FFHL Fuwei Films Holdings Company Ltd

Teleconference to be Held at 8:30 a.m. EDT BEIJING, April 14 /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 the financial results for the fourth quarter and full year ended December 31, 2007. Financial Results Highlights -- Revenues for 2007 rose 2.9% to US$59.1 million (RMB 449.4 million) from 2006; -- Revenues of specialty films in 2007 rose 6.1% from 2006 to US$22.4 million (RMB 170.0 million), or 37.8% of total revenues; -- Revenues from overseas in 2007 soared 23.9% from 2006 to US$15.0 million (RMB 114.2 million), or 25.4% of total revenues; -- Gross margin was 22.2% in 2007, as opposed to 23.5% in 2006; 'We are pleased to report a solid year of decent top-line growth and further buildup of our research team,' said Xiaoan He, Chairman and CEO of Fuwei Films. 'Our exports saw strong expansion, due to our enhanced efforts to market overseas. And we continued to grow sales of higher-margin specialty films, even though we have been facing a challenging operating environment since the second half of 2007, exemplified by higher raw material costs and the capital shortfall for our Third Production Line of thick films.' Mr. He continued, 'Going forward, we will keep using our newly strengthened R&D platform and our Trial Production Line to commercialize products. Finally, we believe that our enhanced foreign marketing campaigns are positioning us to yield encouraging results in new markets.' Fourth Quarter Financial Results Revenues for the fourth quarter of 2007 were US$16.3 million (RMB 121.5 million), compared with RMB 121.5 million in the fourth quarter of 2006. Revenues of specialty films in the fourth quarter 2007 rose 8.4% from same period 2006 to US$5.7 million (RMB 42.5 million), or 35.0% of total revenues. The following is a breakdown of commodity and specialty film sales for the three-month periods ended December 31, 2007 and December 31, 2006 (amounts in thousands): Three months period ended December 31, December 31, 2007 % of 2006 % of RMB US$ Total RMB Total Printing film 23,493 3,162 19.3 28,588 23.5 Stamping film 19,078 2,568 15.7 28,419 23.4 Metallization film 8,724 1,174 7.2 7,117 5.9 Base film for other applications 27,751 3,735 22.8 14,509 11.9 Specialty film 42,480 5,717 35.0 42,848 35.3 Total 122,005 16,356 100 121,482 100 Revenues from overseas in the fourth quarter of 2007 increased 1.5% from same period 2006 to US$3.2 million (RMB 23.5 million), or 19.4% of total revenues. The following is a breakdown of domestic versus overseas sales for the three-month periods ended December 31, 2007 and December 31, 2006 (amounts in thousands): Three months period ended December December 31, 2007 % of 31, 2006 % of RMB US$ Total RMB Total Sales in China 98,006 13,191 80.6 98,305 80.9 Sales in other countries 23,521 3,166 19.4 23,177 19.1 Total 121,527 16,357 100 121,482 100 Gross profit for the fourth quarter of 2007 was US$2.6 million (RMB 19.3 million), compared with RMB 27.8 million in same period 2006. The Company generated a gross margin of 16.0% in fourth quarter 2007, versus 22.9% in same period 2006. The decrease in gross margin was primarily due to increased raw material consumption on the Rental Production Line. In addition, since the second half of 2007, the decrease of export tax rebates rate also has contributed to the lower gross profit. Operating expenses in the fourth quarter of 2007 was US$1.7 million (RMB 12.4 million), compared with RMB 5.5 million. The increase was mainly due to: 1) higher costs of professional services related to being as a public company; and 2) administrative expenses such as wage increases. Selling expenses in fourth quarter 2007 decreased 8.1% from fourth quarter 2006 to US$471,000 (RMB 3.4 million). Administrative expenses increased to US$1.3 million (RMB 10.0 million) from RMB 2.6 million. Net income for the fourth quarter of 2007 decreased to US$0.2 million (RMB 1.0 million), or diluted EPS of US$0.01 (RMB 0.08), from RMB 21.5 million, or diluted EPS of RMB 19.5 in the same period of 2006. Full Year 2007 Financial Results Revenues for the year 2007 rose 2.9% from 2006 to US$59.1 million (RMB 449.4 million). The increase in net sales was primarily due to increased sales from the Rental Production Line. Revenues of specialty films in 2007 rose 6.1% from 2006 to US$22.4 