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Fuwei Films Announces Second Quarter 2007 Financial Results

BEIJING, July 26 /Xinhua-PRNewswire-FirstCall/ -- Fuwei Films (Holdings) Co. Limited (Nasdaq: FFHL), China’s leading manufacturer and distributor of high quality BOPET plastic film, today announced financial results for the second quarter and six months ended June 30, 2007.

Second Quarter 2007 Financial Highlights(1)

-- Net Sales of $15.8 million

-- Gross Profit of $4.3 million, an increase of 15% year-over-year

-- Operating Income of $3.1 million, up 18% year-over-year

-- Net Income of $2.6 million, up 23% year-over-year

-- Basic and Diluted EPS of $0.20

(1) All results are prepared in accordance with Generally Accepted

Accounting Principles (GAAP) in the United States.

Net sales for the second quarter of 2007 were RMB 120.9 million (US$ 15.8 million), a decrease of 1.6 percent over the same period last year. The decrease in net sales was primarily due to a reduction in sales volumes, which were mostly offset by higher selling prices during the quarter. Net sales for the first six months of 2007 were RMB 220.2 million (US$ 28.5 million), a slight increase from the RMB 219.9 million recorded in the first half of 2006.

Net income for the second quarter of 2007 was RMB 20.1 million (US$ 2.6 million), an increase of 23 percent over second quarter 2006 net income of RMB 16.3 million. The increase is mainly due to higher gross margins flowing through to the bottom line. Net income for the first six months of 2007 increased to RMB 33.4 million from RMB 32.3 million in the same period of 2006.

Xiaoan He, Chairman and CEO of Fuwei Films commented, “Fuwei Films delivered a solid quarter. We continued to focus on our strategic goal of increasing the proportion of higher margin specialty film in our sales mix. We achieved a record high of over 40 percent of total sales coming from specialty film in this quarter.

“In addition, we recently completed external construction for the factory that will house our thick film production line and our research and development trial production line. This is an important step toward further increasing our capacity in the specialty segment of the film market. With no existing domestic producer of thick film used for electronic film (TFT-LCD) screens, we believe there is a significant opportunity for us to gain market share in this segment of the industry.

“Entry into the thick film market, along with expansion into overseas markets, production expansion, and R&D enhancement are the core elements of our growth strategy. We also see a further opportunity to build the required capacity that will support this growth through carefully targeted strategic acquisitions (M&A) and this will be a key focus for us going forward.”

Financial Review

Sales by Product:

Sales of specialty films in the second quarter 2007 were RMB 49.2 million (US$ 6.4 million), an increase of 6.2 percent over the second quarter last year. Specialty film accounted for 40.7 percent of Fuwei Films’ total net sales compared with 37.7 percent in the same period of 2006. The increase was largely attributable to stronger sales volume following increased trial and acceptance by Fuwei Films’ customers as well as overall market growth.

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

Q2, 2007 % of Total Q2, 2006 % of Total

RMB US$ RMB

Printing film 7,552 984 6.2 8,737 7.1

Stamping film 15,039 1,959 12.4 15,061 12.3

Metallization film 27,486 3,580 22.7 26,379 21.4

Base film for other

applications 21,681 2,823 18.0 26,414 21.5

Specialty film 49,171 6,404 40.7 46,295 37.7

120,929 15,750 100 122,886 100

======== ======== ======== ======== ========

Sales of specialty film during the six months ended June 30, 2007 were RMB 86.5 million (US$ 11.2 million), an increase of 10.7 percent over the same period last year. Sales of specialty film in the first half 2007 accounted for 39.3 percent of Fuwei Films’ total net sales, up from 35.5 percent in the same period of 2006.

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

Six months period ended

June 30, 2007 % of Total June 30, 2006 % of Total

RMB US$ RMB

Printing film 13,605 1,763 6.2 19,177 8.7

Stamping film 27,407 3,551 12.4 26,621 12.1

Metallization film 51,072 6,617 23.2 48,547 22.1

Base film for other

applications 41,654 5,397 18.9 47,526 21.6

Specialty film 86,456 11,201 39.3 78,068 35.5

220,194 28,529 100 219,939 100

======= ====== ===== ======= =====

Sales by Geography:

Overseas sales in the second quarter of 2007 were RMB 38.7 million (US$ 5.0 million), up 41.9 percent from RMB 27.3 million recorded in the second quarter last year. Overseas sales accounted for 32.0 percent of total net sales in the second quarter compared with 22.2 percent in the same period of 2006. The increase was mainly due to the Company’s strategy of diversifying its customer portfolio and targeting more overseas clients.

