Business News
Fuwei Films Announces Third Quarter 2008 Financial Results
Friday 14. November 2008 - Fuwei Films (Holdings) Co. Limited (NASDAQ:FFHL) ("Fuwei" or "the Company"), a manufacturer and distributor of high-quality BOPET plastic films in China, today released the financial results for the third quarter and first nine months of 2008.
Financial Highlights
— In the third quarter of 2008, revenue rose 11.2% to RMB 119.8 million (US$17.5 million) from the same period of 2007;
— In the first nine months of 2008, revenue rose 6.3% to RMB 348.6 million (US$49.8 million) from the same period of 2007.
“We hereby release our third quarter of 2008 financial results,” said Xiaoan He, Chairman and CEO of Fuwei Films. “We entered the first nine months of 2008 with a number of challenges including strong competition in the marketplace, an increase in the cost of raw materials, energy and labor, especially the rapid changes in the macro-economic environments both at home and abroad, anti-dumping investigations in the United States and Korea, and the inadequate domestic and overseas market demand resulting from the world- wide financial crisis which originated in the United States during the third quarter. Furthermore, the implementation of Chinese macro control policy by the Chinese government this year and the Chinese government’s support for environmental protection and the measures taken by the government against excessive luxurious packaging have caused the demand for the high-end and luxurious BOPET films to decline. Despite the fact that we have received the comparatively lower anti-dumping duty rate from Korea and the United States, which was expected to have positive effects on recovering overseas sales, current overseas sales still remained the same, resulting from the decreased demand in overseas market caused by the financial crisis. Consequently, the results of the first nine months in 2008 were not as strong as the same period last year.”
Mr. He continued, “However, we believe that Fuwei will be able to continue to utilize its current advantages when facing the negative influences of the macro economic environment and of challenges arising from an uncertain economic future.”
Third Quarter of 2008 Financial Results
For the third quarter of 2008, revenue rose 11.2% to RMB 119.8 million (US$17.5 million) from the third quarter of 2007.
Revenue of specialty films was RMB 22.1 million (US$3.2 million), or 18.5% of total revenue.
The following is a breakdown of commodity and specialty film sales for the three-month periods ended September 30, 2008 and September 30, 2007 (amounts in thousands):
Three-month period ended
September 30,2008 September 30,2007
% of % of
RMB US$ Total RMB Total
Printing film 16,661 2,413 13.9% 18,327 17.0%
Stamping film 41,945 6,121 35.0% 24,224 22.5%
Metallization film 20,171 2,943 16.8% 8,323 7.7%
Base film for other
applications 18,938 2,764 15.8% 15,743 14.7%
Specialty film 22,134 3,230 18.5% 41,037 38.1%
Total 119,849 17,489 100.0% 107,652 100.0%
Revenue from overseas in the third quarter of 2008 was RMB 16.2 million (US$2.4 million), or 13.5% of total revenues.
The following is a breakdown of domestic versus overseas sales for the three-month periods ended September 30, 2008 and September 30, 2007 (amounts in thousands):
Three-month period ended
September 30,2008 September 30,2007
% of % of
RMB US$ Total RMB Total
Sales in China 103,674 15,129 86.5% 88,741 82.4%
Sales in other countries 16,175 2,360 13.5% 18,912 17.6%
Total 119,849 17,489 100.0% 107,652 100.0%
Gross profit was RMB 14.6 million (US$2.1 million), compared with RMB 23.6 million (US$3.4 million) in the same period of 2007. The Company generated a gross margin of 12.1%, versus 21.9% in the same period of 2007. The decrease in gross margin was mainly due to the decline of the average selling prices, the decreased sales of specialty films, as well as the increased costs of raw materials, power and labor.
Operating expenses were RMB 8.4 million (US$1.2 million). Selling expenses increased 34.4% to RMB 3.9 million (US$0.6 million) from the same period of 2007.
Administrative expenses decreased 11.8 % to RMB 4.5 million (US$0.7 million) from the same period of 2007.
Net income was RMB 7.1 million (US$1.0 million) compared with RMB 12.9 million (US$1.7 million) in the same period of 2007. Earnings per diluted share were RMB 0.54 (US$0.08) compared with RMB 0.99 (US$0.14) in the same period of last year.
Total diluted shares outstanding remained the same as the third quarter of 2007, at 13,062,500 as of September 30, 2008.
Nine-month 2008 Financial Results
For the first nine months of 2008, revenue rose 6.3% to RMB 348.6 million (US$49.8 million) from the same period of 2007. Revenue of specialty films in the first nine months of 2008 was RMB 97.0 million (US$13.9 million), or 27.8% of total revenue.
