Fuwei Films Announces Fourth Quarter and Full Year 2012 Financial Results

BEIJING, April 11, 2013 /PRNewswire-FirstCall/ -- 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 financial results for the fourth quarter and full year ended December 31, 2012.

Fuwei Films 2012 Highlights

• Net cash provided by operating activities was RMB46.5 million for the year ended December 31, 2012 as compared to net cash used in operating activities of RMB14.0 million for the year ended December 31, 2011. This increase in cash flows from operating activities was attributable primarily to the decrease in accounts receivables.
  
• Operating expenses during the year ended December 31, 2012 were RMB60.9 million, an increase of RMB6.1 million, or 11.2%, as compared to 2011. This was due to goodwill impairment for the year ended December 31, 2012.
  
• Fuwei Films was selected as one of the outstanding brands of the plastic packaging industry in China in 2011 and 2012. This award was granted by the China Packaging Federation, one of the leading State-approved national industry federations committed to advocating the development of the packaging industry in China.
  
• Fuwei Films' third production line to manufacture high-performance electric insulation film, base film for solar backsheet and TFT-LCD optical film with an annual design capacity of 23,000 metric tons and thickness between 38 and 250um was put into trial operation.

Mr. Xiaoan He, Chairman and CEO of Fuwei Films said, "Despite the challenges in the marketplace, including increased competition and a significant reduction in selling prices arising from excessive capacity, Fuwei Films focused on innovation and completed the installation of its third production line. We intend to develop our high value-added thick films to meet market demands. We believe this is the key to our long term growth and prosperity."

Fourth Quarter 2012 Results

Revenues for the fourth quarter of 2012 were RMB100.7 million (US$16.2 million), compared with RMB109.2 million in the fourth quarter of 2011, a decrease of RMB8.5 million, or 7.8%, mainly due to the decrease in selling prices compared to the same period in 2011 arising from stronger competition attributed to increased capacity in China and overseas.

Sales of specialty films for the fourth quarter of 2012 were RMB27.6 million (US$4.4 million), or 27.4% of total revenues, compared with RMB32.1 million or 29.4% of total revenue in the fourth quarter of 2011. The decrease was mainly attributable to decreased selling prices compared to those in 2011.

The following is a breakdown of commodity and specialty film sales for the three-month periods ended December 31, 2012 and 2011 (amounts in thousands):

Overseas sales for the fourth quarter of 2012 were RMB14.6 million (US$2.3 million), or 14.5% of total revenues, compared with RMB15.1 million or 13.8% of total revenues in the fourth quarter of 2011. The reduction in overseas sales was mainly due to stronger competition in the global market causing a significant drop of overseas selling prices in the fourth quarter of 2012 compared with the same period last year.

The following is a breakdown of domestic versus overseas sales for the three-month periods ended December 31, 2012 and 2011 (amounts in thousands):

Gross profit for the fourth quarter of 2012 was RMB(2.8 million) (US$(0.5 million)), compared with RMB7.4 million in the fourth quarter of 2011. Gross margin was (2.8)%, compared with 6.8% in the fourth quarter of 2011. The significant decrease in gross profit was primarily due to the significant decrease in selling prices.  

Operating expenses for the fourth quarter of 2012 was RMB24.9 million (US$4.0 million) compared with RMB12.8 million in the fourth quarter of 2011. This increase was mainly due to the increase of R&D expenses and goodwill impairment for the year ended December 31, 2012.

Operating loss for the fourth quarter of 2012 was RMB(27.8 million) (US$(4.5 million)), compared with operating loss RMB(5.3 million) in the fourth quarter of 2011.

Net loss attributable to the Company for the fourth quarter of 2012 was RMB(12.5 million) (US$(2.0 million)), compared with net loss attributable to the Company RMB(3.8 million) in the fourth quarter of 2011. Basic and diluted loss per share was RMB(0.96) (US$(0.15)), compared with basic and diluted loss per share of RMB(0.29) in the fourth quarter of 2011.

2012 Full Year Results

For the fiscal year ended December 31, 2012, our net revenues were RMB372.9 million (US$59.8 million), which was a decrease of RMB164.7 million or 30.6%, as compared to 2011. The decrease in revenue was mainly due to the reduction of average selling prices by 30.6% and total sales volumes by 0.7%. 

