Vivian Chen - IR Xiaoan He - Chairman and CEO.

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Greetings, and welcome to Fuwei Films Third Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a remainder, this conference is being recorded. It is now my pleasure to introduce your host, Ms.

Vivian Chen with Grayling. Thank you. You may begin..

Thank you. Just a quick reminder that today's call is being recorded. A replay of this call will be made available shortly after the conclusion of today's call.

Before we start, I would like to remind you that certain statements that 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 note 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 U.S.

Securities and Exchange Commission. We undertake no obligation to correct or update any forward-looking statement provided as a result of new information, future events or changes in our expectations. Joining us on today's call are Mr. Xiaoan He, Chairman and Chief Executive Officer of the company; Mr.

Xiuyong Zhang, Director and Chief Financial Officer of the company; and Mr. Jiang Yong, the Corporate Secretary. Before I walk you through our financial results, Mr. He will deliver his opening remarks. Sir, please go ahead..

Thank you, Vivian. Hello, everyone and thank you for joining us today. While our financial results remain challenging, I am pleased to announce that we continue to gain traction in new product as a sample diffusion film, a type of TFT-LCD optical film was preliminarily accepted by a new customer after being delivered for testing.

We are supplying small batches of products according to this customer's purchase order. In addition, a sample base film for solar back sheets has been delivered to a customer for initial testing.

This production line is also expected to be utilized to produce other thick films, including higher performance electrical insulation film, base film for solar back sheets and other films where we may see an opportunity to gain a significant presence in high-technology industries.

We will continue to focus our efforts on R&D, mainly in the area of development of higher quality and more value-added TFT-LCD optical films, factors that will enable the Company to distinguish our competitive advantages and eventually improve earnings performance in the market.

Now Vivian will read to you our financial results for the third quarter of 2014. Then Mr. Zhang and I will begin the Q&A session..

Thank you, Mr. He. I will now provide you with the overview of our key financials for the third quarter 2014, and then I will offer some updates on the company's operation followed by the management Q&A.

Net sales during the third quarter ended September 30, 2014 were RMB69.2 million or US$11.3 million, compared to RMB75.9 million during the same period in 2013, representing a decrease of RMB6.7 million or 8.8%, mainly due to the reduction in average sales price by 0.9% arising from stronger competition in China and a decrease in total sales volumes by 8%.

The reduction of average sales price caused a decrease of RMB0.6 million and the sales volume caused a decrease of RMB6.1 million.

In the third quarter of 2014, sales of specialty films were RMB20.7 million or US$3.4 million, representing 30% of the Company's total revenues as compared to RMB20.6 million or 27.2% in the same period of 2013, which was an increase of RMB0.1 million, or 0.5% as compared to the same period in 2013.

The increase in average sales price caused an increase of RMB0.5 million and the decrease in sales volume caused a decrease of RMB0.4 million. Overseas sales were RMB11.8 million or US$1.9 million, or 17.1% of total revenues, compared with RMB12.8 million or 16.9% of total revenues in the third quarter of 2013.

The decrease in average sales price caused a decrease of RMB2 million and the increase in sales volume resulted in an increase of RMB1 million. The decrease in overseas sales was mainly due to the decrease in average sales price.

Our gross loss was RMB3.1 million or US$0.5 for the third quarter ended September 30, 2014 representing a gross loss rate of 4.5% as compared to a gross loss rate of 13% for the same period in 2013. Correspondingly gross loss rate decreased by 8.5 percentage points compared to the same period in 2013.

Our average product sales price decreased by 0.9% compared to the same period last year and the average cost of goods sold decreased by 8.3% compared to the same period last year. Consequently the amount of decrease in cost of goods sold was higher than that in sales price which resulted in a decrease in our gross loss.

Operating expenses for the third quarter ended September 30, 2014 were RMB12.1 million or US$2 million which was RMB2.5 million or 26% higher than the same period in 2013. This increase was mainly due to the increase in R&D expenditures in the third quarter of 2014.

Net loss attributable to the company during the third quarter ended September 30, 2014 was RMB17.8 million or US2.9 million compared to net loss attributable to the company of RMB23.2 million during the same period in 2013, representing a decrease of RMB5.4 million for the same period in 2013.

Net sales during the nine months period ended September 30, 2014 were RMB209.9 million or US$34.2 million compared to RMB229.9 million during the same period in 2013 representing a decrease of RMB20 million or 8.7% mainly due to the reduction in average sales price rising from stronger competition in China and a decrease of total sales volume by 0.9%.

The reduction of average sales price caused a decrease of RMB17.9 million and the sales volume caused a decrease of RMB2.1 million.

In the nine month period ended September 30, 2014 sales of specialty films were RMB57.1 million of US$9.3 million or 27.2% of our total revenues as compared to RMB70.3 million or 30.6% in the same period of 2013 which was a decrease of RMB13.2 million, or 18.8% as compared to the same period in 2013.

The reduction of average sales price caused a decrease of RMB1.2 million and the decrease in the sales volume caused a decrease of RMB12 million. The decrease was largely attributable to the decrease in sales volume for dry films and heat shrinkable films due to the entrance of new competitors.

Overseas sales during the nine months ended September 30, 2014 were RMB33.4 million or US$5.4 million, or 15.9% of total revenues, compared with an RMB34.9 million or 15.2% of total revenues in the same period in 2013.

The decrease in average sales price caused a decrease of RMB4.6 million and the increase in sales volume resulted in an increase of RMB3.1 million. The decrease in overseas sales was mainly due to a decrease in sales prices.

Our gross loss was RMB12.7 million or US$2.1 million for the first nine months ended September 30, 2014, representing a gross loss rate of 6%, as compared to a gross loss rate of 5.8% for the same period in 2013. Correspondingly, gross loss rate increased by 0.2 percentage points.

Our average product sales prices decreased by 7.8% compared to the same period last year while the average cost of goods sold decreased by 7.6% compared to the same period last year.

Consequently, the amount of decrease in sales revenue was higher than that in cost of goods sold during the nine months ended September 30, 2014 compared with the same period in 2013, which resulted in an increase in the Company's gross loss.

Operating expenses for the nine months ended September 30, 2014 were RMB32.9 million or US$5.4 million, compared to RMB36.9 million in the same period in 2013, which was RMB4 million or 10.8% lower than the same period in 2013. This decrease is mainly due to decreased R&D expenditure for the first nine-months of 2014.

Basic and diluted net loss per share were RMB1.36 or US$0.22 and RMB1.78 for the three-month period ended September 30, 2014 and 2013, respectively. Total shareholders' equity was RMB406.3 million or US$66.2 million as of September 30, 2014, compared with RMB460.3 million as of December 31, 2013.

As of September 30, 2014, the Company had 13,062,500 basic and diluted total ordinary shares outstanding. In conclusion we would like to thank our shareholders for their continued loyalty and support. We will keep you updated about our progress with the third production line as well as other business and product developments. With that, Mr. He, Mr.

Zhang and Mr. Yong will be happy to answer your questions. We require your patience as we translate these questions and answer. Operator, please begin the Q&A. .

Thank you for joining us on this conference call. We look forward to being in touch with you and we'll keep you updated about our progress. This now concludes our call..

Ladies and gentlemen, we thank you for your participation and you may disconnect your lines at this time..