Weijia Dai - IR, Grayling USA Yong Jiang - Corporate Secretary.

Analysts:.

Greetings, and welcome to the Fuwei Films Fourth Quarter and Full Year 2016 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 reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Ms. Weijia Dai with Grayling USA. Thank you. You may begin..

Thank you. Let me remind you that today’s call is being recorded. A replay of this call will be made available shortly at 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, Fuwei Films’ Corporate Secretary. Before I walk you through our financial results, Mr.

Jiang will deliver his opening remarks and I will translate Mr. Jiang’s remarks. Sir, please go ahead..

[Foreign Language].

Thank you. Welcome to Fuwei Films fourth quarter and full year 2016 financial results conference call. 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 difficult industry and economic conditions in the periods ahead. Now, I will read you our financial results for the fourth quarter and full year of 2016. Then, Mr. Jiang will be ready for the Q&A session.

Now, I will provide you with an overview of Fuwei Films key financial numbers for the fourth quarter and full year 2016, then I will review some of the operational highlights; in the end, we will open up the call for Q&A.

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.

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.

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 million or US$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 Company for 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.

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.

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 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 other income or 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 or 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.

Basic and diluted loss per share for the year ended December 31, 2016 was RMB16.68 or US$2.40. Now, let me give you some highlights of Fuwei Films’ cash position.

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.

As of the end of 2016, total shareholders’ equity was RMB265.2 million or US$38.2 million compared to RMB319.7 million as of December 31, 2015. Working capital as of December 31, 2016 was negative RMB117.1 million or negative US$24.5 million compared with working capital of negative RMB151.6 million as of December 31, 2015.

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. Jiang will be happy to answer your questions.

We will require your patients as we translate each question and each answer. Operator, please begin the Q&A..

Operator:.

Thank you for joining us on the conference call. Fuwei wishes to thank its shareholders, customers and employees. We look forward to being in touch with you and keep you updated with our progress..

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