New Independent Accountants Complete Review
BEIJING, Jan. 10 /Xinhua-PRNewswire-FirstCall/ -- Fuwei Films (Holdings) Co. Limited (Nasdaq: FFHL) (“Fuwei” or “the Company”), a manufacturer and distributor of high-quality BOPET plastic films in China, today announced that the review of its interim financial statements for the third quarter and nine months ended September 30, 2007 has been completed.
On November 12, 2007, Fuwei reported preliminary third quarter and nine months results which had not undergone a review by independent accountants.
Mr. Xiaoan He, Chairman and CEO of Fuwei, commented, “We are pleased to be able to present our third quarter and nine months 2007 results reflecting the review of our new independent accounting firm.”
Mr. He continued, “We are now in a position to provide an expanded presentation and discussion of our previously announced third quarter and nine months results. As we stated previously, Fuwei experienced a solid quarter. We are also proud that during and since the third quarter 2007, we have been able to overcome several significant challenges such as regaining compliance with Nasdaq Marketplace Rules resulting from the election of three new directors and a new chairman of our audit committee.”
Third Quarter 2007 Financial Highlights (Reviewed)
-- Net Sales of US$14.3 million (RMB 107.7 million), a 12.8 percent
increase year-over-year;
-- Gross Profit of US$3.1 million (RMB 23.6 million), an increase of 5.4
percent year-over-year;
-- Operating Income of US$2.1 million (RMB 15.6 million), down 2.5 percent
year-over-year;
-- Net Income of US$1.7 million (RMB 12.9 million), down 7.2 percent year-
over-year. Compared to the number previously disclosed on November 12,
2007 (US$1.8 million, or RMB13.9 million), the slight difference is
mainly due to the audit adjustments adopted by our independent auditor,
rather than due to the different accounting principles adopted by the
new independent accountants and the Company;
-- Basic and Diluted EPS of US$0.13 (RMB 0.99). Compared to the number
previously disclosed on November 12, 2007 (US$0.14, or RMB1.07), the
difference is due to change in the adjusted net income.
Third Quarter & Nine Months Financial Results (Reviewed)
Net sales for the third quarter of 2007 were US$14.3 million (RMB 107.7 million), an increase of 12.8 percent over the same period 2006. The increase in net sales was primarily due to production from the leased line. Net sales for the first nine months of 2007 were US$42.8 million (RMB 327.8 million), an increase of 3.9 percent from the US$ 39.4 million (RMB 315.4 million) recorded in the first nine months of 2006.
Sales by Product:
Sales of specialty films in the third quarter 2007 were US$5.4 million (RMB 41.0 million), an increase of 4.6 percent over the third quarter 2006. Specialty films accounted for 38.1 percent of Fuwei’s total net sales in the third quarter 2007.
The following is a breakdown of commodity and specialty film sales for the three months periods ended September 30, 2007 and September 30, 2006
(amounts in thousands):
Three months period ended
Sep 30,
Sep 30,2007 2006
RMB US$ % of Total RMB % of Total
Printing film 18,327 2,428 17 19,206 20
Stamping film 24,224 3,209 23 22,882 24
Metallization film 8,323 1,103 8 8,477 9
Base film for other
applications 15,743 2,085 15 5,677 6
Specialty film 41,037 5,436 38 39,220 41
Total 107,652 14,261 100 95,463 100
Sales of specialty films during the nine months ended September 30, 2007 were US$16.6 million (RMB 127.5 million), an increase of 8.7 percent over the same period 2006. Sales of specialty films in the first nine months of 2007 accounted for 38.9 percent of Fuwei’s total net sales, up from 37.2 percent in the same period of 2006.
The following is a breakdown of commodity and specialty film sales for the nine months periods ended September 30, 2007 and September 30, 2006 (amounts in thousands):
Nine months period ended
Sep
Sep 30,2007 30,2006
RMB US$ % of Total RMB % of Total
Printing film 59,961 7,826 18 66,727 21
Stamping film 75,288 9,826 23 71,437 23
Metallization film 21,944 2,864 7 27,655 9
Base film for other
applications 43,173 5,635 13 32,275 10
Specialty film 127,481 16,639 39 117,308 37
Total 327,847 42,790 100 315,402 100
Sales by Geography:
Overseas sales in the third quarter of 2007 were US$2.5 million (RMB 18.9 million), down 12.1 percent from US$2.7 million (RMB 21.5 million) recorded in the third quarter 2006. Overseas sales accounted for 17.6 percent of total net sales in the third quarter compared with 22.5 percent in the same period of 2006. The Company, along with many Chinese companies in similar industries, was negatively impacted by the reduction in the export tax rebate, which went from 11 percent to 5 percent on July 1, 2007.
