omniture

Fuwei Films Announces Third Quarter 2008 Financial Results

- Teleconference to be Held Friday, November 14, 2008, at 8:30 a.m. EST -

BEIJING, Nov. 14 /Xinhua-PRNewswire/ -- 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 third quarter and first nine months of 2008.

Financial Highlights

-- In the third quarter of 2008, revenue rose 11.2% to RMB 119.8 million

(US$17.5 million) from the same period of 2007;

-- In the first nine months of 2008, revenue rose 6.3% to RMB 348.6

million (US$49.8 million) from the same period of 2007.

"We hereby release our third quarter of 2008 financial results," said Xiaoan He, Chairman and CEO of Fuwei Films. "We entered the first nine months of 2008 with a number of challenges including strong competition in the marketplace, an increase in the cost of raw materials, energy and labor, especially the rapid changes in the macro-economic environments both at home and abroad, anti-dumping investigations in the United States and Korea, and the inadequate domestic and overseas market demand resulting from the world-wide financial crisis which originated in the United States during the third quarter. Furthermore, the implementation of Chinese macro control policy by the Chinese government this year and the Chinese government's support for environmental protection and the measures taken by the government against excessive luxurious packaging have caused the demand for the high-end and luxurious BOPET films to decline. Despite the fact that we have received the comparatively lower anti-dumping duty rate from Korea and the United States, which was expected to have positive effects on recovering overseas sales, current overseas sales still remained the same, resulting from the decreased demand in overseas market caused by the financial crisis. Consequently, the results of the first nine months in 2008 were not as strong as the same period last year."

Mr. He continued, "However, we believe that Fuwei will be able to continue to utilize its current advantages when facing the negative influences of the macro economic environment and of challenges arising from an uncertain economic future."

Third Quarter of 2008 Financial Results

For the third quarter of 2008, revenue rose 11.2% to RMB 119.8 million (US$17.5 million) from the third quarter of 2007.

Revenue of specialty films was RMB 22.1 million (US$3.2 million), or 18.5% of total revenue.

The following is a breakdown of commodity and specialty film sales for the three-month periods ended September 30, 2008 and September 30, 2007 (amounts in thousands):

Three-month period ended

September 30,2008 September 30,2007

% of % of

RMB US$ Total RMB Total

Printing film 16,661 2,413 13.9% 18,327 17.0%

Stamping film 41,945 6,121 35.0% 24,224 22.5%

Metallization film 20,171 2,943 16.8% 8,323 7.7%

Base film for other

applications 18,938 2,764 15.8% 15,743 14.7%

Specialty film 22,134 3,230 18.5% 41,037 38.1%

Total 119,849 17,489 100.0% 107,652 100.0%

Revenue from overseas in the third quarter of 2008 was RMB 16.2 million (US$2.4 million), or 13.5% of total revenues.

The following is a breakdown of domestic versus overseas sales for the three-month periods ended September 30, 2008 and September 30, 2007 (amounts in thousands):

Three-month period ended

September 30,2008 September 30,2007

% of % of

RMB US$ Total RMB Total

Sales in China 103,674 15,129 86.5% 88,741 82.4%

Sales in other countries 16,175 2,360 13.5% 18,912 17.6%

Total 119,849 17,489 100.0% 107,652 100.0%

Gross profit was RMB 14.6 million (US$2.1 million), compared with RMB 23.6 million (US$3.4 million) in the same period of 2007. The Company generated a gross margin of 12.1%, versus 21.9% in the same period of 2007. The decrease in gross margin was mainly due to the decline of the average selling prices, the decreased sales of specialty films, as well as the increased costs of raw materials, power and labor.

Operating expenses were RMB 8.4 million (US$1.2 million). Selling expenses increased 34.4% to RMB 3.9 million (US$0.6 million) from the same period of 2007.

Administrative expenses decreased 11.8 % to RMB 4.5 million (US$0.7 million) from the same period of 2007.

Net income was RMB 7.1 million (US$1.0 million) compared with RMB 12.9 million (US$1.7 million) in the same period of 2007. Earnings per diluted share were RMB 0.54 (US$0.08) compared with RMB 0.99 (US$0.14) in the same period of last year.

