Fuwei Films (Holdings) Co., Ltd. (FFHL) Q1 2020 Results - Earnings Call Transcript

Fuwei Films (Holdings) Co., Ltd. (FFHL) Q1 2020 Earnings Conference Call April 29, 2020 9:00 AM ET

Company Participants

Shiwei Yin - IR

Yong Jiang - Corporate Secretary

Vernon Hill - Chairman

Frank Cavallaro - Executive Vice President and Chief Financial Officer

Conference Call Participants

Operator

Good day ladies and gentlemen and welcome to the Fuwei Films’ Fourth Quarter 2019 Earnings Conference Call. All lines have been placed in a listen-only mode and the floor will be open for your questions and comments following the presentation.

At this time, it is my pleasure to turn the floor over to your host Mr. Shiwei Yin. Sir, the floor is yours.

Shiwei Yin

Thank you, Jess. Let me remind you that today's call is being recorded. A replay of this call will be made available shortly after the conclusion of the call.

Before we start, I'd like to remind you that certain statements are not of historical facts made during the course of this conference call about future events and projected financial results constitute forward looking statements that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. You should know that the company’s actual results may differ materially from those projected in these statements due to a variety of factors affecting the business. Forward-looking statements are subject to risks and uncertainties. Discussion of the factors that may affect future results is contained in our filings with the US Securities and Exchange Commission. We undertake no obligation to correct or update any forward-looking statements provided as a result of new information, future events or changes in our expectations.

Joining the call today is Mr. Yong Jiang, Corporate Secretary. Before I walk you through our financial results, Mr. Jiang will deliver his opening remarks. Sir, please go ahead.

Yong Jiang

[Foreign Language]

Shiwei Yin

[Interpreted] Thank you for joining us today. Despite persisting oversupply in the BOPET plastic and films market, our revenues and gross margins continue to grow. Sales of specialty films increased by 9.1% year-over-year and accounted for 48.4% of our total revenues in 2019.

Our gross margin increased by 8.5 percentage point to 24.9% for the year of 2019, as compared to 16.4% in 2018. We believe our focus on innovation enable the company to extend end user products, applications and attracting new clients and expand relationships with existing customers. We're encouraged by positive trends in revenues and gross margins, which we expect to enable us to better navigate the industrial and economic landscape.

Now I will read to you our financial results for the fourth quarter and full year of 2019. Revenues for the fourth quarter were RMB86.8 million or US$12.5 million, compared with RMB90.1 million in the fourth quarter of 2018, a decrease of RMB2.3 million or 3.7%.

Sales volume accounted for an increase of RMB3.2 million, while the decrease of average sales price caused a decrease of RMB6.5 million. Sales of specialty films for the fourth quarter were RMB47.7 million, or US$6.9 million or 54.9% of total revenues, compared with RMB39.8 million or 44.1% of total revenue in the fourth quarter of 2018.

Sales volume accounted for an increase of RMB10.9 million, while the decrease of average sales price caused a decrease of RMB3.0 million. [technical difficulty] first quarter RMB81.4 million or US$11.7 million or 93.8% of total revenues compared with RMB80.8 million or 89.7% of total revenues in the fourth quarter of 2018.

Sales volume accounted for an increase of RMB7.0 million, while the decrease of average sales price caused a decrease of RMB6.4 million. [technical difficulty] for the fourth, there were RMB5.4 million or US$0.8 million or 6.2% of total revenues, compared with RMB9.3 million or 10.3% of total revenues in the fourth quarter of 2018.

[technical difficulty] quarter RMB31.0 million or US$4.5 million, representing a gross margin of 35.7% compared with a gross profit of RMB21.3 million, representing a gross margin of 23.7% in the fourth quarter of 2018.

[technical difficulty] the fourth quarter of 2019 were RMB15.7 million or US$2.3 million compared with RMB19.0 million in the fourth quarter of 2018. And net profit attributable to the company for the fourth quarter was RMB10.3 million or US$1.5 million compared with net loss attributable to the company of RMB3.5 million in fourth quarter of 2018.

[technical difficulty] profit per share was RMB3.17 or US$0.46, compared with basic and diluted loss per share of RMB1.06 in the fourth quarter of 2018.

Year results, net revenues were RMB335.6 million, US$48.2 million, compared to RMB333.5 million in 2018 representing an increase of RMB2.1 million or 0.6%. The decrease in average sales price caused a decrease of RMB0.8 million, which was more than offset by the increase in sales volume factor and caused an increase of RMB2.9 million.

