Fuwei Films Announces Fourth Quarter and Full Year 2013 Financial Results

-- Teleconference to be Held on Monday, April 14, 2014, at 9:00 a.m. EDT --

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Apr 11, 2014, 04:00 ET

BEIJING, April 11, 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 financial results for the fourth quarter and full year ended December 31, 2013.

Fuwei Films 2013 Highlights

Net revenues of RMB305.0 million or US$50.4 million.
Positive net cash from operations of RMB3.1 million or US$0.5 million.
Testing of a type of TFT-LCD optical film from Fuwei's third production line commenced with clients in the fourth quarter of 2013.
Fuwei Films was awarded the "Shandong Famous Brand" designation by Shandong Provincial Quality Supervision Bureau for an additional five years
A public auction was held on March 25, 2014 by the Weifang State-owned Assets Operation Administration Company, Fuwei's controlling shareholder, to sell over 6,912,503 (or 52.9%) of the Company's outstanding ordinary shares it owned. The successful bidder, Shandong SNTON Optical Materials Technology Co., Ltd., is expected to receive control over 6,912,503 (or 52.9%) of the Company's outstanding ordinary shares at a price of RMB101,800 (approximately US$16,573) or approximately US$2.40 per ordinary share. The transfer process is expected to be completed by the end of April 2014.

Mr. Xiaoan He, Chairman and CEO of Fuwei Films commented, "2013 was a challenging year for Fuwei Films with increased competition and excessive capacity resulting in significant reduction of selling prices. Despite the challenges in the marketplace, Fuwei Films focused on innovation and completed the trial operation of its third production line. We believe the addition of the third production line is a sound strategy that will help us deliver long-term value for our shareholders. We are confident that our high-end specialty films and enhanced product portfolio will help us attract new clients and expand relationships with existing customers. This strategy is designed to keep Fuwei Films strong despite global economic fluctuations. As we look to 2014, we will seek to capitalize upon opportunities in emerging markets and technologies by focusing efforts on continued innovation and R&D."

Fourth Quarter 2013 Results

Revenues for the fourth quarter of 2013 were RMB75.1 million or US$12.4 million, compared with RMB100.7 million in the fourth quarter of 2012, a decrease of RMB25.6 million, or 25.4%, mainly due to the decrease in selling prices and volumes compared to the same period in 2012 arising from stronger competition attributed to increased capacity in China and overseas.

Sales of specialty films for the fourth quarter of 2013 were RMB19.1 million or US$3.2 million, or 25.5% of total revenues, compared with RMB27.6 million or 27.4% of total revenue in the fourth quarter of 2012. The decrease was mainly attributable to decreased selling prices compared to those in 2012.

The following is a breakdown of commodity and specialty film sales for the three-month periods ended December 31, 2013 and 2012 (amounts in thousands):

	Three months period ended
	December 31, 2013		% of Total	December 31, 2012	% of Total
	RMB	US$	% of Total	RMB	% of Total
Stamping and transfer film	35,166	5,809	46.9%	54,434	54.1%
Printing film	8,339	1,378	11.1%	8,621	8.6%
Metallized film	3,864	638	5.1%	4,520	4.5%
Specialty film	19,128	3,160	25.5%	27,603	27.4%
Base film for other applications	8,585	1,418	11.4%	5,492	5.5%

Total	75,082	12,403	100%	100,670	100%

Overseas sales for the fourth quarter of 2013 were RMB7.0 million or US$1.2 million, or 9.3% of total revenues, compared with RMB14.6 million or 14.5% of total revenues in the fourth quarter of 2012. The decrease in overseas sales was mainly due to the slow growth in demand from enhanced competition as well as anti-dumping measures taken by the USA and South Korea, which led to decreases in orders from the overseas market compared to the same period of 2012.

The following is a breakdown of domestic versus overseas sales for the three-month periods ended December 31, 2013 and 2012 (amounts in thousands):

	Three-month period ended
	December 31, 2013		% of Total	December 31, 2012	% of Total
	RMB	US$	% of Total	RMB	% of Total
Sales in China	68,126	11,254	90.7%	86,070	85.5%
Sales in other countries	6,956	1,149	9.3%	14,600	14.5%

Total	75,082	12,403	100%	100,670	100.0%

Gross loss for the fourth quarter of 2013 was RMB 2.1 million or US$0.34 million, compared with a gross loss of RMB2.8 million in the fourth quarter of 2012. Gross loss margin was 2.8%, the same as compared with the fourth quarter of 2012.

Operating expenses for the fourth quarter of 2013 were RMB12.1 million or US$2.0 million compared with RMB24.9 million in the fourth quarter of 2012. This decrease was mainly due to the lack of goodwill impairment.