Total diluted shares outstanding remained the same as the third quarter of 2007, at 13,062,500 as of September 30, 2008.

Nine-month 2008 Financial Results

For the first nine months of 2008, revenue rose 6.3% to RMB 348.6 million (US$49.8 million) from the same period of 2007. Revenue of specialty films in the first nine months of 2008 was RMB 97.0 million (US$13.9 million), or 27.8% of total revenue.

The following is a breakdown of commodity and specialty film sales for the nine-month periods ended September 30, 2008 and September 30, 2007 (amounts in thousands):

Three-month period ended

September 30,2008 September 30,2007

% of % of

RMB US$ Total RMB Total

Printing film 48,047 6,865 13.8% 59,961 18.3%

Stamping film 87,916 12,561 25.2% 75,288 23.0%

Metallization film 35,915 5,132 10.3% 21,944 6.7%

Base film for other

applications 79,716 11,390 22.9% 43,173 13.1%

Specialty film 97,035 13,864 27.8% 127,481 38.9%

Total 348,629 49,812 100.0% 327,847 100.0%

Revenue from overseas in the first nine months of 2008 was RMB 48.7 million (US$7.0 million), or 14.0% of total revenue.

The following is a breakdown of domestic versus overseas sales for the nine-month periods ended September 30, 2008 and September 30, 2007 (amounts in thousands):

Three-month period ended

September 30,2008 September 30,2007

% of % of

RMB US$ Total RMB Total

Sales in China 299,975 42,860 86.0% 236,971 72.3%

Sales in other countries 48,654 6,952 14.0% 90,876 27.7%

Total 348,629 49,812 100.0% 327,847 100.0%

Gross profit was RMB 58.1 million (US$8.3 million), compared with RMB 80.5 million (US$11.7 million) in the same period of 2007. The Company generated a gross margin of 16.7%, versus 24.6% in the same period of 2007.

Operating expenses were RMB 28.5 million (US$4.1 million), compared with RMB 23.2 million (US$3.4 million) in the same period of 2007. Selling expenses were a little bit lower compared with the corresponding period of 2007. Administrative expenses increased to RMB 16.9 million (US$2.4 million) from RMB 11.6 million (US$1.7 million) in the same period of 2007.

Net income was RMB 24.7 million (US$3.5 million), or diluted EPS of RMB 1.89 (US$0.27), compared with RMB 46.3 million (US$6.0 million), or diluted EPS of RMB 3.54 (US$0.51) in the same period of 2007.

Total shareholders' equity increased to RMB 537.1 million (US$78.4 million) as of September 30, 2008, from RMB 530.3 million (US$77.3 million) as of June 30, 2008.

Recent Developments

On September 9, 2008, the Company announced that its BOPET Dry Resist Films Project was a Shandong government-supported key technology project. Such government-supported initiatives have in the past received priority in borrowing from banks. In addition, the Company also announced its patent application of Single-Sided Matte BOPET films had been accepted by the State Intellectual Property Office ("SIPO"). Single-Sided Matte BOPET film is a high-quality and more aesthetically pleasing product. Compared with traditional BOPET films, it is also more cost efficient.

On September 18, 2008, the Company announced that Fuwei Films (Shandong) Co., Ltd. the Company's wholly-owned operating subsidiary ("Fuwei Shandong"), has filed six new patent applications, all of which are awaiting reviews by SIPO. The six patents comprise four new inventions and two innovations. These patents can be used in tobacco packaging, fresh food preservation, laminated panel of electric appliances and LCD screens. The Company expects to employ the new patents to further penetrate the high-end BOPET film market and attract affluent high-end users. The review process is expected to be one to three years.

On September 2, 2008, the Company announced that the Korean Trade Commission made the final determination of the anti-dumping investigation of BOPET films originated in China and India on August 27, 2008 and decided to recommend to the Ministry of Strategy and Finance to levy the anti-dumping duty ("ADD") on such imports for five years. The final determination of the ADD rate for Fuwei is 5.67%, versus 6.13% in the preliminary determination. The ADD rate for other Chinese companies is 23.6% except two other Chinese companies which enjoy the ADD rate of 8.93% and 15.95%, respectively. The ADD rate for one Indian company is 10.4% and for other Indian companies is 25.32%. The ADD rates became effective on October 27, 2008.