For the specialty films were RMB162.4 million, US$23.3 million or 48.4% of our total revenues as compared to RMB148.8 million or 44.6% in 2018, which was an increase of RMB13.6 million or 9.1% higher than 2018. The increase of sales volume that's an increase of RMB14.3 million, offset in part by the decline in average sales price which caused a decrease of RMB0.7 million.

Obviously, sales were RMB47.6 million, US$6.8 million or 14.2% of total revenues, compared with RMB45.4 million or 13.6% of total revenues in 2018. The increase of average sales price caused an increase of RMB0.6 million and the decrease in sales volume caused an increase of RMB1.6 million.

[technical difficulty] company for the year was RMB11.4 million or US$1.6 million compared with a net loss of RMB20.2 million in 2018. Basic and diluted earnings per share for the year ended December 31, 2019 was RMB3.48 or US$0.50.

[technical difficulty] operating activities was RMB54.4 million for the year ended December 31, 2019. As compared to the net cash provided by operating activities of RMB25.1 million for the year ended December 31, 2018.

Cash and cash equivalents at year end was RMB60.9 million or us 8.7 million compared with RMB8.9 million as of December 31, 2018.

In conclusion we would like to thank our shareholders for their continued loyalty and support, I believe we are well positioned to face the current challenges and are committed to providing value to our shareholders and customers. We'll keep you informed of our progress.

With that, Mr. Jiang will be happy to answer your questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] We'll go first to Joe Mora [ph].

Unidentified Analyst

Yes. Well, that's very good results. And I was curious about the cash flow for the fourth quarter. How much cash was generated from operations and follow up on that do you have any plans for the cash that you're generating for the company? Thank you.

Shiwei Yin

What is the question? [technical difficulty]

Yong Jiang

[Foreign Language]

Shiwei Yin

[Interpreted] Joe so the annual cash flow from operation was RMB54 million and we didn't – we're not breaking down by the quarter.

Unidentified Analyst

What was it for the nine months? I suppose we could subtract from the nine month report?

Shiwei Yin

[Foreign Language]

Yong Jiang

[Foreign Language]

Shiwei Yin

[Interpreted] Okay. Joe, so the cash flow for operations the first nine months is about RMB36 million. So the difference is the number that you're looking for, it's about 18.

Unidentified Analyst

Okay, thank you and any plans lastly for cash?

Shiwei Yin

You were like what was the use for that cash?

Unidentified Analyst

Yeah.

Shiwei Yin

[Foreign Language]

Yong Jiang

[Foreign Language]

Shiwei Yin

[Interpreted] Joe, so as you may know – so the company we are – after a couple years of challenging situation, we are starting to turn things around. So while you see that we are starting to generate positive cash flow again, which is good, as you pointed out, but we've been prudent with that and we're planning to use cash to consolidate, to strengthen our balance sheet – our financial situation and also need cash to run our operation. Specifically that means to expand our customer and also product base.

Yong Jiang

[Foreign Language]

Shiwei Yin

[Interpreted] And also one other factor obviously as the elephant in the room so to speak is the huge uncertainty that's created by the COVID-19 virus. So obviously, we need cash as sort of a reserve in case of uncertainty down the road.

Unidentified Analyst

Thank you. And also with your competitive situation, given the health crisis, has that changed relative to your competitors in terms of getting out of the crisis, and in terms of your supply chain and your market share?

Shiwei Yin

[Foreign Language]

Yong Jiang

[Foreign Language]

Shiwei Yin

[Interpreted] Joe, so given the tremendous concern as a result of the virus, directly what we are seeing is that demand for products was down in first quarter in China. And we've probably seen that across the world as well. And then on top of that, as we have mentioned in our release and also on the call is that the overall demand and supply situation in our specific industry at this moment in time is that there's still more supply than demand. So in response to all these external factors our policy is two – is threefold. Number one it will continue to increase the development of differentiated products. And this is going to be a focus of our work – this was the focus of our work in 2019 and going into 2020 this will continue to be a focus because differentiated products is where notably that we have – we may have an edge of our competitors and also where there might be higher margins. And then the second fold is that we are trying to take advantage of the low oil price right now to stock up on some raw material. And then the third one is that we aim to expand into international markets such as Japan or Europe given the crisis.

Unidentified Analyst

Thank you.

Operator

[Operator Instructions] With no other questions signaled, I'll turn the conference back to management for any additional or closing comments.

Shiwei Yin

Thank you for joining us on today's call. We look forward to being in touch with you and keep you updated about our progress. Have a nice day.

Operator

Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time and have a great day.