million (RMB 170.0 million), or 37.8% of total revenues. The increase was largely attributable to the heightened popularity of high-end specialty films like heat-sealable films, high-gloss films, as more customers opted for them to enhance their product image. The growth in specialty films also benefited from exports to Korea, the United States and Europe. The following is a breakdown of commodity and specialty film sales for the full-year periods ended December 31, 2007 and December 31, 2006 (amounts in thousands): Fiscal Year Ended December December 31, 2007 % of 31, 2006 % of RMB US$ Total RMB Total Printing film 83,453 10,972 18.6 95,315 21.8 Stamping film 94,366 12,407 21.0 99,856 22.9 Metallization film 30,668 4,032 6.8 34,772 8.0 Base film for other applications 70,925 9,325 15.8 46,784 10.7 Specialty film 169,961 22,346 37.8 160,157 36.7 Total 449,373 59,082 100 436,884 100 Revenues from overseas in 2007 soared 23.9% from 2006 to US$15.0 million (RMB 114.2 million), or 25.4% of total revenues. The following is a breakdown of domestic versus overseas sales for the full-year periods ended December 31, 2007 and December 31, 2006 (amounts in thousands): Fiscal year period ended December December 31, 2007 % of 31, 2006 % of RMB US$ Total RMB Total Sales in China 335,213 44,073 74.6 345,122 79.0 Sales in other countries 114,160 15,010 25.4 91,762 21.0 Total 449,373 59,083 100 436,884 100 Gross profit for 2007 was US$13.1 million (RMB 99.8 million), compared with RMB 102.5 million. Gross margin was 22.2%, as opposed to 23.5% in 2006. The decrease in gross margin was primarily due to increased consumption by the Rental Production Line. In addition, since the second half of 2007, the decrease of export tax rebates rate also has contributed to the lower gross profit. Operating expenses for 2007 were $4.7 million (RMB 35.6 million), compared with RMB 24.5 million in 2006. The increase was mainly due to higher costs of professional services related to being a public company, as well as due to higher administrative expenses, such as wage increases. Selling expenses decreased 8.5% to $2.0 million ($15.1 million) from 2006, while administrative expenses increased to $2.7 million (RMB 20.5 million), from RMB 8.0 million in 2006. Net income for the year 2007 decreased to US$6.2 million (RMB 47.3million), or diluted EPS of US$0.48 (RMB 3.62), versus RMB 67.7 million, or diluted EPS of RMB 61.4 in 2006. Total cash and cash equivalents as of December 31, 2007 were US$4.2 million (RMB 30.9 million) as compared with RMB 249.9 million as of December 31, 2006. Total shareholders' equity increased to US$70.3 million (RMB 512.5 million) as of December 31, 2007 from a total shareholders' equity of RMB 465.9 million as of December 31, 2006. As of December 31, 2007, the Company has 13,062,500 basic and diluted total common shares outstanding. The Trial Production Line Fuwei began the construction of a Trial Production Line which is capable of producing BOPET films with thickness of 12-50 m and has an annual designed capacity of 1,500 metric tones. The Trial Production Line has finished the equipment installation stage at the end of 2007 and currently is being used for research and development purpose. It is expected to strengthen Fuwei's competitive advantage by allowing more focused research and development of multi-layer BOPET films. Overseas Marketing Expansion Fuwei has also reinforced its marketing and sales efforts overseas. On October 25, 2007, the Company opened a marketing office in Osaka, Japan, to focus on market expansion and customer service for BOPET films in Japan. Research indicates Japanese customers are in favor of top-quality BOPET films and world-class after-sales support. By establishing an office in Japan, the Company aims to familiarize itself with the local market and increase the promotion of Fuwei's brand. Fuwei is also targeting the Korean market for beneficial results. Research & Development Initiatives Fuwei has been strengthening its R&D capabilities. Its R&D team now has 13 senior researchers and technicians, including one Ph.D and seven masters degree-holders. In addition, the Company recruited five foreign consultants with extensive expertise in the BOPET industry. On the intellectual property front, Fuwei received four patents from the Chinese