Fuwei Films Announces Fourth Quarter and Full Year 2016 Financial Results

- Teleconference to be Held on Friday, April 7, 2017, at 9:00 a.m. EDT -

Fuwei Films 2016 Highlights

• Net revenues were RMB253.9 million or US$36.6 million.
• Net cash used in operating activities was RMB23.2 million.
• Our gross margin was 7.0% for the year of 2016.
• Basic and diluted loss per share was RMB16.68 or US$2.4.

"We continue to face strong competition from emerging and incumbent players which has created oversupply relative to demand in the marketplace in 2016. While this has impacted the Company's financial results, we are pleased to announce that our sales volume for specialty films has increased. We believe that our focus on continued innovation and R&D will enable the Company to expand end-user applications and our high-end specialty films while increasing the product portfolio, which we believe, will help us to attract new clients and expand relationships with existing customers. We are encouraged by positive trends in sales volume and gross margins that we expect to enable us to weather different industry and economic conditions in the periods ahead," commented by Mr. Zengyong Wang, the CEO and Chairman of the Company.

Fourth Quarter 2016 Results

Revenues for the fourth quarter of 2016 were RMB70.9 million or US$10.2 million, compared with RMB63.7 million in the fourth quarter of 2015, an increase of RMB7.2 million, or 11.3%. Sales volume accounted for an increase of RMB4.8 million while the increase of average sales price caused an increase of RMB2.4 million.

Sales of specialty films for the fourth quarter of 2016 were RMB28.1 million or US$4.1million, or 39.7% of total revenues, compared with RMB18.8 million or 29.5% of total revenue in the fourth quarter of 2015. The increase was mainly attributable to increased selling volumes compared to those in 2015.

The following is a breakdown of commodity and specialty film sales for the three-month periods ended December 31, 2016 and 2015 (amounts in thousands):

Overseas sales for the fourth quarter of 2016 were RMB6.7 million or US$1.0 million, or 9.5% of total revenues, compared with RMB10.3 million or 16.2% of total revenues in the fourth quarter of 2015. Sales volume accounted for a decrease of RMB3.1 million while the reduction of average sales price caused a decrease of RMB0.5 million.

The following is a breakdown of domestic versus overseas sales for the three-month periods ended December 31, 2016 and 2015 (amounts in thousands):

Gross profit for the fourth quarter of 2016 was RMB5.5 million or US$0.8 million, representing a gross margin of 7.7%, compared with a gross profit of RMB3.7 million, representing a gross margin of 5.9% in the fourth quarter of 2015.

Operating expenses for the fourth quarter of 2016 were RMB17.8 million or US$2.6 million compared with RMB24.8 million or US$3.8 million in the fourth quarter of 2015. This decrease is mainly due to accrued allowance for assets impairment in 2015.

Operating loss for the fourth quarter of 2016 was RMB12.3 millionUS$1.8 million, compared with an operating loss of RMB21.1 million or US$3.2 million in the fourth quarter of 2015.

Net loss attributable to the Companyfor the fourth quarter of 2016 was RMB18.7 million or US$2.7 million, compared with net loss attributable to the Company of RMB27.2 million in the fourth quarter of 2015.

Basic and diluted loss per share was RMB5.76 or US$0.83, compared with basic and diluted loss per share of RMB8.32 or US$1.28 in the fourth quarter of 2015.

2016 Full Year Results

During the fiscal year ended December 31, 2016, net revenues were RMB253.9 million or US$36.6 million, compared to RMB248.9 million during the same period in 2015, representing an increase of RMB5.0 million or 2.0%. While a reduction in average sales price caused a decrease of RMB6.9 million, this was more than offset by an increase of RMB11.9 million in sales volume.

In 2016, sales of specialty films were RMB96.1 million or US$13.8 million or 37.8% of our total revenues as compared to RMB73.9 million or 29.7% in 2015, which was an increase of RMB22.2 million, or 30.0%, as compared to the same period in 2015. The increase was due to the increased sales volume.

Overseas sales were RMB41.8 million or US$6.0 million, or 16.5% of total revenues, compared with RMB54.6 million or 22.0% of total revenues in 2015. For further analysis of the factors causing overseas sales decrease, the decrease of average sales price caused a decrease of RMB4.1million and sales volume factor made a decrease of RMB8.7 million.