The following is a breakdown of commodity and specialty film sales for the nine-month periods ended September 30, 2008 and September 30, 2007 (amounts in thousands):
Three-month period ended
September 30,2008 September 30,2007
% of % of
RMB US$ Total RMB Total
Printing film 48,047 6,865 13.8% 59,961 18.3%
Stamping film 87,916 12,561 25.2% 75,288 23.0%
Metallization film 35,915 5,132 10.3% 21,944 6.7%
Base film for other
applications 79,716 11,390 22.9% 43,173 13.1%
Specialty film 97,035 13,864 27.8% 127,481 38.9%
Total 348,629 49,812 100.0% 327,847 100.0%
Revenue from overseas in the first nine months of 2008 was RMB 48.7 million (US$7.0 million), or 14.0% of total revenue.
The following is a breakdown of domestic versus overseas sales for the nine-month periods ended September 30, 2008 and September 30, 2007 (amounts in thousands):
Three-month period ended
September 30,2008 September 30,2007
% of % of
RMB US$ Total RMB Total
Sales in China 299,975 42,860 86.0% 236,971 72.3%
Sales in other countries 48,654 6,952 14.0% 90,876 27.7%
Total 348,629 49,812 100.0% 327,847 100.0%
Gross profit was RMB 58.1 million (US$8.3 million), compared with RMB 80.5 million (US$11.7 million) in the same period of 2007. The Company generated a gross margin of 16.7%, versus 24.6% in the same period of 2007.
Operating expenses were RMB 28.5 million (US$4.1 million), compared with RMB 23.2 million (US$3.4 million) in the same period of 2007. Selling expenses were a little bit lower compared with the corresponding period of 2007. Administrative expenses increased to RMB 16.9 million (US$2.4 million) from RMB 11.6 million (US$1.7 million) in the same period of 2007.
Net income was RMB 24.7 million (US$3.5 million), or diluted EPS of RMB 1.89 (US$0.27), compared with RMB 46.3 million (US$6.0 million), or diluted EPS of RMB 3.54 (US$0.51) in the same period of 2007.
Total shareholders’ equity increased to RMB 537.1 million (US$78.4 million) as of September 30, 2008, from RMB 530.3 million (US$77.3 million) as of June 30, 2008.
Recent Developments
On September 9, 2008, the Company announced that its BOPET Dry Resist Films Project was a Shandong government-supported key technology project. Such government-supported initiatives have in the past received priority in borrowing from banks. In addition, the Company also announced its patent application of Single-Sided Matte BOPET films had been accepted by the State Intellectual Property Office (“SIPO”). Single-Sided Matte BOPET film is a high-quality and more aesthetically pleasing product. Compared with traditional BOPET films, it is also more cost efficient.
On September 18, 2008, the Company announced that Fuwei Films (Shandong) Co., Ltd. the Company’s wholly-owned operating subsidiary (“Fuwei Shandong”), has filed six new patent applications, all of which are awaiting reviews by SIPO. The six patents comprise four new inventions and two innovations. These patents can be used in tobacco packaging, fresh food preservation, laminated panel of electric appliances and LCD screens. The Company expects to employ the new patents to further penetrate the high-end BOPET film market and attract affluent high-end users. The review process is expected to be one to three years.
On September 2, 2008, the Company announced that the Korean Trade Commission made the final determination of the anti-dumping investigation of BOPET films originated in China and India on August 27, 2008 and decided to recommend to the Ministry of Strategy and Finance to levy the anti-dumping duty (“ADD”) on such imports for five years. The final determination of the ADD rate for Fuwei is 5.67%, versus 6.13% in the preliminary determination. The ADD rate for other Chinese companies is 23.6% except two other Chinese companies which enjoy the ADD rate of 8.93% and 15.95%, respectively. The ADD rate for one Indian company is 10.4% and for other Indian companies is 25.32%. The ADD rates became effective on October 27, 2008.
On October 8, 2008, the Company announced that it has received the final results of the BOPET film-related anti-dumping investigation conducted by the United States. Fuwei was one of the five Chinese BOPET film manufacturers to receive the lowest ADD rate of 3.49%. The average ADD rate for other Chinese companies has been assessed at 76.72% in this investigation.
On October 31, 2008, the Company announced that the Company became aware that the initial trial of the Company’s three major shareholders, Mr. Jun Yin, Mr. Tongju Zhou and Mr. Duo Wang, had begun on October 23 and continued on October 24 and October 27, 2008. The trial was held at Jinan Intermediate People’s Court in the city of Jinan, Shandong Province. As of October 27, 2008, there has been no verdict announced by Jinan Intermediate People’s Court.