authorities, with three more pending. Appointment of New CFO On April 11, 2008, the Company appointed Mr. Xiuyong Zhang as the new Chief Financial Officer. Mr. Zhang has been a director of the Company since November 2007. He has also been a director of Fuwei's operating subsidiary, Fuwei Films (Shandong) Co., Ltd., since July 2004 and Vice President for Finance there since January 2005. He has more than 10 years of experience in accounting, finance and investments, and holds a Certified Public Accountant title issued by the Ministry of Finance in China. He has received the Professional Certification in Laws from China University of Political Science and Law and China Central Radio and TV University. Strategic Outlook In 2008, the Company aims to use the newly strengthened R&D team and make full use of the Trial Production Line to develop innovative materials and techniques for high-end specialty films, such as the in-line coating film for food packaging, the DFR base film for electronic industry, the white film for outdoor billboards, and the soft embossable, holographic film for anti-fraud purposes. Some of the new products as described above, such as the white film, are attractively viewed by overseas customers. The Company is currently positioning itself for an market adjustment phase overseas. By adjusting its export product composition, Fuwei is seeking to achieve both stronger sales and higher margins in foreign markets, especially Japan and Korea. Conference Call Information The Company will host a teleconference today, Monday, April 14, 2008, at 8:30 a.m. EDT / 8:30 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 call start time. The call is being simultaneously Webcast and can be accessed on the Fuwei Films Website at http://www.fuweiholdings.com/ . Please visit the Web site at least 15 minutes prior to the scheduled call time to register for the Web cast and download any necessary audio software. A replay of the call can also be accessed via telephone from 12:00 p.m. EDT on Monday, April 14, 2008, through 11:59 p.m. EST on Tuesday April 29, 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: 274493. A Web cast replay of the call will also be made and can be accessed on the Fuwei Films site at http://www.fuweiholdings.com/ . 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 fiscally 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. For more information, please contact: In China: Christina He Investor Relations Tel: +86-10-8518-5620 Email: In the U.S.: Leslie Wolf-Creutzfeldt Investor Relations The Global Consulting Group Tel: +1-646-284-9472 Email: Financial Tables to Follow FUWEI FILMS (HOLDINGS) CO., LTD and SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 2006 and 2007 (Audited, amounts in thousands, except share and per share data) 2,006 2,007 RMB RMB US$ Assets Current assets Cash 249,939 30,909 4,237 Restricted cash 3,311 64,909 8,898 Accounts receivable, net 75,530 58,195 7,978 Inventories 23,783 41,670 5,712 Prepayments and other receivables 19,438 16,160 2,215 Deferred expenses -- -- -- Deferred income tax assets -- -- -- Total current assets 372,001 211,842 29,041 Property, plant and equipment, net 317,690 493,562 67,661 Lease prepayments 23,059 22,290 3,056 Deposits for purchase of property, plant and equipment 13,900 -- -- Intangible asset, net 109 36 5 Goodwill 10,276 10,276 1,409 Deferred income tax assets 1,047 969 133 Total assets 738,082 738,975 101,304 Liabilities Current liabilities Short-term bank loans 239,678 188,027 25,776 Accounts payable 12,809 19,609 2,688 Accrued expenses and other payables 19,497 18,544 2,542 Amounts due to related parties -- -- Deferred income tax liabilities 191 265 36 Total liabilities 272,175 226,445 31,043 Shareholders' equity Ordinary shares of US$0.129752 par value; 20,000,000 shares authorized; 771 and 13,062,500 issued and outstanding as of December 31, 2006 and 2007, respectively 13,323 13,323 1,826 Additional paid-in capital 311,907 311,907 42,759 Accumulated other comprehensive income 1,785 1,148 157 Retained earnings 138,892 186,152 25,519 Total shareholders' equity 465,907 512,530 70,262 Total liabilities and shareholders' equity 738,082 739,975 101,304 FUWEI FILMS (HOLDINGS) CO., LTD and SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME For the years ended December 31, 