On October 8, 2008, the Company announced that it has received the final results of the BOPET film-related anti-dumping investigation conducted by the United States. Fuwei was one of the five Chinese BOPET film manufacturers to receive the lowest ADD rate of 3.49%. The average ADD rate for other Chinese companies has been assessed at 76.72% in this investigation.

On October 31, 2008, the Company announced that the Company became aware that the initial trial of the Company's three major shareholders, Mr. Jun Yin, Mr. Tongju Zhou and Mr. Duo Wang, had begun on October 23 and continued on October 24 and October 27, 2008. The trial was held at Jinan Intermediate People's Court in the city of Jinan, Shandong Province. As of October 27, 2008, there has been no verdict announced by Jinan Intermediate People's Court.

Conference Call Information

The Company will host a teleconference on Friday, November 14, 2008, at 8:30 a.m. EST / 9:30 p.m. Beijing time 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 10 minutes prior to the scheduled start time. The call is being simultaneously Webcast and can be accessed on Fuwei's Website at http://www.fuweiholdings.com . Please visit the Web site at least 15 minutes prior to the scheduled start time to register for the Webcast and download any necessary audio software.

A replay of the call can also be accessed via telephone until 11:59 p.m. EST on Friday, November 21, 2008, 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: 301666. A Web cast replay of the call will also be made and can be accessed on the Fuwei's site at http://www.fuweiholdings.com .

About Fuwei Films

Fuwei conducts its business through its wholly owned subsidiary 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'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 disclosed in the Company's reports filed with the United States 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 which include, among other things, the global financial crisis of 2008, 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 BALANCE SHEETS

AS OF SEPTEMBER 30, 2008 AND DECEMBER 31, 2007

(amounts in thousands except share and per share value)

As of Sep. 30, 2008 As of Dec.

(Unaudited) 31, 2007

RMB US$ RMB

ASSETS

Current assets

Cash and cash equivalents 3,383 493 30,909

Restricted cash 14,097 2,056 64,909

Accounts receivable, net 63,995 9,335 58,195

Inventory 56,557 8,250 41,670

Advance to suppliers 30,425 4,438 13,538

Prepayments and other receivables 3,592 526 2,622

Total current assets 172,049 25,098 211,842

Plant and equipment, net 214,710 31,321 228,309

Construction in progress 301,155 43,931 265,253

Lease prepayments, net 22,638 3,302 22,290

Intangible assets -- -- 36

Goodwill 10,276 1,499 10,276

Deposit 21,000 3,064 --

Deferred tax assets 1,019 150 969

Total assets 742,847 108,365 738,975

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Short-term borrowings 166,491 24,287 188,027

Accounts payables 20,878 3,046 19,609

Advance from customers 15,012 2,190 10,957

Accrued expenses and other payables 3,104 453 7,587

Deferred tax liabilities 259 38 265

Total liability 205,744 30,014 226,445

Shareholders' equity

Registered capital (of US$0.129752

par value; 20,000,000 shares

authorized; 13,062,500 issued and

outstanding) 13,323 1,944 13,323

Additional paid-in capital 311,907 45,500 311,907

Statutory reserve 30,077 4,387 26,924

Retained earnings 180,780 26,372 159,228

Cumulative translation adjustment 1,016 148 1,148

Total shareholders' equity 537,103 78,351 512,530

Total liabilities and shareholders'

equity 742,847 108,365 738,975

FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

AND OTHER COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2008 AND 2007

(amounts in thousands except share and per share value)

(UNAUDITED)

Three Month Period ended Sep. 30

2008 2007

RMB US$ RMB

Revenue 119,849 17,489 107,652

Cost of sales (105,297) (15,365) (84,067)

Gross profit 14,552 2,124 23,585

Operating expenses

Selling expenses (3,857) (563) (2,869)

Administrative expenses (4,510) (658) (5,116)

Total operating expenses (8,367) (1,221) (7,985)

