Yangzhou, April 24, 2024/PRNewswire/ -- Meihua International Medical Technology Co., Ltd. (“MHUA” or the “Company”) (NASDAQ: MHUA), a reputable manufacturer and supplier of Class I, II, and Class III disposable medical devices with operating subsidiaries in China, today announced financial results for the full year ended December 31, 2023. All amounts below are in US dollars.

2023Financial highlights for the full year:

• Revenue remained stable in 2023 and fell slightly by 6% to $97.1 million, compared to $103.3 million in 2022. After deducting the impact of the RMB exchange rate, revenue in 2023 decreased by 1.5% compared to 2022.
• Gross profit in 2023 was US$33.2 million, compared to US$38.1 million in 2022.
• Gross margin fell slightly to 34% in 2023, compared to 37% in 2022.
• Operating profit in 2023 was US$14.7 million, compared to US$10.8 million in 2022.
• Net profit attributable to shareholders in 2023 was $11.6 million, compared to $6.2 million in 2022.

Mr. Liu Yongjun, chairman of the company, commented, “In 2023, the company's profitability and cash flow improved significantly, and the revenue remained relatively stable against the backdrop of China's domestic economic recovery falling short of expectations. The company's profit increased significantly, mainly due to our strategic initiatives to streamline and improve the company's operations, and once again focus on promoting the growth of high-end product sales. This year, our company not only integrated upstream and downstream medical industry resources through investment and acquisition of shares in two high-quality companies, Jiangsu Zhongxiang New International and Jiangsu Guomai Company (conditional pre-acquisition), including a new medical logistics platform system, supplier management system, and expanded sales channels. We have also invested in land near the Hainan Boao Medical Pilot Zone and are building a new medical industrial park. The project currently has four national licensing policies for the Hainan Medical Pilot Zone. The company will take advantage of this advantage to actively introduce new international products, such as supporting products for minimally invasive medical surgical robots, smart home hyperbaric oxygen chambers, and other product development in the C-end civilian market. We expect the overall project to be completed in early 2025. We believe this move will help Meihua International transition from the field of general consumables to high-quality consumables and a broader C-side track, and we are confident that next year's economic data will show clear results.

“The company's revenue in 2023 was $97.1 million, compared to $103.3 million in 2022. We are determined to improve operational efficiency and successfully achieved a 32.1% year-on-year reduction in operating expenses in 2023. Net profit increased 87.6% year over year to $11.6 million. At the same time, operating cash flow turned into an inflow of $2.3 million, compared to an outflow of $9.2 million in 2022.

“In 2023, we will work closely with 339 distributors in Europe, North America, Asia, South America, Africa and Oceania to better reach the global network for our products. Domestically, our network includes 3,424 distributors, which has helped us build brand awareness. We have also established strategic partnerships with over 540 hospitals and deepened our market influence and industry position through direct sales channels.”

Mr. Liu Yongjun added, “In the future, we will make full use of our extensive and diverse high-quality product portfolio, Hainan national policy dividends, and sales channels; vigorously develop intelligent medical products, one-stop logistics service platforms, expand our share in overseas markets such as the US, and further complete the overall strategic transformation of our Meihua Healthcare. The company will also increase investment in the application of artificial intelligence in new products and improving production efficiency to further enhance our core competitiveness, strengthen our market position and create long-term value for customers and shareholders through continuous operational improvements.”

2023Financial report for the full year:

revenues

Revenue in 2023 fell by $6.2 million, or 6%, to $97.1 million, compared to 2022 revenue of $103.3 million. The decline in revenue was mainly due to RMB depreciation and exchange rate fluctuations. Excluding exchange rate effects, the actual decline in total revenue was only 1.5%.

Operating costs

Operating costs mainly include material costs, direct labor costs, indirect costs, and other incidental expenses directly from the company's main business. Operating costs fell by $1.3 million, or 2%, to $63.9 million in 2023, compared to $65.2 million in 2022. Excluding some fixed costs, such as leasing expenses and the salaries of production department executives, the reduction in operating costs is basically the same as the decline in revenue.

Gross profit and gross profit margin

Gross profit in 2023 fell by US$4.9 million, or 13%, to US$33.2 million, compared to US$38.1 million in 2022. Gross margin fell to 34% in 2023, compared to 37% in 2022, mainly because some fixed costs did not fall directly in proportion to revenue.

Operating costs and expenses

Operating costs and expenses mainly include sales expenses, general and administrative expenses, and R&D expenses.

- Selling expenses

Sales expenses in 2023 increased by $200,000, or 3%, to $7.3 million, compared to $7.1 million in 2022. The increase in sales expenses is mainly due to the following reasons:

(a) The cost of meetings in 2023 decreased by $100,000, or 7 per cent, to $1 million, compared to $1.1 million in 2022. Conference expenses are mainly used for the company's market expansion, business development, business negotiations, medical exhibitions, and exhibition services. These expenses help the company promote products, develop markets and channels, strengthen customer contacts, and establish long-term stable cooperative relationships;

(b) Transportation costs fell by $300,000, or 10%, to $2.3 million in 2023, compared to $2.6 million in 2022. The decline in transportation costs is mainly due to the decline in customer order demand;

(c) The cost of compensation and benefits fell by $100,000, or 7%, to $1.4 million in 2023, compared to $1.5 million in 2022. The decline in compensation and benefits is mainly due to the decline in sales team salary and benefits, which is in line with the decline in revenue.

(d) Consultancy fees for 2023 and 2022 were $800,000 and zero, respectively. The company signed a contract with a consulting company on October 12, 2023 to analyze the company's main basic medical consumables sales channel expansion and robotic surgery system market research in the US and other related overseas markets.

