Fuwei Films Announces Its Unaudited Financial Results for the Third Quarter of 2014

BEIJING, November 21, 2014 /PRNewswire/ -- 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, 2014.

Highlights

• Net sales during the third quarter ended September 30, 2014 were RMB69.2 million or US$11.3 million, compared to RMB75.9 million during the same period in 2013, representing a decrease of RMB6.7 million or 8.8%.
• Net loss attributable to the Company during the third quarter ended September 30, 2014 was RMB17.8 million or US$2.9 million compared to net loss attributable to the Company of RMB23.2 million during the same period in 2013, representing a decrease of RMB5.4 million or 23.3%.
• Basic and diluted net loss per share was RMB1.36 or US$0.22 and RMB1.78 for the three-month period ended September 30, 2014 and 2013, respectively.
• Net cash used in operating activities for the nine months ended September 30, 2014 was RMB18.9 million or US$3.1 million compared to net cash used in operating activities of RMB3.4 million for the nine months ended September 30, 2013.

"While our financial results remain challenged, I am pleased to announce that we continue to gain progress in new product as a sample diffusion film (a type of TFT-LCD optical film) was preliminarily accepted by a new customer after being delivered for testing," commented Mr. Xiaoan He, Chairman and Chief Executive Officer of Fuwei Films. "We are supplying small batches of products according to this customer's purchase order. In addition, a sample base film for solar backsheets has been delivered to a customer for initial testing. This production line is also expected to be utilized to produce other thick films, including high performance electrical insulation film, base film for solar back sheets and other films where we may see an opportunity to gain a significant presence in high-technology industries. "We will continue to focus our efforts on R&D, mainly in the area of development of higher quality and more value-added TFT-LCD optical film, factors that will enable the Company to distinguish our competitive advantages and eventually improve earnings performance in the market," concluded Mr. He.

Third Quarter 2014 Results

Net sales during the third quarter ended September 30, 2014 were RMB69.2 million or US$11.3 million, compared to RMB75.9 million during the same period in 2013, representing a decrease of RMB6.7 million or 8.8%, mainly due to the reduction in average sales price by 0.9% arising from stronger competition in China and decrease of total sales volumes by 8.0%. The reduction of average sales price caused a decrease of RMB0.6 million and the sales volume caused a decrease of RMB6.1 million.

In the third quarter of 2014, sales of specialty films were RMB20.7 million or US$3.4 million, representing 30.0% of the Company's total revenues as compared to RMB20.6 million or 27.2% in the same period of 2013, which was an increase of RMB0.1 million, or 0.5% as compared to the same period in 2013. The increase in average sales price caused an increase of RMB0.5 million and the decrease in the sales volume caused a decrease of RMB0.4 million.

Overseas sales were RMB11.8 million or US$1.9 million, or 17.1% of total revenues, compared with RMB12.8 million or 16.9% of total revenues in the third quarter of 2013. The decrease in average sales price caused a decrease of RMB2.0 million and the increase in sales volume resulted in an increase of RMB1.0 million. The decrease in overseas sales was mainly due to the decrease in average sales price.

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

Our gross loss was RMB3.1 million or US$0.5 million for the third quarter ended September 30, 2014, representing a gross loss rate of 4.5%, as compared to a gross loss rate of 13.0% for the same period in 2013. Correspondingly, gross loss rate decreased by 8.5 percentage points compared to the same period in 2013. Our average product sales prices decreased by 0.9% compared to the same period last year and the average cost of goods sold decreased by 8.3% compared to the same period last year. Consequently, the amount of decrease in cost of goods sold was higher than that in sales prices, which resulted in a decrease in our gross loss.

Operating expenses for the third quarter ended September 30, 2014 were RMB12.1 million or US$2.0 million, which was RMB2.5 million, or 26.0% higher than the same period in 2013. This increase was mainly due to the increase in R&D expenditure in the third quarter of 2014.

Net loss attributable to the Company during the third quarter ended September 30, 2014 was RMB17.8 million or US$2.9 million compared to net loss attributable to the Company of RMB23.2 million during the same period in 2013, representing a decrease of RMB5.4 million for the same period in 2013.

Nine Months 2014 Results

Net sales during the nine-month period ended September 30, 2014 were RMB209.9 million or US$34.2 million, compared to RMB229.9 million, during the same period in 2013, representing a decrease of RMB20.0 million or 8.7%, mainly due to the reduction in average sales price by 7.8% arising from stronger competition in China and decrease of total sales volumes by 0.9%. The reduction of average sales price caused a decrease of RMB17.9 million and the sales volume caused a decrease of RMB2.1 million.

In the nine-month period ended September 30, 2014, sales of specialty films were RMB57.1 million or US$9.3million or 27.2% of our total revenues as compared to RMB70.3 million or 30.6% in the same period of 2013, which was a decrease of RMB13.2 million, or 18.8% as compared to the same period in 2013. The reduction of average sales price caused a decrease of RMB1.2 million and the decrease in the sales volume caused a decrease of RMB12.0 million. The decrease was largely attributable to the decrease in sales volume for dry films and heat shrinkable films due to the entrance of new competitors.

Overseas sales during the nine months ended September 30, 2014 were RMB33.4 million or US$5.4 million, or 15.9% of total revenues, compared with RMB34.9 million or 15.2% of total revenues in the same period in 2013. The decrease in average sales price caused a decrease of RMB4.6 million and the increase in sales volume resulted in an increase of RMB3.1 million. The decrease in overseas sales was mainly due to decrease in sales prices.

Our gross loss was RMB12.7 million or US$2.1 million for the first nine months ended September 30, 2014, representing a gross loss rate of 6.0%, as compared to a gross loss rate of 5.8% for the same period in 2013. Correspondingly, gross loss rate increased by 0.2 percentage points. Our average product sales prices decreased by 7.8% compared to the same period last year while the average cost of goods sold decreased by 7.6% compared to the same period last year. Consequently, the amount of decrease in sales revenue was higher than that in cost of goods sold during the nine months ended September 30, 2014 compared with the same period in 2013, which resulted in an increase in the Company's gross loss.

Operating expenses for the nine months ended September 30, 2014 were RMB32.9 million or US$5.4 million, compared to RMB36.9 million in the same period in 2013, which was RMB4.0 million or 10.8% lower than the same period in 2013. This decrease is mainly due to decreased R&D expenditure for the first nine-months of 2014.

Basic and diluted net loss per share was RMB1.36 or US$0.22 and RMB1.78 for the three-month period ended September 30, 2014 and 2013, respectively.

Total shareholders' equity was RMB406.3 million or US$66.2 million as of September 30, 2014, compared with RMB460.3 million as of December 31, 2013.

As of September 30, 2014, the Company had 13,062,500 basic and diluted total ordinary shares outstanding.

Conference Call Information

The Company will host a teleconference on Friday, November 21, 2014, 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 +1-877-660-6853 in North America, or +1-201-612-7415 internationally, and entering the following Conference ID: 13595551. The replay will be available until December 21, 2014, at 11:59 p.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's BOPET 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: fuweiIR@fuweifilms.com

In the U.S.:

Ms. Vivian Chen
Investor Relations
Grayling
Phone: +1-646-284-9427
Email: vivian.chen@grayling.com