The following is a breakdown of PRC domestic and overseas sales for the three months periods ended September 30, 2007 and September 30, 2006 (amounts in thousands):
Three months period ended
Sep 30,
Sep 30,2007 2006
RMB US$ % of Total RMB % of Total
Sales in China 88,741 11,756 82 73,938 77
Sales in other
countries 18,912 2,505 18 21,524 23
Total 107,652 14,261 100 95,463 100
Overseas sales during the nine months ended September 30, 2007, were US$11.9 million (RMB 90.9 million), an increase of 33.4 percent from the US$8.5 million (RMB 67.9 million) recorded in the same period 2006. Overseas sales accounted for 27.6 percent of total net sales compared with 21.5 percent in the same period of 2006. The increase in overseas sales during the nine months ended September 30, 2007 is mainly due to increased brand recognition in our overseas market.
The following is a breakdown of PRC domestic and overseas sales for the nine months periods ended September 30, 2007 and September 30, 2006 (amounts in thousands):
Nine months period ended
Sep 30,
Sep 30,2007 2006
RMB US$ % of Total RMB % of Total
Sales in China 236,971 30,929 72 247,489 78
Sales in other
countries 90,876 11,861 28 67,913 22
Total 327,847 42,790 100 315,402 100
Gross profit increased 5.4 percent to US$3.1 million (RMB 23.6 million) in the third quarter 2007 from US$2.8 million (RMB 22.4 million) in the same quarter 2006. Fuwei Films generated a gross margin of 21.9 percent in the third quarter 2007 compared with 23.5 percent in the same period of 2006. The decrease in gross margin is primarily due to the increase of raw material prices.
Gross profit for the first nine months of 2007 increased 7.6 percent to US$10.5 million (RMB 80.5 million) and for the same period of 2006 it was US$ 9.3 million (RMB 74.8 million). Gross margin was 24.6 percent compared with 23.7 percent in the first nine months of 2006.
Operating expenses in the third quarter of 2007 increased 23.1 percent to US$1.1 million (RMB 8.0 million) from US$0.8 million (RMB 6.5 million) in the same quarter 2006. Selling expenses were lower in the third quarter 2006, while administrative expenses increased to US$ 0.6 million (RMB 4.8 million). This increase was mainly due to: 1) costs related to legal and accounting compliance as a public company; 2) wage increases; 3) higher compensation paid to foreign technical consultants. Operating expenses during the first nine months of 2007 were US$3.0 million (RMB 23.2 million), or 21.5 percent higher than the US$2.4 million (RMB 19.1 million) recorded in the same period of 2006. This was mainly due to the same reason mentioned above.
Net income for the third quarter of 2007 was US$ 1.7 million (RMB 12.9 million), compared to US$ 1.7 million (RMB 13.9 million) in the third quarter of 2006, representing a decrease of 7.2 percent from the third quarter of 2006 based upon the comparison of the amounts in RMB. The decrease in net income was primarily due to the increase in operating expenses and income taxes in the reporting quarter. The income tax rate for the third quarter of 2007 was 7.5 percent, compared with 0 percent in the same period of 2006. Net income for the first nine months of 2007 increased by 0.2 percent to US$6.0 million (RMB 46.3 million) from US$5.8 million (RMB 46.2 million) in the same period of 2006.
The average currency conversion exchange rate from Renminbi to U.S. Dollars applied to the third quarter of 2007 is 7.5488 RMB:1 USD, the rate applied to the third quarter of 2006 is 7.9654:1, the rate applied to the nine months ended September 30, 2007 is 7.6618:1, and the rate applied to the nine months ended September 30, 2006 is 8.0101:1. All percentage changes for comparable reporting periods were calculated based upon the amounts only in RMB.
