Fuwei Films Announces Its Unaudited Financial Results for the Third Quarter of 2017

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-Teleconference to be Held on Wednesday, November 29, 2017 at 8:00 am EST-

BEIJING, Nov. 28, 2017 — Fuwei Films (Holdings) Co., Ltd. (Nasdaq: FFHL, “Fuwei Films” or the “Company”), a manufacturer and distributor of high-quality BOPET plastic films in China, today announced its unaudited financial results for the three and nine months ended September 30, 2017.

Highlights

  • Net sales during the third quarter ended September 30, 2017 were RMB73.9 million or US$11.1 million, compared to RMB61.6 million during the same period in 2016, representing an increase of RMB12.3 million or 20.0%.
  • Sales of specialty films in the third quarter ended September 30, 2017 were RMB28.5 million or US$4.3 million or 38.6% of our total revenues as compared to RMB22.7 million or 36.8% in the same period of 2016, which was an increase of RMB5.8 million, or 25.6% as compared to the same period in 2016.
  • Our gross profit was RMB6.7 million or US$1.0 million for the third quarter ended September 30, 2017, representing a gross profit margin of 9.1%, as compared to a gross profit margin of 1.7% for the same period in 2016.
  • Basic and diluted net loss per share was RMB3.70 (US$0.56) and RMB4.11 for the three-month period ended September 30, 2017 and 2016, respectively.

Mr. Zengyong Wang, Chairman and CEO of Fuwei Films, commented, “While we continue to face strong competition from emerging and incumbent players in the marketplace, which has led to oversupply relative to demand in the marketplace, we are encouraged by positive trends in the increased net sales, especially the sales of specialty films. We believe our commitment to innovation and R&D has expanded our end-user applications that will enable the Company to capitalize on these opportunities despite challenging industry and economic conditions.”

Third Quarter 2017 Results

Net sales during the third quarter ended September 30, 2017 were RMB73.9 million or US$11.1 million, compared to RMB61.6 million during the same period in 2016, representing an increase of RMB12.3 million or 20.0%. The increase of average sales price caused an increase of RMB8.7 million and the sales volume increase caused an increase of RMB3.6 million.

In the third quarter of 2017, sales of specialty films were RMB28.5 million or US$4.3 million or 38.6% of our total revenues as compared to RMB22.7 million or 36.8% in the same period of 2016, which was an increase of RMB5.8 million, or 25.6% as compared to the same period in 2016. The increase in average sales price caused an increase of RMB0.1 million and the increase in the sales volume caused an increase of RMB5.7 million.

The following is a breakdown of commodity and specialty film sales (amounts in thousands):

Three-Month Period
Ended
September 30, 2017

% of  Total

Three-Month Period
Ended
September 30, 2016

% of  Total

RMB

US$

RMB

Stamping  and transfer film

29,588

4,447

40.0%

23,715

38.4%

Printing film

7,068

1,062

9.6%

7,173

11.7%

Metallization film

1,874

282

2.5%

1,634

2.7%

Specialty film

28,487

4,282

38.6%

22,666

36.8%

Base film for other application

6,839

1,028

9.3%

6,373

10.4%

73,857

11,101

100.0%

61,560

100.0%

Overseas sales were RMB15.2 million or US$2.3 million, or 20.6% of total revenues, compared with RMB11.4 million or 18.4% of total revenues in the third quarter of 2016. This is an increase of RMB3.8 million. The increase in average sales price caused an increase of RMB1.1 million and the increase in sales volume resulted in an increase of RMB2.7 million.

The following is a breakdown of PRC domestic and overseas sales (amounts in thousands):

Three-Month Period
Ended
September 30, 2017

% of Total

Three-Month Period
Ended
September 30, 2016

% of Total

RMB

US$

RMB

Sales in China

58,614

8,810

79.4%

50,205

81.6%

Sales in other countries

15,243

2,291

20.6%

11,355

18.4%

73,857

11,101

100.0%

61,560

100.0%

Our gross profit was RMB6.7 million or US$1.0 million for the third quarter ended September 30, 2017, representing a gross profit margin of 9.1%, as compared to a gross profit margin of 1.7% for the same period in 2016. Correspondingly, gross profit rate increased by 7.4 percentage point compared to the same period in 2016 mainly due to the increase of average sales price.

Operating expenses for the third quarter ended September 30, 2017 were RMB16.3 million or US$2.5million, which was RMB3.6 million, or 28.3% higher than the same period in 2016. This increase was mainly due to increased expenses on research and development.

Net loss attributable to the Company during the third quarter ended September 30, 2017 was RMB12.1 million or US$1.8 million compared to net loss attributable to the Company of RMB13.4 million during the same period in 2016, representing a decrease in loss of RMB1.3 million.

Basic and diluted net loss per share was RMB3.70 (US$0.56) and RMB4.11 for the three-month period ended September 30, 2017 and 2016, respectively.

Total shareholders' equity was RMB230.32 million or US$34.62 million as of September 30, 2017, compared with RMB265.21 million as of December 31, 2016.

