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''We are pleased to report a solid year of decent top-line growth andfurther buildup of our research team,'' said Xiaoan He, Chairman and CEO ofFuwei Films. ''Our exports saw strong expansion, due to our enhanced effortsto market overseas. And we continued to grow sales of higher-margin specialtyfilms, even though we have been facing a challenging operating environmentsince the second half of 2007, exemplified by higher raw material costs andthe capital shortfall for our Third Production Line of thick films.''
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Mr. He continued, ''Going forward, we will keep using our newlystrengthened R&D platform and our Trial Production Line to commercializeproducts. Finally, we believe that our enhanced foreign marketing campaignsare 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 121.5million), 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 sameperiod 2006 to US$5.7 million (RMB 42.5 million), or 35.0% of total revenues.
Revenues from overseas in the fourth quarter of 2007 increased 1.5% fromsame period 2006 to US$3.2 million (RMB 23.5 million), or 19.4% of totalrevenues.
Gross profit for the fourth quarter of 2007 was US$2.6 million (RMB 19.3million), compared with RMB 27.8 million in same period 2006. The Companygenerated a gross margin of 16.0% in fourth quarter 2007, versus 22.9% in sameperiod 2006. The decrease in gross margin was primarily due to increased rawmaterial consumption on the Rental Production Line. In addition, since thesecond half of 2007, the decrease of export tax rebates rate also hascontributed to the lower gross profit.
Operating expenses in the fourth quarter of 2007 was US$1.7 million (RMB12.4 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 infourth quarter 2007 decreased 8.1% from fourth quarter 2006 to US$471,000 (RMB3.4 million). Administrative expenses increased to US$1.3 million (RMB 10.0million) from RMB 2.6 million.
Net income for the fourth quarter of 2007 decreased to US$0.2 million (RMB1.0 million), or diluted EPS of US$0.01 (RMB 0.08), from RMB 21.5 million, ordiluted 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 (RMB449.4 million). The increase in net sales was primarily due to increasedsales 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 largelyattributable to the heightened popularity of high-end specialty films likeheat-sealable films, high-gloss films, as more customers opted for them toenhance their product image. The growth in specialty films also benefitedfrom exports to Korea, the United States and Europe.
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 profit for 2007 was US$13.1 million (RMB 99.8 million), comparedwith 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 theRental Production Line. In addition, since the second half of 2007, thedecrease of export tax rebates rate also has