In 2012, sales of specialty films were RMB92.5 million (US$14.9 million) and 24.8% of our total revenues as compared to RMB140.5 million and 26.1% in 2011, which was a decrease of RMB48.0 million, or 34.1%, as compared to the same period in 2011. The decrease was largely attributable to the decrease in demand and selling prices for films in electronics and high-end packaging.

The Company's revenue by significant types of films for the periods ended December 31, 2012 and 2011 is as follows (amounts in thousands):

Overseas sales were RMB70.6 million or US$11.3 million, or 18.9% of total revenues, compared with RMB145.5 million or 27.1% of total revenues in 2011. The decrease in overseas sales was mainly due to less demand from international markets and enhanced competition as well as anti-dump measures taken by the USA and South Korea, which led to decrease in orders from the overseas markets and the significant decrease of selling prices compared to the same period of 2011.

The following is a breakdown of domestic versus overseas sales for the periods ended December 31, 2012 and 2011 (amounts in thousands):                                                                   

Our gross loss was RMB(3.1 million) (US$(0.5 million)) for the year of 2012, representing a gross margin of (0.8)%, as compared to a gross margin of 15.9% in 2011. Gross margin decreased by 16.7 percentage points compared to the same period in 2011. Our average unit selling price decreased by 30.6% compared to last year due to excess capacity and stronger competition in the market. In addition, the main raw materials used in our production of BOPET films, polyethylene terephthalate (or PET) resin and additives, comprised approximately 73.0% of our total costs of goods sold and these prices were greatly influenced by price fluctuation in crude oil. Our main raw material costs, PET resin, were reduced by 14.7% compared to last year. The decrease in product selling prices largely exceeded that in main raw material costs during 2012 compared with 2011, which contributed to the significant decrease in our gross profit.

Our operating expenses during the year ended December 31, 2012 were RMB60.9 million, which was an increase of RMB6.1 million, or 11.2%, as compared to 2011. The increase was mainly due to goodwill impairment for the year ended December 31, 2012.

Total other income during the year ended December 31, 2012 was RMB1.8 million (US$0.3 million), compared to total other expense of RMB(5.7 million) in 2011, which was mainly attributable to interest capitalization of RMB11.2 million (US$1.8 million) related to the third production line project in 2012. Interest payments totaled RMB11.2 million (US$1.8 million) during 2012, which was RMB1.0 million or 9.3% higher than that in 2011, mainly due to higher interest rates on bank loans.

Income tax benefits during the year ended December 31, 2012 were RMB7.7 million (US$1.2 million) compared to an income tax expense of RMB(4.0 million) during 2011, which was mainly attributable to the tax effect of changes in deferred tax during 2012.

Net loss attributable to the Company for full year 2012 was RMB(54.4 million) (US$(8.7 million)), compared with net income of RMB21.1 million in 2011.

Net cash provided by operating activities was RMB46.5 million (US$7.5 million) for the year ended December 31, 2012 as compared to net cash used in operating activities of RMB(14.0 million) for the year ended December 31, 2011. This increase in cash flows from operating activities was attributable primarily to the decrease in accounts receivables. In this year, we took actions to collect overdue invoices from our customers, which resulted in an increase in cash flows.

Cash and cash equivalents on December 31, 2012 was RMB5.0 million (US$0.8 million), compared with RMB44.2 million as of December 31, 2011.

Conference Call Information

The Company will host a teleconference on Friday, April 12, 2013, at 9:00 a.m. EDT / 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: 411313. The replay will be available until May 12, 2013, at 11:59 p.m. EDT.

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 Films' 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 is 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 short and long-term effects of the global financial crisis on the Company and the BOPET film industry; 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. 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:
Miss Lysander Lee
Investor Relations Officer
Phone: +86 133 615 59266

In the U.S.:
Ms. Leslie Wolf-Creutzfeldt
Investor Relations
Grayling
Phone: +1-646-284-9472
Email: [email protected]

Financial Tables Follow

SOURCE Fuwei Films (Holdings) Co., Ltd.

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