The following is a breakdown of domestic versus overseas sales for the periods ended December 31, 2016 and 2015 (amounts in thousands):

Our gross margin was 7.0% for the year of 2016, as compared to a gross margin of zero in 2015. Gross margin increased by 7.0 percentage points compared to the same period in 2015. Our average unit sales price decreased by 2.6% compared to last year. The unit sales cost decreased by 9.4% due to the price reduction of main raw materials. Consequently, the decrease in cost of goods sold per unit exceeded that in product sales price during 2016 compared with 2015, which contributed to the increase in our gross profit.

Our operating expenses during the year ended December 31, 2016 were RMB60.0 million, a decrease of RMB1.2 million, or 2.0%, as compared to 2015.

Total other expense is a combination result of interest income, interest expense and others income (expense). Total other expense during the year ended December 31, 2016 was RMB6.9 million (US$1.0 million), compared to total other expense of RMB0.9 million in 2015. This is mainly attributed to the previously recognized impairment losses relating to the long-term deposit reversed as a result of the refund of total long-term deposit received, offset by the higher interest charges due to capital lease obligations.

Income tax expense during the year ended December 31, 2016 was RMB5.3 million (US$0.8 million) compared to an income tax expense of RMB7.0 million during 2015, which was mainly attributable to tax effect of changes in deferred tax during 2016. We only recognized deferred tax assets for the loss of 2016 after considering the possibility of realizing the benefits under the conservatism principle.

Net loss attributable to the Company for full year 2016 was RMB54.5 million or US$7.8 million, compared with a net loss of RMB69.2 million or US$10.7 million in 2015.

Net cash used in operating activities was RMB23.2 million for the year ended December 31, 2016 as compared to net cash used in operating activities of RMB27.0 million for the year ended December 31, 2015.

Cash and cash equivalents on December 31, 2016 was RMB13.3 million or US$1.9 million, compared with RMB14.4 million as of December 31, 2015.

Basic and diluted loss per share for the year ended December 31, 2016 was RMB16.68 or US$2.40.

Conference Call Information

The Company will host a teleconference on Friday, April 7, 2017 at 9:00 am 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 +1-877-481-4010 in North America, or +1-919-882-2331 internationally, and entering the following Conference ID: 10299. The replay will be available until May 7, 2017, at 11:59 p.m. EDT.

About Fuwei Films

Fuwei Films conducts its business through its wholly owned subsidiary, Fuwei Films (Shandong) Co., Ltd. ("Fuwei Shandong"). Fuwei Shandong 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.

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 significant competition in the BOPET film industry, especially the significant oversupply of BOPET films resulting from the rapid growth of the Chinese BOPET industry capacity, changes in the international market and trade barriers, especially the adverse impact of the antidumping investigation and imposition of an anti-dumping duty on imports of the BOPET films originating from the People's Republic of China ("China") conducted by certain main importing countries; fluctuations of RMB exchange rate, the reduce in demand for the Company's products or the loss of main customers which may result in the decrease of sales, and negatively influencing the Company's financial performance, uncertainty as to the future profitability, uncertainty as to the Company's ability to successfully obtain additional funds to meet the working capital needs of the new BOPET production line, uncertainty as to the Company's ability to continuously develop new BOPET film products to be produced by the third production line and keep up with changes in BOPET film technology, risks associated with possible defects and errors in its products including complaints and claims from clients, uncertainty as to its ability to protect and enforce its intellectual property rights, uncertainty as to its ability to attract and retain qualified executives and personnel, and uncertainty in acquiring raw materials on time and on acceptable terms, particularly in light of the volatility in the prices of petroleum products in recent years, instability of power and energy supply, and the uncertainty regarding the future operation of the Company in connection with the changes in the labor law in China, the measures taken by the Chinese government to save energy and reduce emissions, and the complaints from nearby residents and local government about the noise caused by our production as well as the uncertainty of the impact of major shareholder transfer that have substantial influence over the Company and the Company's business operation including possible overlap of our BOPET products, customers and market orientation with an BOPET film manufacturer, which is controlled by the same individual who has control over the shares of our major shareholder. 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 Manager
Phone: +86-133-615-59266
Email: fuweiIR@fuweifilms.com

In the U.S.:

Vivian Chen
Investor Relations
Grayling
Phone: +1-646-284-9427
Email: vivian.chen@grayling.com

Financial Tables Follow

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SOURCE Fuwei Films (Holdings) Co., Ltd.