2005, 2006 and 2007 (Audited, amounts in thousands, except share and per share data) 2005 2006 2007 RMB RMB RMB US$ Revenues, net 346,205 436,884 449,373 59,083 Cost of goods sold (259,090) (334,341) (349,531) (45,956) Gross profit 87,115 102,543 99,842 13,127 Operating expenses - Distribution expenses (10,517) (16,483) (15,061) (1,980) - Administrative expenses (10,599) (8,043) (20,515) (2,698) Total operating expenses (21,116) (24,526) (35,576) (4,678) Operating income 65,999 78,017 64,266 8,450 Other income/(expense) - Interest income 863 43 589 77 - Interest expense (13,747) (12,884) (13,233) (1,739) - Sales of scrap materials 3,596 3,639 - Others, net 358 (393) 319 42 Total other income/(expense) (8,930) (9,595) (12,325) (1,620) Income before income tax benefit/(expense) 57,069 68,422 51,941 6,829 Income tax benefit/(expense) 59 (757) (4,681) (615) Net income 57,128 67,665 47,260 6,214 Other comprehensive income - Foreign currency translation adjustments 1,732 53 (637) -- Comprehensive income 58,860 67,718 46,623 6,214 Earnings per share - Basic 74,096 61.46 3.62 0.48 - Diluted 74,096 61.37 3.62 0.48 Weighted average number of ordinary shares - Basic 771 1,101,031 13,062,500 13,062,500 - Diluted 771 1,102,488 13,062,500 13,062,500 FUWEI FILMS (HOLDINGS) CO., LTD and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the years ended December 31, 2005, 2006 and 2007 (Audited, amounts in thousands) 2005 2006 2007 2007 RMB RMB RMB US$ Cash flow from operating activities Net income 57,128 67,665 47,260 6,214 Adjustments to reconcile net income to net cash (used in)/provided by operating activities - Loss/(gain) on disposal of property, plant and equipment (32) -- -- -- - Depreciation of property, plant and equipment 23,337 23,425 23,217 3,053 - Amortization of intangible assets 73 72 73 10 - Lease prepayments charged to expense 392 724 741 97 - Deferred income taxes (59) 757 152 20 - Bad debt expense/(recovery) 1,007 (1,143) 1,772 233 - Foreign currency exchange loss 1 53 -- -- Changes in operating assets and liabilities - Accounts receivable (21,676) (28,258) 17,335 2,279 - Inventories (6,855) 1,104 (19,659) (2,585) - Prepaid expenses and other current assets 4,780 (8,220) 6,698 881 - Accounts payable (1,044) 2,196 6,824 897 - Accrued expenses and other payables (13,880) 117 (1,557) (205) - Amounts due from related parties 415 -- -- -- Net cash provided by operating activities 43,587 58,492 82,856 10,894 Cash flow from investing activities Purchases of property, plant and equipment (22,411) (37,526) (590) (78) Restricted cash related to trade finance -- (3,311) (61,598) (8,099) Payment of land use rights -- (2,649) -- -- Deposits paid for purchase of property, plant and equipment (13,900) -- (184,600) (24,271) Proceeds from sale of property, plant and equipment 111 7 -- -- Collection of amounts due from related parties 4,721 -- -- -- Net cash used in investing activities (31,479) (43,479)(246,787) (32,447) Cash flow from financing activities Net proceeds from issuance of share capital -- 235,867 -- -- Principal payments of short-term bank loans (252,600) (18,368) (51,650) (6,791) Proceeds from short-term bank loans 300,056 10,000 -- -- Repayments of loans payable to related parties (29,989) -- -- -- Payments of expenses relating to the proposed offering (1,785) -- -- -- Dividends paid (26,265) -- -- -- Net cash (used in)/provided by financing activities (10,583) 227,499 (51,650) (6,791) Effect of foreign exchange rate changes (1) -- (3,448) 555 Net increase/ (decrease) in cash 1,524 242,512 (219,029) (27,789) Cash At beginning of the year 5,903 7,427 249,939 32,027 At end of the year 7,427 249,939 30,909 4,237 FUWEI FILMS (HOLDINGS) CO., LTD and SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) For the years ended December 31, 2005, 2006 and 2007 (Audited, amounts in thousands) 2005 2006 2007 RMB RMB RMB US$ Supplemental disclosure of cash flow information Cash paid during the year for interest expense 14,899 15,739 12,921 1,699 DATASOURCE: Fuwei Films (Holdings) Co. Limited CONTACT: In China - Christina He of Investor Relations, +86-10-8518-5620, or ; In the U.S. - Leslie Wolf-Creutzfeldt, Investor Relations of The Global Consulting Group, +1-646-284-9472, or lwolf- Web Site: http://www.fuweiholdings.com/

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