As of September 30, 2017, the Company had 3,265,837 basic and diluted total ordinary shares outstanding.

Nine Months 2017 Results

Net sales during the nine-month period ended September 30, 2017 were RMB211.9 million or US$31.8 million, compared to RMB183.0 million, during the same period in 2016, representing an increase of RMB28.9 million or 15.8%. The increase of average sales price caused an increase of RMB21.3 million and the increase in the sales volume caused an increase of RMB7.6 million.

In the nine-month period ended September 30, 2017, sales of specialty films were RMB75.8 million or US$11.4 million or 35.8% of our total revenues as compared to RMB68.0 million or 37.1% in the same period of 2016, which was an increase of RMB7.8 million, or 11.5% as compared to the same period in 2016. The increase of average sales price caused an increase of RMB0.1 million and the increase in the sales volume caused an increase of RMB7.7 million.

Overseas sales during the nine months ended September 30, 2017 were RMB44.2 million or US$6.7 million, or 20.9% of total revenues, compared with RMB35.1 million or 19.2% of total revenues in the same period in 2016. This was RMB9.2 million higher than the same period in 2016. The increase in sales volume resulted in an increase of RMB5.2 million and the increase of average sales price caused an increase of RMB3.9 million.

The following is a breakdown of PRC domestic and overseas sales (amounts in thousands):

Nine-Month Period
Ended
September 30, 2017

% of Total

Nine-Month Period
Ended
September 30, 2016

% of Total

RMB

US$

RMB

Sales in China

167,622

25,193

79.1%

147,944

80.8%

Sales in other countries

44,245

6,651

20.9%

35,079

19.2%

211,867

31,844

100.0%

183,023

100.0%

Our gross profit was RMB15.5 million or US$2.3 million for the first nine months ended September 30, 2017, representing a gross profit margin of 7.3%, as compared to a gross profit margin of 6.7% for the same period in 2016. Correspondingly, gross profit rate increased by 0.6 percentage points. Our average product sales prices increased by 11.2% compared to the same period last year while the average cost of goods sold increased by 10.5% compared to the same period last year. Consequently, the amount of increase in sales price was higher than that in cost of goods sold during the nine months ended September 30, 2017 compared with the same period in 2016, which resulted in an increase in our gross profit.

Operating expenses for the nine months ended September 30, 2017 were RMB44.3 million or US$6.7 million, compared to RMB42.2 million in the same period in 2016, which was RMB2.1 million or 5.0% higher than the same period in 2016. This increase is mainly due to increased expenses on research and development.

Conference Call Information

The Company will host a teleconference on Wednesday, November 29, 2017, at 8:00 a.m. EST / 9:00 p.m. Beijing time to discuss the financial results. To participate in the call, please dial +1-877-407-9205 in North America, or +1-201-689-8054 internationally, approximately 10 minutes prior to the scheduled start time.

A replay of the call can also be accessed via telephone by calling +1-877-481-4010 in North America, or +1-919-882-2331internationally, and entering the following Conference ID: 22811. The replay will be available until December 29, 2017, at 8:00 a.m. EST.

About Fuwei Films

Fuwei Films conducts its business through its wholly owned subsidiary, Fuwei Films (Shandong) Co., Ltd. (“Shandong Fuwei”). Shandong Fuwei develops, manufactures and distributes high-quality plastic films using the biaxial oriented stretch technique, otherwise known as BOPET film (biaxially oriented polyethylene terephthalate). Fuwei'sBOPET film is widely used to package food, medicine, cosmetics, tobacco, and alcohol, as well as in the imaging, electronics, and magnetic products industries.

Safe Harbor

This press release contains information that constitutes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to risks. Risk factors that could contribute to such differences include those matters more fully disclosed in the Company's reports filed with the U.S. Securities and Exchange Commission which, among other things, include both the possible delisting of the Company's ordinary shares from the NASDAQ Global Market; significant competition in the BOPET film industry, especially the significant oversupply of BOPET films resulting from the rapid growth of the Chinese BOPET industry capacity, changes in the international market and trade barriers, especially the adverse impact of the antidumping investigation and imposition of an anti-dumping duty on imports of the BOPET films originating from the People's Republic of China (“China“) conducted by certain main importing countries; fluctuations of RMB exchange rate, the reduce in demand for the Company's products or the loss of main customers which may result in the decrease of sales, and negatively influencing the Company's financial performance, uncertainty as to the future profitability, uncertainty as to the Company's ability to successfully obtain additional funds to meet the working capital needs of the new BOPET production line, uncertainty as to the Company's ability to continuously develop new BOPET film products to be produced by the third production line and keep up with changes in BOPET film technology, risks associated with possible defects and errors in its products including complaints and claims from clients, uncertainty as to its ability to protect and enforce its intellectual property rights, uncertainty as to its ability to attract and retain qualified executives and personnel, and uncertainty in acquiring raw materials on time and on acceptable terms, particularly in light of the volatility in the prices of petroleum products in recent years, instability of power and energy supply, and the uncertainty regarding the future operation of the Company in connection with the changes in the labor law in China, the measures taken by the Chinese government to save energy and reduce emissions, and the complaints from nearby residents and local government about the noise caused by our production as well as the uncertainty of the impact of major shareholder transfer that have substantial influence over the Company and the Company's business operation including possible overlap of our BOPET products, customers and market orientation with an BOPET film manufacturer, which is controlled by the same individual who has control over the shares of our major shareholder. The forward-looking information provided herein represents the Company's estimates as of the date of the press release, and subsequent events and developments may cause the Company's estimates to change. The Company specifically disclaims any obligation to update the forward-looking information in the future. Therefore, this forward-looking information should not be relied upon as representing the Company's estimates of its future financial performance as of any date subsequent to the date of this press release. Actual results of our operations may differ materially from information contained in the forward-looking statements as a result of the risk factors.