- General and administrative expenses

General and administrative expenses decreased by US$5.9 million, or 48%, to US$6.5 million in 2023, compared to US$12.5 million in 2022. The decrease in general and administrative expenses was mainly due to the following reasons: (a) the 2023 service fee fell by $5.9 million to $1.3 million, compared to the 2022 service fee of $7.2 million, mainly due to the reduction in investment advisory fees in 2023; (b) the 2023 surtax fee decreased by $60,000, or 9%, to $590,000 compared to the 2022 surtax fee; (c) the 2023 conference fee fell by $40,000, or 4%, to $810,000 compared to the 2022 meeting fee; (d) Compensation and benefits expenses increased by $80,000 to $1.44 million in 2023, compared to $1.36 million in 2022.

- R&D expenses

R&D expenses fell by US$200,000, or 7%, to US$2.8 million in 2023, compared to US$3 million in 2022. The decline in R&D costs is mainly due to a decrease in sample manufacturing costs. However, R&D funding is still basically at the same level as last year.

Operating profit

Due to these factors, operating profit increased by USD 3.9 million in 2023, or 36%, to USD 14.7 million, compared to USD 10.8 million in 2022.

net profit

Net profit in 2023 increased by US$5.4 million, or 88%, to US$11.6 million, compared to 2022 net profit of US$6.2 million.

Recent business summary

On January 8, 2024, Jiangsu Huadong, a wholly-owned subsidiary of MHUA, made a conditional pre-acquisition of Jiangsu Guomai Medical Technology Co., Ltd. The acquisition has already paid an advance payment of 9.03 million US dollars, and the pre-purchase share ratio is 40%; it is expected that the acquisition will finally be completed on December 17, 2024 after both parties have reached the evaluation conditions. The acquisition of Jiangsu Guomai will greatly enhance Meihua International's overall logistics distribution capabilities and the overall influence of upstream and downstream medical consumables, thereby increasing Meihua's gross sales margin.

On February 26, 2024, the company announced the restructuring of its subsidiaries. Rehabilitation International Medical Co., Ltd., a subsidiary of MHUA, transferred 55% of its shares in Hainan Guoxie Technology Group Co., Ltd. to Jiangsu Huadong Medical Devices Industrial Co., Ltd. Jiangsu Huadong will retain 45% of the shares of the Hainan National Association and sell the remaining 10% to Yangzhou Boxin Medical Devices Co., Ltd. to a third party at a consideration of 1.4 million US dollars. Its Hainan project has completed land development and is undergoing the main construction of a new office building and factory building. It is expected to be basically put into operation by early 2025. The Hainan project will enjoy preferential national policies after the customs closure of Hainan Island, and introduce and produce new products such as components related to surgical robots and intelligent hyperbaric oxygen chambers. After launch, it will bring new business growth points to Meihua International Healthcare.

On January 2, 2024, the company announced that it has completed the registered direct issuance with authorized institutional investors as previously disclosed, purchased the first batch of 6 million US dollars of securities, issued a 7% original issuance discount advanced convertible promissory note and a 5-year common stock purchase warrant of no more than $50.5 million to purchase 1,205,255 shares of the company's common shares, which can be exercised at a price of $2.99 per common share in simultaneous private placement. The total proceeds are approximately US$5.58 million.

About Meihua International Medical Technology Co., Ltd

Meihua International Medical Technologies Co., Ltd. (Meihua International Medical Technologies Co., Ltd.) It is a well-known manufacturer and supplier of Class I, Class II and Class III disposable medical devices in China, with operating subsidiaries in China. The company produces and sells Class I disposable medical consumables such as eye drop bottles, medicine bottles, artificial anal bags, etc., as well as Class II and Class III disposable medical devices such as identification wristbands, gynecological examination kits, surgical examination kits, surgical kits, medical brushes, medical dressings, masks, disposable infusion pumps, electronic pumps, puncture packs, etc., and distributes disposable medical devices purchased from other manufacturers as agents. The company has passed international “CE” certification and ISO 13485 system certification, and has registered more than 20 products with the US FDA (registration number: 3006554788). The company has served hospitals, pharmacies, medical institutions and medical equipment companies for more than 30 years. More than 800 products are sold domestically, and more than 120 products are exported to more than 30 countries, all over Europe, North America, South America, Asia, Africa and Oceania.

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Forward-looking statements

The statements in this press release regarding the Company's future expectations, plans and prospects constitute forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements about plans, goals, goals, strategies, future events, expected results, assumptions, and any other factual statement that has not occurred. Any textual statement involving “may,” “will,” “should,” “believe,” “expect,” “expect,” “estimate,” “estimate,” or similar unfactual text, particularly relating to the company's listing on the NASDAQ global market and completion of the offering, shall be considered a forward-looking statement. Due to various factors, actual results may differ materially from historical results or what is stated in these forward-looking statements. These factors include, but are not limited to, the company's strategic goals, the company's future plans, market demand and user acceptance of the company's products or services, technology updates, economic trends, the company's reputation and brand, the impact of industry competition and bidding, relevant policies and regulations, fluctuations in China's macroeconomic situation, the international market situation of the company's services, and related risks and related assumptions disclosed in the prospectus. For these reasons and other related reasons, we recommend investors not to blindly rely on such forward-looking statements, and we urge investors to check the relevant company documents on the SEC website to obtain other factors that may affect the company's future operating results. The Company is under no obligation to publicly amend changes to these forward-looking statements due to specific events or reasons after these documents have been reported.

Investors and media should contact:

Investor Relations Department
Email: secretary@meihuamed.com
Tel: +86-0514-89800199

Christensen
Song Yang
Email: yang.song@christensencomms.com
Tel: +86-010-59001548