Fuwei Films Announces Its Unaudited Financial Results for the Second Quarter of 2011

BEIJING, August 11, 2011 /PRNewswire-Asia-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 unaudited financial results for the second quarter and first six months of 2011.

Highlights

• Net sales for the second quarter were RMB137.3 million (US$21.2 million), compared with RMB 110.3 million in the same period of 2010;
• Gross profit for the second quarter was RMB22.5 million (US$3.5 million), compared with RMB 19.7 million in the same period of 2010;
• Net sales during the first six months were RMB311.5 million (US$48.2 million), compared with RMB 198.8 million in the same period of 2010;
• Net income for the first six months was RMB29.8 million (US$4.6 million), compared with RMB 297,000 in the same six-month period of 2010;
• Basic and diluted earnings per share for the first six months was RMB2.28 (US$0.35), compared with RMB 0.02 in the same period of 2010;
• Sales of Specialty films for the first six months were RMB79.5 million (US$12.3 million) compared to RMB 24.8 million in the same period of 2010;
• Overseas sales during the first six months were RMB107.9 million (US$16.7 million) compared to RMB 36.7 million in the same period of 2010.

Mr. Xiaoan He, Chairman and CEO of Fuwei Films, said, "I am particularly pleased to see the percentage growth of our high-end specialty films and overseas sales, which we believe indicates our product portfolio is improving in accordance with the differentiation and overseas market expansion strategy."

Second Quarter of 2011 Results

Net sales during the second quarter ended June 30, 2011 were RMB137.3 million (US$21.2 million), compared to RMB110.3 million (US$16.3 million), during the same period in 2010, representing a 24.5% increase, mainly due to the increase of the sales price compared to the same period in 2010.

The sales of specialty films during the second quarter ended June 30, 2011 were RMB 39.6 million (US$ 6.1 million), reflected 28.9% of total net sales as compared to 14.7% in the same period of 2010. The increase was largely attributable to the increase in demand for films for electronics and high-end packaging.

The following is a breakdown of commodity and specialty film sales for the three-month periods ended June 30, 2011 and 2010 (amounts in thousands):

Overseas sales during the second quarter ended June 30, 2011 were RMB43.1 million (US$6.7 million), which accounted for 31.4% of total net sales, as compared with RMB25.4 million (US$3.7 million), and 23.0% in the same period in 2010, which is 70.1% higher than the same period last year. The increase in overseas sales was mainly due to the increase of overseas market demand and increase of sales price.

The following is a breakdown of domestic and overseas sales for the three-month periods ended June 30, 2011 and 2010 (amounts in thousands):

Gross profit was RMB22.5 million (US$3.5 million) for the second quarter ended June 30, 2011, representing a gross margin of 16.4%, as compared to a gross margin of 17.8% from the same period in 2010. This decrease was mainly due to an increase in cost of goods sold during the second quarter ended June 30, 2011 compared with the same period in 2010.

Operating expenses for the second quarter ended June 30, 2011 were RMB12.2 million (US$1.9 million), which was RMB4.9 million (US$0.8 million), or 28.7% lower than the same period in 2010. This decrease was mainly due to reduced class action litigation and related legal fees.

Net income during the second quarter ended June 30, 2011 was RMB6.1 million (US$0.9 million) compared to net loss of RMB3,000 (US$400) during the same period in 2010, representing an increase of RMB 6.1 million (US$0.9 million) from the same period in 2010. The increase was mainly due to the increase of revenue and gross profit, and decrease of operating expense.

Net cash flows used in operating activities for the six months ended June 30, 2011 was RMB9.4 million (US$1.5 million) compared to net cash flows provided by operating activities of RMB17.2 million (US$2.6 million) for the six months ended June 30, 2010, which is a decrease of RMB26.6 million (US$4.1 million). This decrease in cash flows from operating activities was attributable primarily to the increase in other receivables and decrease in advances from customers.

Total shareholders' equity was RMB582.3 million (US$90.1 million) as of June 30, 2011, compared with RMB552.5 million (US$ 83.6 million) as of December 31, 2010.

As of June 30, 2011, the Company had 13,062,500 basic and diluted total ordinary shares outstanding.

In addition, the Company received a second notification, dated May 17, 2011 (the "Second Notification") from the Weifang State-Owned Assets Operation Administration Company, a wholly-owned subsidiary of Weifang State-Owned Asset Management and Supervision Committee (the "Administration Company"), regarding the transfer of ownership of the Company stock previously controlled by the Company's major shareholders. The Company received the first notification dated May 5, 2011 from the Administrative Company pursuant to which the former major shareholders of the Company, Messrs. Jun Yin, Duo Wang and Tong Ju Zhou, transferred their entire ownership in several intermediate holding companies to the Administration Company, Ms. Qing Liu, and Mr. Zhixin Han. Pursuant to the Second Notification, the Company was informed that Ms. Qing Liu and Mr. Zhixin Han transferred their entire ownership in the intermediate holding company, Easebright Investments Limited, to the Administration Company. As a result of the transfer, and based on the information provided by the Administration Company, the Company believes that 65.45% of its outstanding ordinary shares are controlled indirectly by the Administration Company.

On June 30, 2011, our wholly-owned subsidiary, Fuwei Films (Shandong) Co., Ltd. ("Shandong Fuwei") signed a letter of intent on PETG heat shrinkable label film supply for the second half of this year with China Bottlers Procurement Consortium ("CBPC"), the authorized procurement service provider for the Coca-Cola Bottling system in China. PETG is an improved BOPET material, which is widely used in the international label industry due to its environmentally friendly nature. Shandong Fuwei developed its propriety PETG heat shrinkable label films through years of independent R&D. This product not only fills the gap in China but also is widely recognized and approved by many internationally renowned suppliers, such as Coca-Cola. The patent application for this product filed by Shandong Fuwei has been accepted. According to the letter of intent, Shandong Fuwei, as the exclusive local supplier of Coca-Cola in China, will supply PETG heat shrinkable label films to designated label suppliers within the Coca-Cola bottling system. Once the letter of intent is fully implemented, it is estimated that the sales of heat shrinkable label films to be supplied to Coca-Cola may account for 8 to10 percent of Shandong Fuwei's total sales in the second half of 2011.

On July 22, 2012, Shandong Fuwei entered into a supplementary agreement to the contract entered into on March 30, 2011 with Lindauer Dornier GmbH ("Dornier"), a German equipment supplier, pursuant to which, among other things, both parties agreed to change the scheduled delivery to between March 2012 to April 2012, three months earlier than the original agreement.

Additionally, in accordance with the recent meeting attended by the engineers from both parties to discuss latest products and technology developments in Lindauer, Germany, this supplementary agreement includes some targeted adjustments regarding technical specifications and equipment configuration. Accordingly, the total price of this production line has been increased by EUR 402,800 to EUR 16.85 million.

Mr. He concluded, "We are grateful to our shareholders for their support and loyalty. We are focused on providing the highest quality results for our customers, investors and employees and will continue to keep everyone informed of our progress."

Conference Call Information

The Company will host a teleconference on Thursday, August 11, 2011, at 8:00 a.m. EDT / 8:00 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 access codes: Account#: 286 and Conference ID: 376428. The replay will be available until September 11, 2011, 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 (biaxially-oriented polyethylene terephthalate) film. 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 are 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 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.

- Financial Tables to Follow -