For more information, please contact:

In China:

Ms. Xiaoli Yu
Investor Relations Officer
Phone: +86-133-615-59266
Email: [email protected]

In the U.S.:

Ms. Vivian Chen
Investor Relations
Citigate Dewe Rogerson
Phone: +1-646-284-9427
Email: [email protected]

Financial Tables to Follow

FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2017 AND DECEMBER 31, 2016

(amounts in thousands except share and per share value)

(Unaudited)

September 30, 2017

December 31, 2016

RMB

US$

RMB

ASSETS

Current assets

Cash and cash equivalents

23,720

3,565

13,343

Restricted cash

72,551

10,905

73,421

Accounts and bills receivable, net

23,151

3,480

29,453

Inventories

21,419

3,219

25,153

Advance to suppliers

11,634

1,749

6,043

Prepayments and other receivables

1,696

255

6,489

Deferred tax assets – current

1,298

195

1,199

Total current assets

155,469

23,368

155,101

Property, plant and equipment, net

382,344

57,467

410,654

Construction in progress

366

55

431

Lease prepayments, net

16,963

2,550

17,358

Advance to suppliers – long term, net

1,700

256

1,861

Deferred tax assets – non current

7,926

1,191

8,032

Total assets

564,768

84,887

593,437

LIABILITIES AND EQUITY

Current liabilities

Short-term borrowings

65,000

9,770

60,000

Long-term loan, current portion

1,625

244

3,300

Due to related parties

134,413

20,202

131,747

Accounts payables

19,544

2,937

20,581

Notes payable

100,000

15,030

100,888

Advance from customers

5,530

831

3,509

Accrued expenses and other payables

5,507

828

5,204

Total current liabilities

331,619

49,842

325,229

Deferred tax liabilities

2,822

424

2,997

Total liabilities

334,441

50,266

328,226

Equity

Shareholders' equity

Registered capital(of US$0.519008 par value; 5,000,000 shares authorized; 3,265,837 issued and outstanding)

13,323

2,002

13,323

Additional paid-in capital

311,907

46,880

311,907

Statutory reserve

37,441

5,627

37,441

Retained earnings

(134,382)

(20,198)

(98,505)

Cumulative translation adjustment

2,038

310

1,045

Total shareholders' equity

230,327

34,621

265,211

Total equity

230,327

34,621

265,211

Total liabilities and equity

564,768

84,887

593,437

&

FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2017 AND 2016

(amounts in thousands except share and per share value)

(Unaudited)

The Three-Month Period Ended September 30, 

The Nine-Month Period Ended September 30,  

2017

2016

2017

2016

RMB

US$

RMB

RMB

US$

RMB

Net sales 

73,857

11,101

61,560

211,867

31,844

183,023

Cost of sales 

67,145

10,092

60,504

196,373

29,515

170,752

Gross profit (loss)

6,712

1,009

1,056

15,494

2,329

12,271

Operating expenses 

Selling expenses 

3,410

513

3,193

10,617

1,596

9,482

Administrative expenses 

12,917

1,941

9,497

33,669

5,060

32,694

Total operating expenses 

16,327

2,454

12,690

44,286

6,656

42,176

Operating loss  

(9,615)

(1,445)

(11,634)

(28,792)

(4,327)

(29,905)

Other income (expense) 

– Interest income 

103

16

200

607

91

552

– Interest expense 

(2,244)

(337)

(2,030)

(7,097)

(1,067)

(5,491)

– Others income (expense), net 

(374)

(56)

26

(763)

(115)

(1,328)

Total other expense

(2,515)

(377)

(1,804)

(7,253)

(1,091)

(6,267)

Loss before provision for income taxes 

(12,130)

(1,822)

(13,438)

(36,045)

(5,418)

(36,172)

Income tax benefit (expense)

54

8

10

168

25

492

Net loss  

(12,076)

(1,814)

(13,428)

(35,877)

(5,393)

(35,680)

Net loss attributable to noncontrolling interests 

Net loss attributable to the Company 

(12,076)

(1,814)

(13,428)

(35,877)

(5,393)

(35,680)

Other comprehensive income (loss)

– Foreign currency translation adjustments attributable to noncontrolling interest

(2)

(24)

– Foreign currency translation adjustments attributable to the Company

1,206

181

(9)

993

149

(88)

Comprehensive loss attributable to non-controlling interest

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