Operating loss for the fourth quarter of 2013 was RMB14.2 million US$2.3 million, compared with operating loss of RMB27.8 million in the fourth quarter of 2012.

Net loss attributable to the Company for the fourth quarter of 2013 was RMB0.5 million or US$0.08 million, compared with net loss attributable to the Company RMB 12.5 million in the fourth quarter of 2012. Basic and diluted loss per share was RMB0.04 or US$0.01, compared with basic and diluted loss per share of RMB0.96 in the fourth quarter of 2012.

2013 Full Year Results

During the fiscal year ended December 31, 2013, net revenues were RMB305.0 million or US$50.3 million, compared to RMB372.9 million during the same period in 2012, representing a decrease of RMB67.9 million or 18.2%, mainly due to the reduction of average sales price by 4.9% and total sales volumes by 14.0%. The reduction of average sales price caused a decrease of RMB15.6 million and sales volume accounted for a decrease of RMB52.3 million.

In 2013, sales of specialty films were RMB89.4 million or US$14.8 million or 29.3% of total revenues as compared to RMB92.5 million or 24.8% in 2012, which was a decrease of RMB3.1 million, or 3.4%, as compared to the same period in 2012. The reduction of average sales price caused a decrease of RMB5.6 million and sales volume factored an increase of RMB2.5 million. The decrease was largely attributable to the decrease in sales prices for films in electronics and high-end packaging.

The Company's revenue by significant types of films for the periods ended December 31, 2013 and 2012 is as follows (amounts in thousands):

	For the year ended December 31,
	2013		% of Total	2012	% of Total
	RMB	US$	% of Total	RMB	% of Total
Stamping and transfer film	142,309	23,508	46.7%	202,029	54.2%
Printing film	27,852	4,601	9.1%	42,449	11.4%
Metallized film	17,686	2,922	5.8%	18,886	5.1%
Specialty film	89,382	14,764	29.3%	92,536	24.8%
Base film for other applications	27,721	4,579	9.1%	16,966	4.5%
	304,950	50,374	100.0%	372,866	100.0%

Overseas sales were RMB41.9 million or US$6.9 million, or 13.7% of total revenues, compared with RMB70.6 million or 18.9% of total revenues in 2012. The increase of average sales price caused an increase of RMB1.6 million and sales volume accounted for a decrease of RMB30.3 million. The decrease in overseas sales was mainly due to the slow growth in demand, enhanced competition as well as anti-dumping measures taken by the USA and South Korea, which led to decreases in orders from the overseas market compared to the same period of 2012.

The following is a breakdown of domestic versus overseas sales for the periods ended December 31, 2013 and 2012 (amounts in thousands):

	For the year ended December 31,
	2013		% of Total	2012	% of Total
	RMB	US$	% of Total	RMB	% of Total
Sales in China	263,076	43,457	86.3%	302,290	81.1%
Sales in other countries	41,874	6,917	13.7%	70,576	18.9%
	304,950	50,374	100.0%	372,866	100.0%

Gross loss was RMB15.4 million or US$2.5 million for the year of 2013, representing a gross loss margin of 5.0%, as compared to a gross loss margin of 0.8% in 2012. Gross margin decreased by 4.2 percentage points compared to the same period in 2012. Our average unit sales price decreased by 4.9% compared to last year due to the excess capacity and stronger competition in the market. In addition, the main raw materials used in the production of BOPET films, polyethylene terephthalate (or PET) resin and additives, comprised approximately 71.4% of our total costs of goods sold and its prices were greatly influenced by price fluctuation in crude oil. Fuwei's main raw material costs, PET resin, were reduced by 3.0% compared to last year. Moreover, remaining costs with the exception of raw materials accounted for approximately 28.6% of our total cost of goods sold which increased by 1.1% compared to that in 2012. Consequently, the decrease in product sales price exceeded that in cost of goods sold per unit during 2013 compared with 2012, which contributed to the significant increase in gross loss.

Operating expenses during the year ended December 31, 2013 were RMB49.0 million or US$8.1 million, a decrease of RMB11.9 million, or 19.6%, as compared to 2012. The decrease was mainly due to lack of goodwill impairment for the year ended December 31, 2013.

Total other expense is a combination result of interest income, interest expense and other income (expense). Total other expenses during the year ended December 31, 2013 was RMB4.6 million or US$0.8 million, compared to total other income of RMB1.8 million in 2012. Total other expense of 2013 increased compared to 2012, was mainly due to the expense of interest in the current year while all interest payments were capitalized in 2012. Interest payments totaled RMB12.2 million or US$2.0 million during 2013, RMB1.0 million or 8.9% higher than that in 2012, which was mainly due to higher interest payments associated with the capital lease obligations.