Update on the Trial Production Line
The installation of the Trial Production Line was completed by the end of December 2007, as scheduled. The Company is currently awaiting the results of safety tests conducted by the regulatory authorities. Upon receiving the approval from the local government, the Company will start the debugging and experiments of new products on the Trial Production Line. The Company is planning to start such process by early February.
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 Ended Nine Months Ended
(Unaudited) (Unaudited)
Sep. 30, Sep.30,
Sep. 30, 2007 2006 Sep. 30, 2007 2006
RMB US$ RMB RMB US$ RMB
Net
sales 107,652 14,261 95,463 327,847 42,790 315,402
Cost of
sales (84,067) (11,136)(73,032) (247,323) (32,280) (240,625)
Gross
profit 23,585 3,125 22,431 80,524 10,510 74,777
Operating
expenses
Selling
expenses (2,869) (380) (3,900) (11,623) (1,517) (12,758)
Administrative
expenses (4,778) (633) (2,237) (10,496) (1,370) (5,432)
Depreciation
and
amortization (338) (45) (339) (1,075) (140) (878)
Total
operating
expenses (7,985) (1,058) (6,476) (23,194) (3,027) (19,068)
Operating
income 15,600 2,067 15,955 57,330 7,483 55,709
Other
income/
(expense)
- Interest
income 236 31 11 513 67 18
- Interest
expense (1,745) (231) (1,998) (6,581) (859) (8,937)
- Others,
net 263 36 (292) (299) (39) (591)
Total
other
income/
(expense) (1,246) (164) (2,279) (6,367) (831) (9,510)
Income
before
income
tax
benefit/
(expense) 14,354 1,903 13,676 50,963 6,652 46,199
Income
tax
benefit/
(expense) (1,443) (191) 233 (4,702) (614) (1)
Net
income 12,911 1,712 13,909 46,261 6,038 46,198
Other
Comprehensive
income
- Foreign
currency
translation
adjustments (9) 1,048 (6) (580) 2,540 (6)
Comprehensive
income 12,902 2,760 13,903 45,681 8,578 46,192
Earnings
per
share
(basic
and
diluted)
- Basic 0.99 0.13 18,040 3.54 0.46 59,919
- Diluted 0.99 0.13 18,040 3.54 0.46 59,919
Weighted
average
number
ordinary
shares
- Basic 13,062,500 13,062,500 771 13,062,500 13,062,500 771
- Diluted 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 Sept. 30,2007 As of Dec.
(Unaudited) 31,2006
ASSETS RMB US$ RMB
Current assets
Cash and cash equivalents 67,590 9,021 249,939
Restricted cash 44,679 5,963 3,311
Accounts receivable, net 51,376 6,857 75,530
Inventories 51,108 6,821 23,783
Prepayments and other
receivables 48,733 6,504 19,438
Total current assets 263,486 35,166 372,001
Property, plant and
equipment, net 443,980 59,254 317,690
Lease prepayments, net 22,890 3,055 23,059
Deposits for purchase of
property, plant
and equipment 0 0 13,900
Intangible assets, net 54 7 109
Goodwill 10,276 1,371 10,276
Deferred tax assets 1,047 140 1,047
Total assets 741,733 98,993 738,082
LIABILITIES AND
SHAREHOLDERS’ EQUITY
Current liabilities
Short-term bank loans 183,169 24,446 239,678
Accounts payable 20,781 2,773 12,809
Accrued expenses and other
payables 25,028 3,340 19,497
Deferred tax liabilities 1,166 156 191
Total liabilities 230,144 30,715 272,175
Shareholders’ equity
Ordinary shares of
US$0.129752 par value;
20,000,000 shares
authorized; 13,062,500
issued and outstanding as
of September 30, 2007 and
December 31, 2006,
respectively 13,323 1,707 13,323
Additional paid-in capital 311,907 39,967 311,907
Retained earnings 185,154 23,835 138,892
Accumulative other
comprehensive income 1,205 2,769 1,785
Total shareholders’ equity 511,589 68,278 465,907
Total liabilities and
shareholders’ equity 741,733 98,993 738,082
For more information, please contact:
In China:
Christina He
Investor Relations
Tel: +86-10-8518-5620
Email: fuweiIR@fuweifilms.com
In the U.S.:
Leslie Wolf-Creutzfeldt
Investor Relations
The Global Consulting Group
Tel: +1-646-284-9472
Email: lwolf-creutzfeldt@hfgcg.com