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

Q2, 2007 % of Total Q2, 2006 % of Total

RMB US$ RMB

Sales in China 82,220 10,708 68.0 95,602 77.8

Sales in other

countries 38,709 5,042 32.0 27,284 22.2

120,929 15,750 100 122,886 100

========= ========= ========= ========= =========

Overseas sales during the six months ended June 30, 2007 were RMB 71.7 million (US$ 9.3 million), an increase of 54.6 percent from the RMB 46.4 million recorded in the same period last year. Overseas sales accounted for 32.6 percent of total net sales compared with 21.1 percent in the same period of 2006.

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

Six months period ended

June 30, 2007 % of Total June 30,2006 % of Total

RMB US$ RMB

Sales in China 148,467 19,236 67.4 173,551 78.9

Sales in other

countries 71,727 9,293 32.6 46,388 21.1

220,194 28,529 100 219,939 100

========= ======== ======== ========= ========

Gross Profit increased 15 percent to RMB 32.7 million (US$ 4.3 million) in the second quarter 2007 from RMB 28.4 million in the same quarter last year. Fuwei Films generated a gross margin of 27.0 percent in the second quarter 2007 compared with 23.1 percent in the year ago quarter. The improvement in gross margin is primarily due to higher selling prices and an increased volume of specialty film sold during the quarter.

Gross profit for the first six months of 2007 was RMB 56.9 million (US$ 7.4 million). Gross margin was 25.9 percent compared with 23.8 percent in the first half year of 2006, mainly due to increases in the sales price and higher specialty film sales in the second quarter of 2007.

Operating Expenses in the second quarter of 2007 increased 8.6 percent to RMB 9.0 million (US$ 1.2 million) from RMB 8.3 million in the same quarter last year. Selling expenses were largely unchanged from second quarter 2006, while administrative expenses increased almost 20 percent to RMB 3.5 million. This increase was mainly due to the higher costs associated with becoming a U.S. listed public reporting Company in the year 2007.

Operating expenses during the first six months of 2007 were RMB 15.2 million (US$ 2.0 million), or 20.8 percent higher than the RMB 12.6 million recorded in the same period of 2006. This was also mainly due to the higher costs associated with being a U.S. listed public reporting Company in the year 2007.

Earnings Conference Call

The Company will hold a teleconference today, July 26th, at 9:00 a.m. EDT to discuss the quarterly results. To participate in the call, please dial +1 877-407-9205 in North America, or +1 201-689-8054 internationally, approximately five minutes prior to the scheduled call start time. The call is being simultaneously Web cast and can be accessed on the Fuwei Films Web site at http://www.fuweiholdings.com . Please visit the Web site at least 15 minutes prior to the scheduled call time to register for the Web cast and download any necessary audio software.

A replay of the call can also be accessed via telephone from 12:00 p.m. EDT on July 26th through 11:59 p.m. EDT on August 8th by calling +1-877-660-6853 in North America, or +1-201-612-7415 internationally, and entering the following access codes: Account #: 286 and Conference ID: 247849. A Web cast replay of the call will also be made and can be accessed on the Fuwei Films site at http://www.fuweiholdings.com .

About Fuwei Films

Fuwei Films conducts its business through its wholly owned subsidiary Shandong Fuwei Films Co., Ltd. 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.

For more information about the Company, please visit the Company’s website at http://www.fuweiholdings.com .

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. Any such forward-looking statements involve risk and uncertainties that could cause actual results to differ materially from any future results described by the forward-looking statements. Risk factors that could contribute to such differences include those matters more fully disclosed in the Company’s reports filed with the Securities and Exchange Commission. 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.