Income tax benefit during the year ended December 31, 2013 was RMB10.0 million or US$1.7 million compared to an income tax benefit of RMB7.7 million during 2012, which was mainly attributable to tax effect of changes in deferred tax during 2013.

Net loss attributable to the Company for the full year 2013 was RMB59.0 million or US$9.7 million, compared with net loss of RMB54.4 million in 2012.

Net cash provided by operating activities was RMB3.1 million or US$0.5 million for the year ended December 31, 2013 as compared to net cash provided by operating activities of RMB46.5 million for the year ended December 31, 2012. This decrease in cash flows from operating activities was attributable primarily to the increased operating loss in 2013.

Cash and cash equivalents on December 31, 2013 was RMB11.6 million or US$1.9 million, compared with RMB5.0 million as of December 31, 2012.

Conference Call Information

The Company will host a teleconference on Monday, April 14, 2014, 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: 13579477. The replay will be available until May 14, 2014, 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:

Ms Xiaoli Yu
Investor Relations Officer
Phone: +86-133-615-59266
Email: [email protected]

In the U.S.:

Ms. Vivian Chen
Investor Relations
Grayling
Phone: +1-646-284-9427
Email: [email protected]

Financial Tables Follow

FUWEI FILMS (HOLDINGS) CO., LTD AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 2013 and 2012 (amounts in thousands, except share and per share data)
	December 31, 2013		December 31, 2012
	RMB	US$	RMB
ASSETS
Current assets
Cash and cash equivalents	11,578	1,913	5,006
Restricted cash	41,422	6,842	21,457
Accounts and bills receivable, net	8,373	1,383	21,587
Inventories	38,454	6,352	34,291
Advance to suppliers	6,977	1,153	13,543
Prepayments and other receivables	26,107	4,313	26,174
Deferred tax assets - current	1,702	281	1,857
Total current assets	134,613	22,237	123,915

Property, plant and equipment, net	524,777	86,687	233,335
Construction in progress	632	104	337,990
Lease prepayments, net	18,999	3,138	19,523
Advance to suppliers - long term, net	2,134	353	5,299
Long-term deposit	16,760	2,769	16,760
Other Assets	13,244	2,188	262
Deferred tax assets - non current	20,888	3,450	10,466

Total assets	732,047	120,926	747,550

LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings	105,000	17,345	110,000
Accounts payables	33,454	5,526	28,796
Notes payable	81,990	13,544	38,299
Advance from customers	14,665	2,422	11,714
Accrued expenses and other payables	6,777	1,119	6,831
Obligations under capital leases-current	8,314	1,373	6,282
Total current liabilities	250,200	41,329	201,922

Obligations under capital leases	8,563	1,415	13,718
Long-term loan	10,000	1,652	10,000
Deferred tax liabilities	3,736	617	3,476

Total liabilities	272,499	45,013	229,116

Equity
Shareholders' equity
Registered capital(of US$0.129752 par value; 20,000,000 shares authorized; 13,062,500 issued and outstanding)	13,323	2,201	13,323
Additional paid-in capital	311,907	51,523	311,907
Statutory reserve	37,441	6,185	37,441
Retained earnings	96,370	15,919	155,341
Cumulative translation adjustment	1,266	210	1,222
Total shareholders' equity	460,307	76,038	519,234
Non-controlling interest	(759)	(125)	(800)
Total equity	459,548	75,913	518,434
Total liabilities and equity	732,047	120,926	747,550

FUWEI FILMS (HOLDINGS) CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) FOR THE THREE AND TWELVE-MONTH PERIODS ENDED DECEMBER 31, 2013 AND 2012 (amounts in thousands except share and per share value)
	The Three-Month Period Ended December 31,			The Twelve-Month Period Ended December 31,
	2013		2012		2013		2012
	RMB	US$	RMB		RMB	US$	RMB
Net sales	75,082	12,403	100,670		304,950	50,374	372,866
Cost of sales	77,152	12,745	103,498		320,375	52,922	375,973

Gross（loss)	(2,070)	(342)	(2,828)		(15,425)	(2,548)	(3,107)

Operating expenses
Selling expenses	4,878	806	4,887		16,839	2,782	18,212
Administrative expenses	7,204	1,190	9,771		32,130	5,307	32,389
Goodwill impairment	-	-	10,276		-	-	10,276
Total operating expenses	12,082	1,996	24,934		48,969	8,089	60,877

Operating (loss)	(14,152)	(2,338)	(27,762)		(64,394)	(10,637)	(63,984)

