Business News
Fuwei Films Announces First Quarter 2008 Financial Results
Thursday 15. May 2008 - Fuwei Films (Holdings) Co. Limited (NASDAQ:FFHL) ("Fuwei" or "the Company"), a manufacturer and distributor of high-quality BOPET plastic films in China, today released the financial results for the first quarter of 2008 ended March 31, 2008.
First Quarter 2008 Financial Highlights
— Revenues rose 4.8% to US$14.5 million (RMB 104.0 million) from the
first quarter of 2007
— Net income declined to US$1.1 million (RMB 7.9 million) from RMB 13.3
million in first quarter 2007, but rose from RMB 1.0 million in fourth
quarter 2007
“We entered 2008 facing a number of challenges,” said Xiaoan He, Chairman and CEO of Fuwei. “However, our newly strengthened R&D platform is expected to increase our ability to develop more high value-added specialty film products to counter the unfavorable trend of higher energy and raw material costs.”
First Quarter 2008 Financial Results
Revenues for the first quarter of 2008 rose 4.8% to US$14.5 million (RMB 104.0 million), from RMB 99.3 million in the first quarter of 2007. Revenues of specialty films in first quarter 2008 were US$4.7 million (RMB 33.8 million), or 32.5% of total revenues.
The following is a breakdown of commodity and specialty film sales for the three-month periods ended March 31, 2008 and March 31, 2007 (amounts in thousands):
Three months period ended
March
March 31,2008 31,2007
RMB US$ % of Total RMB % of Total
Printing film 19,230 2,686 18.5% 19,585 19.7%
Stamping film 21,211 2,963 20.4% 23,128 23.3%
Metallization film 2,901 405 2.8% 5,936 6.0%
Base film for other
Applications 26,927 3,761 25.9% 12,128 12.2%
Specialty film 33,765 4,716 32.5% 38,489 38.8%
Total 104,034 14,530 100.0% 99,265 100.0%
Revenues from overseas in the first quarter of 2008 were US$3.4 million (RMB 24.1 million), or 23.2% of total revenues.
The following is a breakdown of domestic versus overseas sales for the three-month periods ended March 31, 2008 and March 31, 2007 (amounts in thousands):
Three months period ended
March
March 31,2008 31,2007
RMB US$ % of Total RMB % of Total
Sales in China 79,899 11,160 76.8% 66,247 66.7%
Sales in other
countries 24,135 3,371 23.2% 33,018 33.3%
Total 104,034 14,530 100.0% 99,265 100.0%
Gross profit for the first quarter of 2008 was US$3.0 million (RMB 21.6 million), compared with RMB 23.6 million in same period 2007. The Company generated a gross margin of 20.8% in the first quarter 2008, versus 23.7% in the same period of 2007. The decrease in gross margin was due to increased consumption of raw materials, labor and power.
Operating expenses in the first quarter of 2008 were US$1.6 million (RMB 11.2 million), compared with RMB 6.2 million in same period 2007. The increase was mainly due to the increased legal expenses related to ongoing litigation and increased staffing costs. Selling expenses in the first quarter 2008 decreased to US$0.5 million (RMB 3.4 million) from RMB 3.7 million in the same period 2007. Administrative expenses increased to US$1.1 million (RMB 7.7 million) from RMB 2.5 million in the first quarter of 2007.
Net income for the first quarter of 2008 decreased to US$1.1 million (RMB 7.9 million), or diluted EPS of US$0.08 (RMB 0.61), from RMB 13.3 million, or diluted EPS of RMB 1.02 in the same period of 2007. On a sequential basis, net income rose from RMB 1.0 million, or RMB 0.08 per share, in the fourth quarter of 2007.
Total cash and cash equivalents as of March 31, 2008 were US$1.6 million (RMB 11.4 million) as compared with RMB 30.9 million as of December 31, 2007.
Total shareholders’ equity increased to US$74.3 million (RMB 521.1 million) as of March 31, 2008 from RMB 512.5 million as of December 31, 2007.
As of March 31, 2008, the Company had 13,062,500 basic and diluted total ordinary shares outstanding.
Anti-Dumping Case Updates
In April, the Company received notice of a preliminary anti-dumping assessment issued by the Korean Trade Commission (KTC). The initial assessment of the tariff rate for Fuwei was 6.13%, versus 24.37% for Chinese companies on average.
The KTC began its anti-dumping investigation of BOPET film products from China and India in November 2007. After studying the trade practices of six Chinese BOPET manufacturers, including Fuwei, and several Indian manufacturers, the KTC issued its preliminary tariff assessment. Fuwei was notified by the KTC that its tarrif rate will be 6.13%, the single-lowest rate received among all the Chinese and Indian manufacturers involved in the investigation. KTC will announce a formal resolution of the anti-dumping case in the summer, upon which the new rates will become effective.
“The decision reached by the KTC is expected to strengthen Fuwei’s reputation as a Chinese exporter of BOPET films to Korea,” said Mr. Xiaoan He, Chairman and CEO of Fuwei. “Fuwei first entered the Korean market in 2005 and since then we have been adding higher-end specialty film products to our export offerings, which makes our products less liable for the anti-dumping case. While tariffs have always been a distortion of the market force, we expect the Korean assessment to work to our advantage to further expand our presence in the overseas market.”
Additionally, the U.S. Department of Commerce has also informed the Company of its preliminary assessment of dumping margins, which has been set at 46.82%, also the lowest among Chinese companies investigated. The Department of Commerce is expected to make its final determination in July 2008.