Operating income 6,185 903 15,600

Other income/(expense)

- Interest income 551 80 236

- Interest expense (392) (57) (1,745)

- Other, net 1,381 202 263

Total other income/(expense) 1,540 225 (1,246)

Income before income tax expense 7,725 1,128 14,354

Income tax benefit/(expense) (617) (90) (1,443)

Net income 7,108 1,038 12,911

Other comprehensive income

-Foreign currency translation

adjustments (300) (44) (8)

Comprehensive income 6,809 994 12,903

Earnings per share, basic and diluted 0.54 0.08 0.99

Weighted average number ordinary

shares, basic and diluted 13,062,500 13,062,500 13,062,500

Nine Month Period ended Sep. 30

2008 2007

RMB US$ RMB

Revenue 348,629 49,812 327,847

Cost of sales (290,503) (41,507) (247,323)

Gross profit 58,126 8,305 80,524

Operating expenses

Selling expenses (11,595) (1,657) (11,623)

Administrative expenses (16,939) (2,420) (11,571)

Total operating expenses (28,534) (4,077) (23,194)

Operating income 29,592 4,228 57,330

Other income/(expense)

- Interest income 619 88 513

- Interest expense (9,037) (1,291) (6,581)

- Other, net 6,032 862 (299)

Total other income/(expense) (2,386) (341) (6,367)

Income before income tax expense 27,206 3,887 50,963

Income tax benefit/(expense) (2,505) (358) (4,702)

Net income 24,701 3,529 46,261

Other comprehensive income

-Foreign currency translation

adjustments (133) (19) (579)

Comprehensive income 24,568 3,510 45,682

Earnings per share, basic and diluted 1.89 0.27 3.54

Weighted average number ordinary

shares, basic and diluted 13,062,500 13,062,500 13,062,500

FUWEI FILMS (HOLDINGS) CO., LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2008 AND 2007

(amounts in thousands except share and per share value)

(UNAUDITED)

Period Ended Sep.30, Period Ended

2008 Sep.30, 2007

RMB US$ RMB

CASH FLOWS FROM OPERATING ACTIVITIES

Net income 24,701 3,529 46,261

Adjustments to reconcile net income

to net cash provided by operating

activities

- Depreciation of property, plant and

equipment 18,510 2,645 18,295

- Amortization of intangible assets 377 54 561

- Deferred income taxes -- -- 974

- Bad debt expense 662 95 --

Changes in operating assets and

liabilities, net of

- Accounts receivable (6,213) (888) 24,153

- Inventories (14,887) (2,127) (27,325)

- Advance to suppliers (16,887) (2,413) --

- Prepaid expenses and other current

assets (1,970) (281) (29,292)

- Accounts payable 1,274 182 7,972

- Accrued expenses and other payables (1,479) (211) 5,531

- Advance from customers 4,056 579 --

- Tax payable (3,007) (430) --

Net cash provided by operating

activities 5,137 734 47,130

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property, plant and

equipment (4,912) (702) (130,700)

Restricted cash related to trade

finance 50,811 7,260 (41,368)

Addition to construction in progress (35,901) (5,130) --

Deposit for purchase (21,000) (3,000) --

Net cash used in investing activities (11,002) (1,572) (172,068)

CASH FLOW FROM FINANCING ACTIVITIES

Net proceeds from issuance of share

capital

Principal payments of short-term bank

loans (275,249) (39,327) (239,678)

Proceeds from short-term bank loans 253,714 36,250 183,169

Net cash used in financing activities (21,535) (3,077) (56,509)

Effect of foreign exchange rate changes (126) 171 (902)

Net decrease in cash and cash equivalent (27,526) (3,744) (182,349)

Cash and cash equivalent

At beginning of period/year 30,909 4,237 249,939

At end of period/year 3,383 493 67,590

Supplemental disclosure of cash flow

information

-Interest paid 9,578 1,369 10,068

-Income taxes paid 3,655 522 4,702

Non-cash transactions in investing

and financing activities:

- Construction in progress

transferred to fixed assets 478 68 --

Source: Fuwei Films (Holdings) Co. Limited
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