Other income /(expense)
- Interest income	189	31	(1,570)		1,024	169	1,022
- Interest expense	(647)	(107)	8,621		(10,094)	(1,667)	-
- Others income /(expense), net	4,898	809	323		4,505	744	798
Total other income /(expense)	4,440	733	7,374		(4,565)	(754)	1,820

(Loss) Income before provision for income taxes	(9,712)	(1,605)	(20,388)		(68,959)	(11,391)	(62,164)

Income tax benefit (expense)	10,214	1,687	7,860		10,007	1,653	7,727

Net (Loss) /income	502	82	(12,528)		(58,952)	(9,738)	(54,437)

Net income (Loss) attributable to noncontrolling interests	3	0	(1)		19	3	(10)
Net (loss) income attributable to the Company	499	82	(12,527)		(58,971)	(9,741)	(54,427)

Other comprehensive income (loss):
- Foreign currency translation adjustments attributable to noncontrolling interest	8	1	7		22	4	8
- Foreign currency translation adjustments attributable to the Company	13	2	9		44	7	(8)

Comprehensive income (loss) attributable to non-controlling interest	11	1	6		41	7	(2)
Comprehensive (loss) income attribute to the Company	512	84	(12,518)		(58,927)	(9,734)	(54,435)

(Loss) Earnings per share, Basic and diluted	(0.04)	(0.01)	(0.96)		(4.51)	(0.74)	(4.17)
Weighted average number ordinary shares, Basic and diluted	13,062,500	13,062,500	13,062,500		13,062,500	13,062,500	13,062,500

FUWEI FILMS (HOLDINGS) CO., LTD AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2013, 2012 and 2011
	The Years Ended December 31,
	2013		2012	2011
	RMB	US$	RMB	RMB
Cash flow from operating activities
Net (loss) income	(58,952)	(9,738)	(54,437)	21,038
Adjustments to reconcile net (loss) income to net cash
provided by(used in) operating activities
- Loss on disposal of property, plant and equipment	33	5	10	-
- Loss on goodwill impairment	-	-	10,276	-
- Depreciation of property, plant and equipment	48,161	7,956	48,709	43,783
- Amortization of intangible assets	524	87	524	454
- Deferred income taxes	(10,007)	(1,653)	(7,727)	165
- Bad debt (recovery) expense	(1,744)	(288)	1,026	(354)
- Inventory provision	-	-	-	3,533
Changes in operating assets and liabilities
- Accounts and bills receivable	13,615	2,249	31,460	(26,620)
- Inventories	(4,164)	(688)	7,483	7,270
- Advance to suppliers	7,909	1,306	(6,351)	2,167
- Prepaid expenses and other current assets	(398)	(66)	29,192	(30,180)
- Accounts payable	4,658	769	9,579	5,021
- Accrued expenses and other payables	38	6	789	(7,185)
- Advance from customers	2,952	488	(162)	(25,415)
- Tax payable	465	77	(23,920)	(7,695)

Net cash provided by (used in) operating activities	3,090	510	46,451	(14,018)

Cash flow from investing activities
Purchases of property, plant and equipment	(4,416)	(729)	(5,285)	(35,943)
Restricted cash related to trade finance	(19,974)	(3,299)	80,752	(100,915)
Advanced to suppliers - non current	3,165	523	57,500	(273)
Amount change in construction in progress	(8,785)	(1,451)	(207,432)	17,806
Interest capitalization related to CIP	(2,059)	(340)	(11,174)	-
Proceeds from sale of property, plant and equipment	-	-	250	-

Net cash used in investing activities	(32,069)	(5,296)	(85,389)	(119,325)

Cash flow from financing activities
Principal payments of short-term bank loans	(110,000)	(18,171)	(168,501)	(142,000)
Proceeds from short-term bank loans	105,000	17,345	110,000	148,501
Payment of capital lease obligation	(8,123)	(1,342)	-	-
Change in notes payable	43,691	7,217	38,299	-
Proceeds from sale-leaseback equipment	5,000	826	20,000	-

Net cash (used in) provided by financing activities	35,568	5,875	(202)	6,501

Effect of foreign exchange rate changes	(17)	20	(26)	(213)

Net increase(decrease) in cash and cash equivalent	6,572	1,109	(39,166)	(127,055)

Cash and cash equivalent
At beginning of period/year	5,006	804	44,172	171,227
At end of period/year	11,578	1,913	5,006	44,172

SUPPLEMENTARY DISCLOSURE:
Interest paid	12,153	2,008	11,174	10,227
Income tax paid	-	-	-	9,654

SUPPLEMENTARY SCHEDULE OF NONCASH INVESTING AND FINANCIAL ACTIVITIES:
Account payable for plant and equipment:	7,466	1,233	6,003	1,730
Obligations for acquired equipment under capital lease:	16,877	2,788	20,000	-