Final Results

Taihua plc

("Taihua" or the "Company" and with its subsidiaries the "Group)

Annual Results for the 12 months ended 31 December 2009

Chairman's Statement

The period under review, proved to be a difficult year for Taihua. The results for the full year showed a RMB 1.641 million loss on sales of RMB 21.422million, which was disappointing. However, we saw a recovery in H2 with a 64% upturn in sales on H1 (RMB 13.308million v RMB 8.114million)

The loss at year end was as a result of a number of accruals, which had not been provided for during the course of the year. Gross Margins were slightly higher in H2 compared to H1. Despite this, the Company's cash position remains strong with RMB86.625million, an increase of RMB4.19million over 2008.

A key success for the Company in 2009 was the achievement of the approval from the European Directorate for Qualitative Medicine ("EDQM") for the sale of Paclitaxel into Europe. This is strategically important as it opens up a large and potentially lucrative market. Since the approval the management of Taihua, have had discussions with a number of potential partners with experience of distributing Active Pharmaceutical Ingredients ("API"s) into the European market. This is taking longer than anticipated, predominately because the Board are keen to ensure the partner is appropriate to work alongside Taihua, and the potential distributors need to ensure that the Company's facilities and processes meet European GMP standards. These potential distributors appear particularly cautious regarding the distribution of APIs , such as Paclitaxel, and the review process of the Company's facilities and systems is taking longer than expected.

As soon as a distribution partnership is established there are a number of different opportunities in the European market that Taihua could exploit, including both the supply of basic Paclitaxel and the supply of injectable Pacliataxel. Supply of basic Paclitaxel, whilst lucrative, is only a small percentage of the total supply price of the product and the Board will endeavour to seek opportunities to capture a larger share of the total supply price

Supply statistics for Paclitaxel (all kg) were as follows:

We are encouraged by the recovery in sales volumes in 2009 H2.

Supply Statistics for Homoharringtonine (all kg) were as follows:

We are similarly encouraged by the recovery in Sales volumes in 2009 H2.

Our existing markets for Paclitaxel are Russia and South America. Homoharringtonine is sold within the PRC. In these markets we have experienced significant competitive pressures, which has meant that the Company needed to reduce prices in order to continue to compete. Paclitaxel was sold at an average price of RMB769/gram a 21% reduction on 2008 prices. Homoharringtonine was sold at an average price of RMB1,709/gram a 29% reduction on 2008 prices.

However, pricing stabilised during 2009 with H2 prices being similar to those charged in H1

A summary of the 2009 Sales and Gross Margins by product is as follows (all figures RMB 000's):

2008 Comparable figures are as follows:

On the face of it, these numbers show a disappointing adverse performance. However, I am encouraged by the twin impacts of the bottoming out of volumes in 2009 H1, followed by a recovery in volumes in H2 and by the opportunities presented by the European approval and the access this gives to a lucrative volume market

The Board remains fully committed to the exploitation of the market opportunities presented by both Paclitaxel and Homoharringtonine. The past two years have been challenging but the Directors believe there is clear evidence to show that the low point was reached in 2009 H1; since that date there has been price stability and a significant upturn in sales volumes. During this difficult trading period the Board has succeeded in generating positive cashflows ,which provides the Company with resources to enable it to exploit opportunities as and when they arise.

Traditional Chinese Medicines ("TCM")

Revenues on TCMs fell by 9% to RMB3.66million in 2009 compared to 2008. However, the Company is actively investigating opportunities to expand its portfolio of products in this area. The Shang Luo region of Shanxi where the Company is located is a key area for natural herbs. The Company believes that the long term prospects for TCMs are good and will invest in opportunities that will enable us to capture a significant share of this market. Our location and our size gives us advantages over other potential competitors

Operations

Paclitaxel's main raw material is the yew tree. The Group currently purchases this product from third parties. In order to reduce the Group's reliance on these suppliers the Group has been developing its own plantations. 50,000 seedlings were planted in 2007 and 65,000 in 2008. The Group require approximately 15,000 mature trees to produce 1kg of Paclitaxel per year so the Board believes the Group will be able to meet 7.6kg of demand internally in the future based on current plantings. The Group will increase its cultivation in future years to further reduce the reliance on 3rd parties, reduce production costs and increase gross margin.

Cephalotaxus sinensis, the Chinese Yew is the main raw material used in the production of Homoharringtonine. This is supplied under contract by Luonan Taichang, a company representing local farmers. Given the relative abundance and free availability of this plant, the Company does not consider it appropriate to develop its own supply.

I would like to take the opportunity to thank our outgoing Non-Executive Chairman, Richard Tanner, and Non-Executive Director, Lauren Lau for their hard work in helping to bring the Company to its current position.

In summary, the past 2 years have been challenging with a difficult worldwide economic environment suppressing demand and therefore profitability. I am encouraged by the stabilisation in pricing in 2009 H2 and by the significant improvement in sales volumes in the same period.

EDQM approval presents us with a major opportunity to take the business into a larger Paclitaxel market which, we believe, will be lucrative.

Our mature TCM portfolio will also be added to when opportunities on favourable terms present themselves. The Company has significant cash reserves and will use these to generate returns for its shareholders.

Nicholas Lyth

Chairman

Annual General Meeting

The Company's Annual General Meeting will be held at Halliwells LLP, 1 Threadneedle Street, London, EC2R 8AY on 30 June 2010 at 10am.

The Annual Report and Accounts will be dispatched to shareholders on, or before, 4 June 2010 and a copy will be available for the Companies website www.taihplc.com 

For more information please contact:

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2009

TAIHUA PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITIION

AS AT 31 DECEMBER 2009

Company Registered number (05918155)

TAIHUA PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2009

TAIHUA PLC

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2009

TAIHUA PLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2009

1. GENERAL INFORMATION

Taihua plc (the "Company") was incorporated and registered in England and Wales on 29 August 2006 under the Companies Act 1985 as a public company limited by shares with the name "China Natural plc" with registered number 05918155. On 8 September 2006, the Company changed its name to "Taihua plc". The address of the registered office is 3 Hardman Square, Spinningfields, Manchester, M3 3EB, and the principal place of business is Room 201, Unit 3, No. 16 Zhong Hua, ShiJiCheng, FuZeYuan, 239 KeJi Road, Hi-tech Zone, Xi An, 710077, People's Republic of China (the "PRC").

The Company is an investment holding company and its subsidiaries are principally engaged in the manufacturing and sales of pharmaceutical products. The consolidated financial statements are presented in Renminbi ("RMB"), the currency of the primary economic environment in which the Group operates.