 2007, the results of the 11 new operatingsubsidiaries and a new variable interest entity acquired by Kelun inMarch/April 2007 pursuant to its corporate restructuring were not included inthe 2006 first half results but were included in the 2007 first half resultsfrom their respective dates of acquisition.
Kelun achieved sales of approximately RMB 691 million (US$90.8 million) inthe first half of 2007, up approximately 63% from RMB 425 million (US$55.8million) in the first half of 2006. According to Kelun, the 2007 increase insales was attributed to (1) an increase in sales volume following thecompletion of the acquisition of the above mentioned operating entities inMarch/April 2007, which accounted for approximately 39% of the increase, (2)an increase in sales volume with respect to Kelun and its other operatingentities and (3) a change in product mix towards higher priced and highermargin products. Gross margin recorded in the first half of 2007 wasapproximately 20%.
Net income after tax and minority interests for the first half of 2007 wasapproximately RMB 65 million (US$8.5 million). This net income excludedapproximately RMB 3 million (US$0.4 million) of pre-acquisition profits of the12 operating entities and also profits of approximately RMB 12 million (US$1.6million) with respect to a fair value adjustment to the inventories of these12 operating entities at their respective dates of acquisition when applyingthe purchase method in accounting for the acquisition of such entities. Ifthese two profit adjustments were added back, net income for the first half of2007 would amount to approximately RMB 80 million (US$10.5 million) orapproximately 11.6% of sales. Due to the seasonality of Kelun's business anddemand patterns in Kelun's main market, the People's Republic of China (PRC),and taking into account the full six months impact of the 12 operatingentities in the second half of 2007, Kelun expects sales in the first sixmonths of 2007 to approximate 42% of the full year sales.
Commenting on the results, Mr. Liu Gexin, Chairman of Kelun said: "Ourresults for the first six months of the year demonstrate a continued strongperformance. In particular, we are seeing growing market demand in China forIV solution products, particularly PP bottles, non-PVC soft bags and upright-standing PP soft bags, due to a rise in living standards and new governmentpolicies to improve healthcare nationally. We will continue to expandcapacity to further leverage our branded market-leading products. "
About Shanghai Century Acquisition Corporation
Shanghai Century is a special purpose acquisition company formed in April2005 for the purpose of acquiring, through a merger, asset acquisition orother similar business combination, or controlling, through contractualarrangements, an operating business having its primary operations in the PRC.
In April 2006, Shanghai Century raised US$115 million through an initialpublic offering on the American Stock Exchange. Shanghai Century's