The forward-looking statements included in this press release are subject to risks, uncertainties and assumptions about our businesses and business environments. These statements reflect our current views with respect to future events and are not a guarantee of future performance. Actual results of our operations may differ materially from information contained in the forward-looking statements as a result of risk factors some of which are include, among other things, competition in the BOPET film industry; growth of, and risks inherent in, the BOPET film industry in China; uncertainty as to future profitability and our ability to obtain adequate financing for our planned capital expenditure requirements; uncertainty as to our ability to continuously develop new BOPET film products and keep up with changes in BOPET film technology; risks associated with possible defects and errors in our products; uncertainty as to our ability to protect and enforce our intellectual property rights; uncertainty as to our ability to attract and retain qualified executives and personnel; and uncertainty in acquiring raw materials on time and on acceptable terms, particularly in view of the volatility in the prices of petroleum products in recent years.

Fuwei Films (Holdings) Co. Ltd and Subsidiaries

Condensed Consolidated Statements of Income and Other Comprehensive Income

(amounts in thousands - except share and per-share value)

Three months period ended Six months period ended

June 30, June 30,

2007 2007 2006 2007 2007 2006

RMB US$ RMB RMB US$ RMB

Net Sales 120,929 15,750 122,886 220,194 28,529 219,939

Cost of Sales 88,264 11,496 94,470 163,257 21,152 167,594

Gross Profit 32,665 4,254 28,416 56,937 7,377 52,345

Selling 5,090 663 5,111 8,754 1,134 8,858

Administration 3,528 459 2,943 5,718 741 3,194

Depreciation

& amortization 416 54 266 737 96 540

Total operating

expenses 9,034 1,176 8,320 15,209 1,971 12,592

Operating income 23,631 3,078 20,096 41,728 5,406 39,753

Interest income

(expense), net (1,597) (208) (3,645) (4,558) (590) (6,933)

Other income

(expenses) (178) (23) (153) (562) (73) (299)

Income

before taxes 21,856 2,847 16,297 36,608 4,743 32,521

Income tax /

(benefit) 1,770 231 (44) 3,258 422 233

Net Income 20,086 2,616 16,341 33,350 4,321 32,288

Basic earnings

per share 1.54 0.20 21.19 2.55 0.33 41.88

Diluted earnings

per share 1.54 0.20 21.19 2.55 0.33 41.88

Weighted average

number of shares

outstanding for

Basic earnings

per share 13,062,500 13,062,500 771 13,062,500 13,062,500 771

Weighted average

number of shares

outstanding for

Diluted earnings

per share 13,062,500 13,062,500 771 13,062,500 13,062,500 771

Fuwei Films (Holdings) Co. Ltd and Subsidiaries

Condensed Consolidated Balance Sheet

(amounts in thousands - except share and per-share value)

As of Jun. 30,2007 As of Dec. 31,2006

ASSETS RMB US$ RMB

Current assets

Cash and cash equivalents 128,344 16,861 253,250

Accounts receivable, net 58,196 7,645 75,530

Inventory 36,923 4,851 23,783

Prepayments and other

receivables 47,800 6,279 19,440

Total current assets 271,263 35,636 372,003

Plant and equipment, net 239,434 31,455 250,937

Construction in progress 163,778 21,516 66,752

Lease prepayments, net 22,682 2,980 23,059

Deposits for purchase of

property, plant and 13,900

equipment

Intangible assets 72 9 109

Goodwill 10,276 1,350 10,276

Deferred tax assets 1,047 138 1,047

Total assets 708,552 93,084 738,083

LIABILITIES AND

SHAREHOLDERS’ EQUITY

Current liabilities

Short-term borrowings 169,090 22,214 239,678

Accounts payables 17,066 2,242 12,809

Accrued expenses and

other payables 22,854 3,002 19,497

Deferred tax liabilities 856 112 192

Total liabilities 209,866 27,570 272,176

Shareholders’ equity

Registered capital 13,323 1,707 13,323

Additional paid-in

capital 311,908 39,967 311,908

Retained earnings 172,241 22,119 138,891

Cumulative translation

adjustment 1,214 1,721 1,785

Total shareholders’

equity 498,686 65,514 465,907

Total liabilities and

shareholders’ equity 708,552 93,084 738,083

For more information, please contact:

In China:

Christina He

Investor Relations

Phone: +86-10-8518-5620

Email: fuweiIR@fuweifilms.com

In the US:

Mark Jones

Global Consulting Group

Phone: +1-646-284-9414

Email: mjones@hfgcg.com

Source: Fuwei Films (Holdings) Co. Limited
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