Xiuyong Zhang - Director and Chief Financial Officer Yong Jiang - Corporate Secretary.

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Greetings, and welcome to the Fuwei Films Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to [Ting Li] of Grayling. Thank you. You may now begin..

Thank you. Let me remind you 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 statements provided as a result of new information, future events or changes in our expectations. Joining us on today’s call is Mr. Yong Jiang, Corporate Secretary. Before I walk you through our financial results, Mr.

Zhang will deliver his opening remarks. My colleague [indiscernible] will translate Mr. Zhang’s remarks. Sir, please go ahead..

Thank you, Ting. Hello everyone, and thank you for joining us today. While we continue to face strong competition from emerging and incumbent players in the marketplace, which has led to oversupply relative to demand in the marketplace, we are encouraged by positive trends in the sales of specialty films.

We believe our commitment to innovation and R&D has expanded our end-user applications that will enable the Company to capitalize on these opportunities despite challenging industry and economic conditions. Now, Ting will read to you our financial results for the second quarter and first half 2016. Then I will begin the Q&A session..

Thank you, Mr. Zhang. I will now provide you with an overview with our key financial numbers for the three months and six months ended June 30, 2016 respectively. Then I will offer some updates on our operations followed by the management Q&A. Financial highlights for the three months ended June 30, 2016.

Net sales during the three months ended June 30, 2016 were RMB59.3 million or US$8.9 million, compared to RMB66.7 million during the same period in 2015, representing a decrease of RMB7.4 million or 11.1%, mainly due to a 5.9% decrease in average sales price and a 5.5% decrease of sales volume arising from stronger competition in China.

The reduction of average sales price caused a decrease of RMB3.7 million and the sales volume decrease caused a decrease of RMB3.7 million.

In the three months ended June 30, 2016, sales of specialty films were RMB23.5 million or US$3.5 million or 39.7% of our total revenues as compared to RMB21.3 million or 31.9% in the same period of 2015, which was an increase of RMB2.2 million, or 10.3% as compared to the same period in 2015.

The reduction of average sales price caused a decrease of RMB0.7 million and the increase in the sales volume caused an increase of RMB2.9 million. The increase was largely attributable to the increase in sales volume.

Overseas sales were RMB11.2 million or US$1.7 million for the three months ended June 30, 2016, or 18.9% of total revenues, compared to RMB15.1 million or 22.7% of total revenues in the second quarter of 2015.

The decrease of average sales price caused a decrease of RMB1.4 million and the decrease in sales volume resulted in a decrease of RMB2.5 million. Our gross profit was RMB5.6 million or US$0.8 million for the three months ended June 30, 2016, representing a gross margin of 9.5%, as compared to a gross margin of 0.4% for the same period in 2015.

Correspondingly, gross margin increased by 9.1 percentage points compared to the same period in 2015. Our average product sales prices decreased by 5.9% compared to the same period last year while the average cost of goods sold decreased by 14.4% compared to the same period last year.

Consequently, the amount of decrease in cost of goods sold was larger than that in sales revenue during the three months ended June 30, 2016 compared with the same period in 2015, which resulted in an increase in our gross profit.

Operating expenses for the three months ended June 30, 2016 were RMB14.5 million or US$2.2 million, as compared to RMB13 million for the same period in 2015, which was RMB1.5 million, or 11.5% higher than the same period in 2015.

This increase was mainly due to depreciation charged to general and administrative expenses in the accounting period in which they are incurred as a result of lack of manufacturing from the third production line since April 2015 and increased allowance for the doubtful accounts receivable.

Net loss attributable to the Company during the three months ended June 30, 2016 was RMB10.2 million or US$1.5 million compared to RMB14.7 million during the same period in 2015, representing a decrease of RMB4.5 million for the same period in 2015.

Basic and diluted net loss per share was RMB0.78 or US$0.12 and RMB1.12 for the three-month period ended June 30, 2016 and 2015, respectively. Total shareholders' equity was RMB297.37 million or US$44.75 million as of June 30, 2016, compared with RMB319.7 million as of December 31, 2015.

As of June 30, 2016, the Company had 13,062,500 basic and diluted total ordinary shares outstanding. Financial highlights for the six months ended June 30, 2016.

Net sales during the six months ended June 30, 2016 were RMB121.5 million or US$18.3 million, compared to RMB119.5 million in the same period in 2015, representing an increase of RMB2 million or 1.7%, mainly due to the increased sales volume.

In the six months ended June 30, 2016, sales of specialty films were RMB45.3 million or US$6.8 million or 37.3% of our total revenues as compared to RMB36.3 million or 30.4% in the same period of 2015, which was an increase of RMB9 million, or 24.8% as compared to the same period in 2015.

The reduction in average sales price caused a decrease of RMB2 million and the increase in the sales volume caused an increase of RMB11 million.

Overseas sales during the six months ended June 30, 2016 were RMB23.7 million or US$3.6 million, or 19.5% of total revenues, compared with RMB28.2 million or 23.6% of total revenues in the same period in 2015. This was RMB4.5 million lower than the same period in 2015.

The decrease in average sales price and sales volume caused a decrease of RMB2.1 million and RMB2.4 million, respectively. Our gross profit was RMB11.2 million or US$1.7 million for the six months ended June 30, 2016, representing a gross margin of 9.2%, as compared to a gross margin of negative 6.3% for the same period in 2015.

Correspondingly, gross margin increased by 15.5 percentage points. Compared to the same period last year, our average product sales prices decreased by 4.2% while the average cost of goods sold decreased by 18.2%.

Consequently, the amount of decrease in cost of goods sold were larger than that in sales revenue during the six months ended June 30, 2016 compared with the same period in 2015, which resulted in an increase in our gross margin.

Operating expenses for the six months ended June 30, 2016 were RMB29.5 million or US$4.4 million, compared to RMB21.8 million in the same period in 2015, which was RMB7.7 million or 35.3% higher.

This increase is mainly due to depreciation charged to general and administrative expenses in the accounting period as a result of lack of manufacturing from the third production line since April 2015 and increased allowance for doubtful accounts receivable.

Net loss attributable to the Company during the six months ended June 30, 2016 was RMB22.3 million or US$3.3 million compared to RMB29.6 million during the same period in 2015, representing a decrease of RMB7.3 million due to the factors described above. In conclusion, we would like to thank our shareholders for their continued loyalty and support.

We believe we are well positioned to face the current challenges and are committed to providing value to our shareholders and customers. We will keep you informed of our progress. With that, Mr. Zhang will be happy to answer your questions. We recall your patience as we translate each question and each answer. Operator, please begin the Q&A..

At this time, we will be conducting a question-and-answer session. [Operator Instructions] Thank you. At this time, I’d like to turn the call back to Ting Li for additional remarks..

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Thank you for joining us on this conference call. We look forward to be in touch with you and we will keep you updated about our progress. Thank you everyone..

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation..